Massachusetts casinos don’t want a piece of the action when it comes to sports betting—if it is legalized. They want all of the action, although they wouldn’t mind sharing a little of it. But they won’t get it without a fight from groups like the homegrown daily fantasy sports operation DraftKings, or Delaware North, a $3 billion Bay State company whose chairman, Jeremy Jacobs owns the Boston Bruins, and which operates nine casinos in seven states.
Lawmakers on Beacon Hill have begun holding hearings on several bills on sports betting, including one by Governor Charlie Baker.
“It’s a complex issue,” said Committee on Economic Development and Emerging Technologies Co-Chairwoman Ann-Margaret Ferrante several days before the hearings. “It’s an issue that we want to be very diligent with, and we want to make sure should Massachusetts go forward with sports betting legalization … that we do it properly.”
Co-Chairman Senator Eric Lesser told The Republican, “It’s important before we rush into a discussion of what legalization would look like, we answer that threshold question of whether we want it in Massachusetts.”
States have been steadily legalizing sports betting since the U.S. Supreme Court lifted the federal ban on it in May 2018. Massachusetts has somewhat dragged its heels in comparison to other states, such as Rhode Island, which became the first in New England to offer sports book last November.
A representative of Delaware North, Amy Latimer, president of its subsidiary TD Garden, told members of the committee: “We view sports wagering as a great opportunity for us to engage fans and get the casual fan interested in sports in a new way.” She added, “We understand gaming, sports and the customer, and Delaware North would like the ability to participate as a sports wagering provider.”
Latimer argues for the state allow mobile sports betting, which she said would generate much more in licensing and revenues than brick and mortar based sports betting, which the state-based casinos would prefer.
TD Garden is well known in the state for being the home of the Bruins and Boston Celtics. Delaware North has multiple revenue streams from restaurants, hotels, resorts and casinos, which it has in Arkansas, New York, Illinois, Florida, West Virginia and Ohio.
Within the Bay State Delaware North is building The Hub on Causeway adjacent to TD Garden, while owning and operating Sea Crest Beach Hotel on Cape Cod.
Meanwhile DraftKings is trying to convince legislators that it is the monarch of the new mobile technologies, and that it is simply 20th century to limit sports betting to land-based casinos.
Another stakeholder in this issue are the former racetracks in East Boston and Raynham which now offer simulcast wagering, but who rights to do that will expire in a few months.
Before, during and after Latimer’s testimony, committee members focused on a possible conflict of interest of having a major league sports owner like Jacobs, who is also chairman of the NHL Board of Governors, offering sports betting.
Committee Co-Chairman Senator Eric Lesser asked, “So if I buy a ticket and I go into the Garden and I’m watching the Bruins and I’m operating a sports betting app from my phone, what you’re asking for is to be able to own all three.”
Governor Baker’s bill would ban wagers on college or amateur sports. It would also bar athletes, referees, coaches, trainers and directors of sports governing bodies as well as those who “holds a position of authority or influence sufficient to exert influence over the participants in a sporting contest” from being part of full owner or being employed by a licensee that offers sports betting.
Latimer said the company was interested in either offering a sports betting platform of its own or partnering with another provider to make it available at TD Garden. NHL rules already prevent Jacobs from making wagers.
Later Jack McNeill, the senior vice president of government and external affairs for the company, told the committee: “We believe in commonsense rules that the leagues have already in place. We don’t think that Jeremy Jacobs should be able to bet on the Bruins.” He added, “We do think, however, that arenas should have the ability to have a platform, whether that be something therein or a third party provider, they should have that ability to engage with their customers.”
McNeill said Baker’s bill “stretches too far” in what it prohibits. “It goes beyond the common sense and practicality of what is operating in the United States and internationally.”
Committee member Rep. Ken Gordon was skeptical that there would be no conflict of interest. Rep. Brian Murray added, “I think the conflict of interest issue that was raised is certainly a real issue. I would think that any legislation put forward will have measures to address that,” he said. “Clearly, I think, that’s an issue that would be addressed in the legislation.”
Later Delaware North issued a statement saying that it would be willing to just partner with another company to offer sports betting. Latimer issued this statement: “Integrity of the game is of the utmost importance and we do not want any appearance of conflict of interest.” She added, “We do not want to operate the sports book, but we do want to partner with a mobile operator that will enhance the fan experience.”
Ryan McCollum of Fair Play Massachusetts, which represents Bay State business owners, testified to the committee in favor of allowing Keno operators in sports bars and restaurants should be able to offer sports betting. “Allowing some Keno operators the ability to offer sports betting to their patrons kills 4 birds with 1 stone,” he said. “Those birds are: more revenue for the state, support for our small businesses, fairness for citizens who don’t live close to casinos and a greater ability to make a dent on the black market.”
A spokesman for Governor Baker later in the week clarified his position on sports betting. Secretary of Housing and Economic Development Mike Kennealy said, “I would say we’re trying to strike a balance here between entering the market and realizing new revenue on one hand and on the other hand taking a somewhat conservative approach. We would argue the best way to do this is on professional sports.”
