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Sports Betting Stumbles

Who would have ever thought that sports betting would not be the boon that everyone thought it was going to be?

Sports Betting Stumbles

The numbers weren’t off, just beneficiaries.

Sports betting seems to have left the land-based casinos behind, except for MGM, which made the wise choice of partnering with Entain early on, solving its technology questions immediately. And that seems to be a large part of the problem.

There were several companies that tried to invent technology, and it just didn’t work. Bally’s scrapped Betworks last month, and build-from-scratch systems at several companies just haven’t worked. Caesars’ purchase of William Hill has taken a while to evolve, but is showing signs of life now. Given MGM’s experience with Entain, it seems partnerships make more sense.

Still, they’ve all taken a back seat to the DFS giants, FanDuel and DraftKings, which at least developed systems that worked during those heady DFS days. When DFS was effectively shut down in most states, and licenses were required, they were ready to go with the systems and the compliance needed to hit the ground running.

And then when the first state with full-blown sports betting (and all other betting) got most of it right, subsequent states didn’t catch on. I don’t want to say they got it wrong, but when a state is looking for the most revenue from sports betting it doesn’t always follow that higher taxes equal more revenue, especially from a business with narrow margins to start with.

Now, there are some states that nailed it. Indiana, Colorado, Arizona—with its particular Indian gaming segment of the market thrown in.

Remember, there’s really only small dollars to be made in sports betting given the small margins. So companies with a late start or uncertain strategy are going to have a difficult time competing. And states that really don’t understand how to make the most money are going to be disappointed.

But one of the correct things New Jersey did—prior to the legalization of sports betting—was the approval of online gaming. Only a few states followed. In Pennsylvania, the state basically blackmailed potential sports betting companies by requiring that they obtain a sports betting license before they receive an online gaming license—all at hefty fees, of course.

But Michigan hit a home run when they not only included online gaming in the legalization bill, but also incorporated all the various gaming players in the state—the lottery, commercial casinos in Detroit and tribal casinos across the state—with a fair tax rate, and serious but rational regulations and a chance to make real money both for the companies/tribes and the state. Michigan quickly became the second most successful interactive gaming state in the nation.

But since then, there has been a strange reluctance for other states to follow suit, despite the positive examples.

Perhaps it’s the bad example of advertising emanating from the sports betting circles. The “risk-free” and “free bets” enticements are dangerous not just to problem gamblers but also to public perception of betting in general. It can be seen as predatory, particularly by legislators who are being asked to vote on online gaming.

While the American Gaming Association has set up a series of ethical advertising standards that make sense and are very reasonable, competition is fierce. There are more than 30 companies involved in U.S. sports betting, and most of them have a miniscule market share. The temptation of catching lightning in a bottle is often too great and a company’s future may rest on it, so in a way it’s understandable.

But we have to be even more diligent and focused. I remember when I went to my first soccer game in the U.K., and discovered to my surprise that there was a sportsbook underneath the stands. Now I don’t know why I was surprised. I knew betting on sports was rampant in the U.K., and many of the clubs had logos of sportsbooks on their jerseys. Now, the sportsbooks being built around the stadiums and the arenas in this country are a far cry from the small book that was under the stands in the U.K., but what does that say about our enthusiasm for betting?

Now that the U.S. has quickly followed that lead, I feel the same way. Does it somehow taint the contest and cast doubt on its integrity, especially when it comes to amateur sports? Maybe we should pause the links between teams, leagues and institutions to ensure every relationship conforms with the AGA policies.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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