Dan Wallach brings us up to speed on the latest developments taking place within the US sports betting industry and the key regulatory challenges that states face when getting legislation over the line.

Since the repeal of PASPA back in 2018, it has seemed like everywhere you turn a new state is opening up to sports betting in some form or another. Whether online, mobile or retail only, 37 US states have legalised sports betting in some way with a steady stream of states passing legislation each year. 

Whilst 2022 saw five new states launch regulated sports betting, only three actually passed laws during the year – Maine, Kansas and Massachusetts. Meanwhile, a series of states narrowly – or not in some cases – missed out on the party. 

California, Georgia and Kentucky could not get legislation through before the end of the legislative session and even Massachusetts lawmakers had to sit throughout the night before they managed to finish squabbling to finally pass the law. 

The former state in particular was an embarrassment for all involved. Infamously $600m was spent on campaigning for both Proposition 26 and 27 and both were flatly rejected by the Californian electorate.

And yet, in 2023, the legislative season doesn’t look too much brighter, either. 

Despite a whole wave of bills being proposed by lawmakers, confidence in much movement on the legalisation of sports betting this year is in low supply as the final few states remain without wagering. 

With only 13 states left to legalise, SBC Leaders spoke to gaming and betting lawyer Wallach to assess the challenges the industry faces with further expansion. 

A political mismatch?

Sometimes, complex political battles can be neatly summarised. And the current scenario in the US is one of those. Simply put, 13 remaining states are not too many. And if sports betting hasn’t been legalised after five years in those states, you can bet your bottom dollar it’s going to be a tough fight to turn opinion around in those states. 

Wallach explained: “The reason so many of these states remain not legal for sports betting is there are legal complications caused by state constitutions. Maybe there’s some competition among stakeholders as to who gets to offer; these weren’t the easy states to begin with. 

“The easy states were done in the first year or two. Now, we’re getting to some of the states that have had issues in the past and difficulty in getting over the finish line.”

Issues in the past can be a bit of an understatement when you consider some of the vehement anti-gambling stances in some communities, particularly amongst religious groups.

In southern and conservative-leaning states there can be difficulty getting lawmakers to back any form of gambling expansion, though it isn’t necessarily a red versus blue issue. Some Democrats are against expansion due to the risks of problem gambling, too. 

But despite the pushback, there is significant support for sports betting in remaining states, including Georgia and Texas, where sports teams and stakeholders are publicly backing sports betting legislation. 

This, Wallach believes, could provide the weight needed to force legislators to offer sports betting to voters in upcoming elections. 

Citing Texas and Georgia, he explained: “Those are two states that have a political dynamic that makes enacting any gambling legislation an uphill battle, because you’re dealing with a political and religious climate that’s antithetical to gambling expansion. But you only have to do it once. And there are lessons to be learned from previous failed attempts.

“But now you have the muscle and the weight of the professional sports teams in their states pushing for legal sports betting. And the lobbying has become more effective over time so that in the second or third attempt to pass sports betting in those states, they’ve actually gained over the stakeholders who have benefited from getting a better understanding of the political and legal climate in those states.” 

Geographic competition

Another consideration that lawmakers face in legalising sports betting is that, as bordering states introduce wagering, players are flocking across those borders and spending money that contributes to competitors’ coffers. 

Take Texas, for example, which is close to several sports betting states including Louisiana, New Mexico, Arizona and Kansas. The logic of pro sports betting campaigners is that gamblers are going to flock to those states to spend their dollars, or worse, potentially head to the offshores and black market operators. 

This argument has worked before, Wallach claims, and has garnered success in Massachusetts, an area where states were legalising betting left, right and centre. Massachusetts residents would often spend their dollars in New Hampshire, forcing the legislature to rethink their stance towards sports betting to keep dollars in the Bay State.

Wallach explained: “That argument has already worked in states like Massachusetts and New York, which have witnessed their residents travelling across state lines and taking their discretionary spending to other states. 

“For several years, New Hampshire’s legal sports betting framework has been powered by upwards of 30 per cent of Massachusetts residents who travelled to New Hampshire just to place a bet. And the numbers are even more dramatic in New Jersey, based upon the proximity and the population size of New York City.” 

And this approach could be a way of winning over legislators in Texas, moving forward. 

“States like Texas, which is surrounded by legal sports betting options and neighbouring states, face significant pressure or at least face a real migration issue of whether the state of Texas continues to maintain the status quo.”

The Constitutional Problem

Another glaring issue of expanding gambling in the US is that some of the remaining states would need to make a constitutional amendment. This, in several cases, would mean getting two-thirds of the legislature to vote in favour of a bill to then send to the electorate to vote on and give a majority to. 

Clearly this makes things even more difficult and, considering some of the other issues covered, these hurdles can be insurmountable. 

The issue of a constitutional amendment was a sticking point for lawmakers in Georgia this year. Several measures tried to tie sports betting to the lottery, therefore bypassing the requirement for a constitutional amendment. 

However, for some, this was unconstitutional and disingenuous. 

Senator Bill Cowsert, who filed a bill that would require a public vote, said: “I think it’s only fair if we’re going to make that big of a cultural change in our state to let the people of Georgia decide to do that.

“There are a number of legislators who have personal opposition to gambling, but feel like it’s only fair to let the people of Georgia decide.”

Ultimately, sports betting legislation died in Georgia this year, unable to make it past the March 6 deadline for bills to make progress to the Senate. 

But Wallach did not necessarily agree with Cowsert’s assessment and argued that Georgians could have passed sports betting without a constitutional amendment. 

He outlined: “I’ve been speaking in a consistent voice on this issue for nearly four years and I’ve not needed to evolve one iota. The Georgia Constitution does not include a blanket ban on all forms of gambling – it only prohibits three specific categories of gambling, pari-mutuel betting, casino gambling, and lotteries, but also allows the Georgia lottery to operate for the benefit of statewide education. 

“So even if sports wagering were to be viewed as a lottery, the state-run lottery could still operate as a lottery game.”

For all the talk of constitutional amendments and public votes, the industry does not have a good experience with the electorate in recent times, with last year’s California vote still fresh in the mind. 

Despite $600m in campaign funding, both Prop 26 and 27 resoundingly failed, not even garnering 25 per cent support from the electorate. 

Brandt Iden, VP of Government Affairs at Fanatics, spoke to SBC last year around the time of the California vote, explaining why the measures were doomed to fail and what it would take to reach a breakthrough. 

Iden said: “My prediction is everybody sort of goes back to their corner and takes a little time off. I’m hopeful and optimistic that the commercials and the tribes will maybe sit down and try to figure out that this can be done legislatively. 

“But it will take a compromise as we’ve seen in Michigan, Arizona, and Connecticut, where tribes and commercials have been able to work together. It would be really disappointing to see us go back to the ballot and 2024 and spend another almost half a billion dollars, if not more, on another fight.”

Iden knows about the legislative process for legalising sports betting, having played a pivotal role in bringing it to Michigan, where he was a Representative for the 61st District.

Asked about his role in that process and how politicians can overcome some of the hurdles outlined in this story, Iden explained that everyone needs to work in the same direction and iron out their differences civilly. 

He explained: “One of the pieces that then made that very successful is the integration of the tribes and the commercials working together within the market. It took a massive compromise to get that done. 

“In fact, it took me five and a half years in my six-year career, and the first time it got vetoed by the governor. So it took me a long time to get that done. And it was a lot of hard work.”