Transcript of the Sports Betting and Wagering in the Age of Legalization Virtual Panel

ANDREW TOPPS: My name is Andrew Topps. I am a third-year law student at the University of New Hampshire School of Law. I would like to welcome you all to the discussion on sports betting and wagering in the age of legalization, on behalf of the Sports and Entertainment Law Society or SELS, of which I am a board member and who is putting on this discussion.

A couple of housekeeping notes before we begin. We want this to be a discussion and not a dissertation. So, if you have a question, please feel free to ask as we go along. If you have a question, you can send it to me privately in the chat, or you can raise your hand. We are all here to learn, but please keep in mind that with this fast-moving body of law, what is said today may change soon.

Before we get into our panel discussion, I would like to introduce one of, if not the leading experts in sports law. He is also the co-founder of the UNH Sports Wagering and Integrity program and, being an academic advisor for SELs, he has been a great mentor to me and a great person to be around. I'd like to turn things over to Professor Michael McCann.

MICHAEL MCCANN: First of all, thank you all for joining this event, and thank you to our amazing group of speakers who are setting aside time for us. And I know Andrew is going to introduce them, so I'm going to save the intros for Andrew. This is really a transformative era in sports law. We know that through name imagine and likeness (John Holden and I have an article coming out on in the Georgia law review on the NIL). But this is probably an even more transformative field in the context of sports betting. As we know, states are legalizing sports betting in certain ways, and states have taken very different approaches that will come up in the discussion. And I really appreciate all of you joining us at UNH law.

Andrew did a fantastic job putting this event together. He is the managing editor of the UNH sports law review, treasurer of the Black Law Students Association, and has been working full time while going to law school, which is really impressive. All of our students are impressive, but I'm always impressed by students who are able to juggle full-time jobs while going to law school. And Andrew previously played college football and also was a sports broadcaster and is currently a regional sales director for a company out in Arizona, so we have a great group of people here at our law school. Thank you to those outside our law school who are joining us and I'm going to turn it back over to Andrew.

ANDREW TOPPS: Thank you, Professor McCann, thank you for those kind words. Quick plug for UNH Hybrid program. If you want to have a life and go to law school, or you know somebody who does, definitely check out the UNH hybrid program. I can attest to that personally; every major adult event has happened to me personally while I've been in law school. I've gotten married, went on a honeymoon, bought and sold a couple of properties, contracted COVID twice, and now I have the most beautiful 10-week-old daughter, and yet I'm still walking across that stage in May. So, if you want to have a life and learn the law, I suggest checking out the UNH hybrid program. Or if you know somebody who does definitely check out the UNH hybrid program.

Moving to our panel, we are in an exciting time for our sports betting and wagering law since the Murphy decision overturned the Professional Amateur Sports Protection Act or PASPA. Single event sports betting was prohibited outside of Nevada, and now it's legal in 30 states and DC, with a couple more slated for launch this year. There are several more states with bills being debated at various stages in respective legislatures, including Massachusetts. Our panelists are here to discuss several questions around this area of law. I would like to thank each and every one of them for participating in this discussion.

First, I would like to introduce Chair Cathy Judd-Stein, the Chair of the Massachusetts Gaming Commission, a role she has served since 2019.

Our next panelist is Director Charlie McIntyre. For the last 12 years, he has served as the New Hampshire Lottery Executive Director. During his tenure, he introduced sports betting throughout the state.

Professor Kristy Gale is a sports technology law pioneer, consultant, and entrepreneur specializing in biometric and tracking data. She is also president and CEO of Honoring Data rights management and an instructor in the Sports Wagering and Integrity Program at UNH Law.

Professor John T Holden is a William SP Spears Fellow and assistant professor at the Department of Management in the Spears School of Business at Oklahoma State. His scholarship is focused on legal and regulatory issues in sports gambling. He is also the author of more than 50 academic articles on gaming policy and related issues of corruption.

And finally, he is the co-founder of the sports wagering and integrity program at UNH. He has testified in front of four state legislatures as an expert witness on sports betting policy. He is known as the sports betting attorney Daniel Wallach Esquire.

So, we are here to talk about sports betting, so the question is, “What is sports betting?.” Well, it's a lawyer's favorite adage; it depends. There is no federal law dictating what encompasses sports betting; therefore, it is a patchwork of state laws and will depend on the jurisdiction in which one wants to engage in that activity. So, with that in mind, the question is, “What is sports betting?.” So, with that, I will turn it over to Director McIntyre. Director McIntyre, what is sports betting in New Hampshire?