The Baker administration estimates his bill would generate about $35 million revenue annually, assuming a 10 percent rate on wagers placed in person and 12.5 percent on mobile wagers. A presentation at the hearings by the Massachusetts Gaming Commission predicted annual profits of between $11 million and $45 million annually assuming a 10% tax rate.
Justin Stempeck, associate counsel of the MGC told lawmakers, “Sports betting is a low margin business.” He noted that the actual revenue would depend on what sports and events can be wagered on, whether mobile betting is part of the mix, whether in-play betting is permitted and how high license fees are.
When committee member Rep. Carole Fiola asked MGC Chairman Cathy Judd-Stein, “Is $35 million to Massachusetts enough to handle everything that needs to be done to ensure the utmost integrity and to follow up and to provide resources to the commonwealth?” the chairman said that would be the lawmakers’ decision. “There are so many balancing considerations for all of you,” she said.
She noted that research indicates that sports betting participation has increase in recent years, from 12.6 percentage by state residents in 2013 to 1.68 percent in 2016.
Although Senator Brendan Crighton has introduced his own sports betting bill, he agrees with Baker that any bill should specifically prohibit betting on college games, and not just colleges based in the Bay State. He declared, “We cannot compete with the legal market unless we allow betting on NCAA games. This betting is going on currently and we’re not going to be able to offer a model that lures folks away [from the illegal market] unless we include what is one of the more popular forms of betting.”
Other states that offer sports betting are divided on the issue of college sports. Mississippi and Pennsylvania allow it. Rhode Island does not.
Later during the hearings representatives of MGM Springfield, Encore Boston Harbor and Plainridge Park Casino told committee members that they support wagering on professional, collegiate and amateur sports, but drew the line at high school sports.
They submitted joint testimony that they would support allow companies like DraftKings to have some portion of the sports betting market but said they should have exclusive rights to bets made at a physical location and that mobile wagers should also be reserved for them and “a limited number of daily fantasy operators with proven sports wagering experience.”
They also called for a single digit tax rate to keep the black market caged. Tax rates in other states range from 6.75 percent in Nevada to 51 percent in Rhode Island.
Penn National Gaming, which operates Plainridge Park, added to the point brought out by the joint statement: mobile operators should be required to be “tethered” to an existing casino.
DraftKings CEO Jason Robbins, who co-founded the daily fantasy sports company, argued for all operators having “a direct relationship with the regulator — and that means being directly accountable to the regulatory authority, the legislature, and ultimately, the residents of Massachusetts.” He added, “To fully realize the potential for mobile sports wagering, the legislation should allow mobile operators to receive licenses directly from the regulator rather than requiring partnership with land-based facilities.”
He added, “DraftKings and our competitors should have a direct relationship with the regulator—and that means being directly accountable to the regulatory authority, the legislature, and ultimately, the residents of Massachusetts.”
Also testifying in the first day was State Treasurer Deborah Goldberg in her role of overseeing the Massachusetts Lottery. She called getting involved in sports betting an “intriguing idea.” Goldberg has for several years urged lawmakers to give the Lottery access to advanced technology, especially mobile technology.
Professional sports leagues also sent representatives to testify. As in other states, they argue the leagues should be paid a percentage of the wagers, an “integrity fee” of about 0.25 percent. They also want to be able to work with regulators to address issues that are considered particularly open to corruption: such as which player commits first foul in a basketball game, or the results of a first pitch in a baseball inning.
Michael Mathis, president of the MGM Springfield casino last week in an interview with the Republican, argued for the state to move as quickly as possible. “It’s happening currently in the commonwealth. It’s just happening illegally with off shore black market operators” he said. “We believe we’re well positioned to bring some light to it and manage it in a responsible way for the commonwealth that brings jobs, tax revenue and integrity.” He cited the actions of Connecticut, Maine and Rhode Island, which are all easily accessible from Massachusetts with a few minutes or hours on the road.
Mathis argues that his casino could see an increase of up to 10 percent in its revenue if sports betting could be used to help draw more patrons. But it wouldn’t take much for Connecticut to get there first and draw off that same revenue, he said.
Although sports betting is not legal in the Bay State, the fanatical fan base of the Patriots and other teams already generates an estimated $680 million “grey market” according to H2 Gambling Capital, a betting market intelligence firm.
While some warn of the need to protect the integrity of the games once sports betting is legal, Mathis says its fairly easy to protect because of the way his company tracks betting that sends up a red flag on suspicious spikes in betting. “We’re able to predict what is average action, what is average interest in a game or an event or a prop bet,” he told the Republican.
Mathis also defended the idea that casinos should be in charge of sports betting. “We’ve got a $960 million facility that is the ultimate leverage of the commonwealth to make sure we make good on our commitments,” he told the Springfield-based paper, “At the end of the day, this is just another game. It has the same risk of fraud and compliance and creditworthiness of paying bets that any of our other games have.”
He also argued against the state setting up a state-operated sports book, noting that neighboring Rhode Island did that last year and took a serious $900,000 hit in February after paying out Super Bowl bets.