DIRECTOR MCINTYRE: I'll answer it another legal way, Andrew; it's how you essentially write the law. And so, with our drafting if the legislature, we define it specifically within the statute, and it's one of those things, you know the obvious ones like the NFL, NBA, and college basketball and hockey. And then there are the ones where you're like, is that really sport? We take action in New Hampshire on cricket and darts. Is darts a sport? I mean, it's more of a thing you do after a couple of cocktails and hope no one gets hurt. And so that's one of those lines you discuss and review as each is approved, depending on the market and depending upon what the player base wants. You review what the offering is, whether you can put guard rails around it in a regulatory fashion, and then you approve it. I will tell you that got broader during COVID when there were virtually no sports to bet on. In terms of what we allowed and what we allowed to offer on our platform. But that's the easiest answer I can think of.

ANDREW TOPPS: Great. Thank you for that. And as we said, Massachusetts has several bills going through various stages of debate right now. Chair Judd-Stein, Next question for you. “What steps are the Massachusetts gaming commission taking to prepare for the eventuality of the legalization of sports betting in that state?”

CATHY JUDD-STEIN: As you've heard, we don't even have sports wagging. It's not legal in Massachusetts. I want to make sure we honor the fact the house of representatives did pass a bill that, if it were enacted, the Gaming Commission would be designated the regulator of legalized sports wagering. It's widely reported the State Senate is actively looking at these issues. But everything is up in the air. So, with that said, because many of the proposed bills do designate the gaming commission as the potential regulator, we are really careful about that, and we're not presumptuous.

But we also want to be ready because we know that, like with our fellow regulators, it gets rolled out real fast. The team is looking really carefully at all the proposals that have been filed so far in Massachusetts. We've been reaching out across the country. The landscape changes with every state, and from each state, you know we learned something new. Every regulator across the nation rolled it out recently and has been so helpful to us. So, we are getting ideas from them. Learning a lot about what we will need for resources is an important piece of the puzzle from all legislative points of view.

You know, what if they do decide to legalize? What resources need to be in place for a regulator to get things going fast? So, we are assessing IT needs and our other budget needs. We always think in Massachusetts of consumer protections, and in Massachusetts, we really are a leader in responsible gaming. So, we did look inward, and last year we published a white paper on responsible gaming and sports wagering where we could look to see about all the opportunities and innovations that we can take advantage of should sport wagering and mobile sports wagering get legalized and take advantage of all the technical tools that could help betters make really responsible, safe, and healthy choices. So those are some of the initial steps we're taking.

We feel really confident, Andrew, that with all the due diligence for doing, if we were designated the regulator of legalized sports waging, we'd be able to get those regulations in place nimbly, and we'd be able to start issuing licenses to those who are eligible under the new law to start accepting sports bets.

ANDREW TOPPS: It's an exciting time in Massachusetts. Professor Wallach, Florida, your home state, had sports betting for a hot second. What did it look like when they had it? Can you talk a little bit about what happened as to why it was revoked?

DANIEL WALLACH: Yeah, Florida stands alone as the only state to have legalized and launched and had sports betting revoked by judicial court order. And what it looked like in Florida was unlike other states that utilized a licensing process for Casinos and horse racetracks or even in New Hampshire, operating through the state lottery. Florida's sports betting regime was accomplished as a Class 3 tribal-state compact, which is governed by the Federal Indian Gaming Regulatory Act. And what Governor Ron DeSantis and the Seminole tribe in Florida agreed to was a hub-and-spoke system in which, under the compact which governs gaming on Indian lands, the Federal law imposes all these requirements that in-person sports betting was granted to the tribe on their reservation properties.

But there was a component of the compact that also authorized off-reservation sports betting. Meaning statewide mobile sports betting where a customer could be located anywhere in the state of Florida and placing a bet that would ultimately be processed at the end of the line at a server located on Indian lands. That is a separate component of that hub-and-spoke arrangement with Florida's other gaming stakeholders, such as the racetracks or the former dog tracks and the Jai-Alai Frontons were allowed to participate as booking agents sort of the spoke under the hub.

That system launched in early November after a court case had been filed challenging the validity of that compact. The legal issue in the case is whether the Federal Indian Gaming Regulatory Act, which only encompasses gaming on Indian lands, was broad enough to allow compacts that authorized internet-based sports betting where the customer is located external to Indian lands. And I took the position that any internet-based sports betting would be violative of the compact because, by definition, the location of the customer placing the bet is a portion of the gaming activity. And in a Supreme court decision issued eight years ago. Justice Elena Kagan said that gaming activity refers to the actions of the gambler. The roll of the dice, the spin of the roulette wheel, and not the downstream administrative equipment.

And following on that line of authority, Judge Dabney Friedrich, in the US District Court for the District of Columbia, held that the off-reservation component of this gaming compact violated IGRA because it allowed internet betting that originated off Indian lands. Because the internet-based sports betting component violated Federal Law as a remedy, Judge Friedrich invalidated the rest of the compact as well, which allowed the Seminole tribe to build four new casinos on Indian land, to have entitlements like roulette and craps, and other types of gaming activities. Literally physically, on their property that went by the wayside too.

So as a consequence of that decision, there's no internet or even retail sports betting in the State of Florida. That case has been appealed by the Seminole tribe and the United States Department of the Interior. The track that it's currently on, it's highly unlikely that the case will reach a resolution on the merits prior to 2022 concluding. So, for the rest of this year, there will certainly be no sports betting of any legal variety in Florida.

That leaves the remaining option either a reversal by the DC court of the DC circuit court of appeals, which won't happen until 2023, with the prospect of Supreme Court involvement down the road. Or they are going to have to take it to the ballet and have ballot initiatives to decide the fate of sports betting in Florida. That issue is something that is not a 2022 or 2023 issue, The earliest that could take place is November 2024, meaning that a launch wouldn't occur until 2025. So, Florida, despite being the third largest state and probably one of the most eager states to join the legal sports betting fraternity that includes 32 states, its likely going to be one of the last states to legalize sports betting even after Massachusetts.

ANDREW TOPPS: Wow that's crazy, absolutely crazy. That Florida is going through all this.

DANIEL WALLACH: It highlights the different regimes under which sports betting can get legalized. It's not a one size fits all. You have lottery states. You have casino-focused states. And then you have states where the tribes have the dominant influences and are the dominant gaming stakeholders. So, you know, States are sort of laboratories of experimentation, and sports is an illustration of that.

ANDREW TOPPS: Absolutely. Professor Holden, You're in Oklahoma, and it's an interesting time throughout that state. What is going on in your jurisdiction with sports betting?

JOHN HOLDEN: Like Florida, we are a state that has a fairly extensive tribal gaming industry. It is our second largest industry behind oil and gas, Unlike Florida we have 34 different tribes and 140 different properties in the state, and we have compacts which perpetually renew.

So back in 2020, the Governor contested whether our compacts perpetually renew. While he was disputing this with the tribes, and it was tied up in a court, he entered into new compacts with four tribes that would allow them to have sports betting. However, before they got up and running with sports betting the Oklahoma Supreme Court said that this was beyond the Governor's powers. He required the legislature to approve these changes, and so they were thrown out. At the moment, our legislature is in session, and we have one bill that's been put forward which needs to make it out of committee by tomorrow in order for it to have a chance to pass this year. If you speak to some of the tribal organizations that aggregate tribal opinion, they're interested in sports betting, but I think they have big concerns about what it could mean in terms of opening up their compacts.

Oklahoma's tribes have a revenue share which is far below most of the other tribes in the country. It's between 4-10%. The Governor has publicly stated that he would like to see 18% revenue share. So, opening it up to add sports betting, opens the conversation around increasing the revenue share on those other games, including craps and roulette, which were recently added to the compacts in 2018.

So, I myself am not particularly optimistic that Oklahoma goes anywhere with sport betting this year. The Governor and the tribes have had a very contentious relationship, since he was elected, and I think we'll sort of see what 2022 brings with the election. And perhaps either the tribes see a clean slate with Governor Stitt again, or surprisingly, he does have a democratic challenger in the form of his former Secretary of Education, who does appear to pose a legitimate threat in a state that doesn't elect democrats. So perhaps we see changes in 2022. But right now, one bill is floating around, but I don't think many people are optimistic that it crosses the goal line.

ANDREW TOPPS: Professor Gale, in your state of Arizona, they just legalized sports betting in 2021. I know this because I am also an Arizona resident. But what does sports betting look like throughout the Grand Canyon State?

KRISTY GALE: Well, as both Professor Holden and Professor Wallach mentioned, there is Indian gaming in Arizona, so there had to be some conversation with the tribes about how we would divide this up? How would that look? We want to make sure that they're not negatively impacted, that the tribes are not negatively impacted because they've essentially had control of gaming in the State of Arizona.

But what Arizona decided to do was offer limited ability, and really only to the professional sports teams in Arizona to offer sports betting products. And so, each of the professional sports betting teams have found one or more partners to offer betting to the fans and I just want to note Arizona is one of only a handful states, maybe 13 or less states that also have authorized gambling on esports. And so that's the status of Arizona. They've opened it up, and it's a pretty good market. There's I guess more to be said about that, and retail versus iGaming, but definitely in Arizona, the pro leagues are leveraging betting, leveraging their partnerships, and adding betting lounges to their facilities to the arenas, etc. So that fans can come watch the game and but in those in those areas.

ANDREW TOPPS: Certainly, I know where the Suns play you know, once they win the title this year you know we're going to see a lot more ads with them and their partners through the sportsbook.

KRISTY GALE: That's what I say, when they win.

ANDREW TOPPS: Exactly. We do have a question from the audience for Chair Judd-Stein. With the neighboring states having passed sports betting legalization - New Hampshire, Rhode Island, Connecticut, New York - and I don't know how much you can speak to this, what is the delay on the proposals in Massachusetts?

CATHY JUDD-STEIN: Well, I'm going to give them the chair of the commission's answer. I'm not going to really opine on that. But I can let you know that certainly newspaper articles have raised this more frequently, and as I mentioned, the legislature, you know it's particularly that the State Senate is reportedly very much looking at these areas.

I have to tell you I do have a personal opinion and delay may mean that we're not repatriating those dollars that come with those bets that started being placed under Director McIntyre's oversight. But I know one thing the Massachusetts legislature takes very seriously and demonstrated back in 2011, is the desire to be thorough and deliberate and careful when they expanded the gaming act. And that is the same bill Governor Patrick signed into law.

As the regulator of casinos in Massachusetts, we recognize the comprehensive nature of the statutory framework that Massachusetts legislators provided that benefit the commonwealth by really maximizing the economic benefits of casino play, and at the same time really mitigating the likely, or anticipated harms or social and economic impacts that come with gaming. So that was very thoughtfully done, and at the same time they provided Massachusetts and the gaming commission was extraordinarily resources, so that we can get the regulation done right. That we can provide these kinds of opportunities and innovations that mitigate against for the community harm that are impacting their immediate neighborhoods, and also really provide the safeguard to ensure that the safety of the patrons and any other vulnerable population community. So, from my heart, I say, stay tuned if and when the Massachusetts legislature decides to legalize sports wagering. In Massachusetts it will be done very, very thoughtfully.

ANDREW TOPPS: And Professor Wallach, I know this is an issue you are well versed in. Why the delays in Massachusetts?

DANIEL WALLACH: Well, you know, time is not an enemy when a legislature has the ability to pass laws almost on year-round basis. There's a lack of a sense of urgency sometimes. But, there's also a significant departure between the two approaches, and when I track the legislation around the country, look at all the different states, my notes on Massachusetts were considerably longer than any other state, because it highlights all the different areas in which the house bill, which was passed by the house of representatives deviates significantly from the different senate proposals. The lead senate proposals sponsored by Senator Eric Lesser, and even from Governor Charlie Baker's proposal.

I never heard of a state where the governor sponsors bills, except, you know, a budget bill. Well Charlie Baker had his own sports betting bill. The key issues of areas of difference seem to be along the lines of collegiate betting. The house bill would allow betting on all collegiate sports, except, I believe, individual player proposition bets, whereas the Senate bill, championed by Senator Lesser, and similar to the Governor Baker's proposal would prohibit betting on all collegiate sports, which would be, maybe the first of its kind in the country. What a lot of States do, such as New Jersey and New Hampshire is they restrict the wagering on the in-state colleges and sporting event and sporting events that take place within the state. Such as you know, NCAA games and the like.

So, you have the overarching issue of how much collegiate betting would you allow. There's also the issue of market access. The casinos in the commonwealth of Massachusetts have made multibillion dollar infrastructure investments in it and have thousands of employees under their employ. They rightfully, in their mind, think that they should have control over the mobile sports betting licenses, which, anecdotal evidence has shown over the past year, is 85 - 90% of the bets in states that allow both types of wagering. And the casinos would like to control that aspect of it. So, the house bill grants, I believe an unlimited amount of untethered online sports betting licenses which would give any online sports betting operator the opportunity to become licensed and not need a partnership with a casino.

The Senate bill, on the other hand, limits the amount of untethered licenses to only six, and in total would grant approximately 24 - 25 online sports betting, but licenses half of which would be controlled by Massachusetts you know state license casinos. So, there's that issue to resolve there's also the issue of tax rates that arranging anywhere between 15% and 25% depending on the proposal licensing fees, problem gambling safeguards. The senate proposal probably goes much further than any other bill or enacted law in the country. Which is the proposal that's championed by Senator Lesser.

So, there are so many areas that need reconciliation and within the senate they don't have a meeting of the minds as to what the preferred approach is. So, because of all these differences, and the lack of a consensus within the senate. This is where we are now even though the house is approved sports betting bills in 2021, 2020. And this debate began as early as February 2019, so it might be an issue of too many chefs in the kitchen, and not speaking in a unified voice.

ANDREW TOPPS: Director McIntyre, we've talked about the potential legalization in Massachusetts. Seems this is more of when not if, and a significant number of betters in New Hampshire are probably coming from Massachusetts. What impact is legalization in Massachusetts going to have on New Hampshire?

CHARLIE MCINTYRE: It's a good question, Andrew, because obviously you can imagine retail behavior doesn't know geography, it doesn't care. It goes where the product is the best and crosses borders. Customers, regardless of whether it's gambling or food or a restaurant. So, when you craft it, we had the benefit of crafting our own legislation, and all the policy decisions that were made on our sports betting law were made by the Lottery staff, in terms of the decisions related to all those questions.

One of the things we did in the legislation was our relationship with DraftKings who was our vendor partner is actually a contractual relationship; it's not a law. And so, if there is a market change condition in Massachusetts, we're able to just renegotiate our contract with DraftKings to take advantage of commercial activity at its best. So, there's that we don't have to go back and change the law. We just have to talk to DraftKings and say, “well this economic factor has changed let's talk about changing our agreement.”

Second, we don't have that silly state income tax which really helps. We don't pay income tax in New Hampshire, as you know being a student up here, so that helps. It's an economic benefit to not have to charge your customer a state income tax. Also, particularly when comes to the retail behavior, because of the locations of the casinos in Massachusetts are not near us, as Kathy well knows. The drive from New Hampshire to Everett is not an easy one, particularly during the day. So, I grew up in Quincy just outside Boston, and it's about 8 miles as a crow flies, but the crow's gonna beat you every time to Everett from Quincy, and so that traffic the North Middles, Northern Middlesex County of Massachusetts and Northern Essex are going to drive up here because it's easier, faster.

Our liquor is way cheaper, and you don't pay taxes on the stuff you buy up here like clothes. So, one of the things we found is because we do geography checks, if you are here placing a bet, we have to know you're in state boundaries to comply with Federal law. So, one of the things we found through our heat plumes of activity is, we have a lot of activity at the Mall of New Hampshire and at the State liquor stores. So, the parking lots, at the state liquor stores, you'll have a ton of activity on sports betting because they've come up here because liquor prices are cheaper. They're placing sports bets and they're going back with a bottle of wine or two and they're going back to Massachusetts.

Also, another factor to come into it is the retail player. The person who walks into a sportsbook is very different customer than a person who uses their phone. They're just two different people. And so, you have to differentiate, in how you cater to those two different customers. It is very important. So, I know that was a long answer, but I hope it makes some sense.

ANDREW TOPPS: Oh, absolutely. You know New York, another state that legalized sports betting is the biggest sports betting state currently, they modeled their laws after the New Hampshire Lotteries. But right now, my understanding is that it's a 51% tax rate for sports book operators. Where do you see the proper tax rate falling? And has that tax rate worked in New Hampshire for your operation?

CHARLIE MCINTYRE: Well, it gets back to an earlier point, about how you built it, right? A lot of the policy decisions we made related to what ultimately was the amount we would take. And we don't call it a tax rate because we're anti-tax. We call it a revenue share model so just saying we're not allowed to use a “T” word up here. So, one of the things we did is we control the marketing. We have a guaranteed spend every year with DraftKings, because we have an ad firm in New Hampshire though our lottery.

And we guarantee to spend so much money every year in partnership with DraftKings in the state. So, all that money they would spend in marketing, which, as Dan Wallach will tell you, is a big number for acquisition costs is off the table up here. So rather than all those free offers and free bets in New Jersey, so much of it is promotional dollars and free offers and free bets. Those are all off the table for us.

And so, the second biggest expense for sports book operator is marketing, and we've taken that burden on for ourselves. They still do the national advertising, but we've taken it on for ourselves in-state. Now we reap the benefits of that, and DraftKings has been fine with it. It also guarantees we control messaging in the state and we're not being inundated with an ad every nine seconds. Which is what you get now in New Jersey and Pennsylvania and Colorado. I've even seen news articles about house speakers and senate presidents saying, I've had it with seeing and looking at sports betting ads in my state. How do we control that? And so that was one of the policy decisions we made early. At the end of the day, each state is going to develop its own little quirkiness and build out. And if you look at the laws that pop up now, they're always amalgams of like 12 other states laws and policy, decisions.