Delaware may take a chance on sports betting

[Louis Cypher]

www.delawareonline.com

By JENNIFER GOLDBLATT
Staff reporter
03/02/2003

When lawmakers legalized slot machines in 1995, they didn't expect to hit the jackpot: Delaware could reap $11 million each year, the state's finance director said at the time.

But it seems that Lady Luck was on Delaware's side. The 5,430 slot machines at Harrington Raceway, Dover Downs and Delaware Park put $193 million into the state's coffers last year.

Now the stakeholders of Delaware's slots revenue are trying to figure out how to defend their good fortunes from Maryland and Pennsylvania, where lawmakers are considering legalizing slots. A 10-member task force of government and casino industry leaders is considering the feasibility of sanctioning sports betting - a practice allowed by federal law only in Delaware, Montana, Oregon and Nevada.

But this time, Delaware may not be so lucky.

In Nevada and Oregon, the only other states where betting on professional sports is legal and in operation - that form of gambling brings in small change relative to other forms.

The $2 billion wagered on sports betting at Nevada's 154 sports betting operations last year was just 1.4 percent of the $136.1 billion wagered on all forms of gambling there, and it's been on a steady decline for the last three years, according to data from Nevada's Gaming Control Board. The casinos' share amounted to $111 million last year.

In Oregon, the $9.9 million of "Sports Action" tickets sold during the last football season accounted for less than 3 percent of the $336 million of all lottery ticket sales in the last fiscal year, according to the Oregon Lottery Office. After winnings and commissions were doled out, income to the state amounted to $2.4 million.

Industry experts point to a combination of factors that keep sports betting from being more popular than it is in the states where it is legal:

• In Nevada, there are many other gambling options.

• Outside of Nevada, those who want to make a sports bet can easily do so through the Internet or illegal bookmakers.

• Sports betting is a more specialized form of gambling and attracts a much smaller set of gamblers than activities such as slots.

"It's just hard to make this work as a major revenue generator," said William Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno.

Though Gov. Ruth Ann Minner has said she opposes any expansion of gambling, proponents of sports betting are looking to stay ahead of the game. Given that 32 percent of all visitors to Delaware's casinos come from Maryland and 14 percent from Pennsylvania, Delaware finance officials estimate the state could lose $48 million a year if the legislation to sanction slots, or Video Lottery Terminals, is approved in those states.

The task force is studying how sports betting could work, how much revenue it could bring in, how much it would cost and how the state and casino operators would share costs and revenue. Some task-force members say they are not discouraged by the small profits sports betting has produced for other states.

Denis McGlynn, chief executive of Dover Downs, conceded sports betting probably won't be the "second coming of slots."

But, he said, the combination of slots and sports betting could give Delaware a competitive advantage over neighboring states.

"The most outstanding benefit of this is that no one else would have it," McGlynn said. "There's reason to believe that we could do at least as well as some of the individual major casinos in Las Vegas would do."

Illegal bets attract many

A main obstacle for building a following to sports betting is the competition from so many forms of illegal gambling.

For anyone who wants to bet on a sporting event now, there are hundreds of opportunities that don't require a trip to Oregon or Nevada. Bettors need only a credit card, an Internet connection or a relationship with an illegal bookmaker.

Estimates on the market for illegal sports betting vary widely. The National Gambling Impact Study Commission estimated that anywhere from $80 billion to $380 billion is illegally wagered on sports each year.

About $4.5 billion was wagered over the Internet last year. The amount of money wagered over the Internet is expected to double by 2005, according to Wagering on the Internet, in a November 2002 report by gaming-research firms Christiansen Capital Advisors and River City Group. About 9.6 million people worldwide gambled on the Internet last year, and about half of those were from the United States. About 15 percent of the Internet bets were on sports betting, according to the report.

Eugene Christiansen, chairman of New York-based Christiansen Capital Advisors, said the proliferation of Internet gambling options is why sports bets play such a small role in Las Vegas.

One of the attractions is that it escapes federal taxes. The Internal Revenue Service includes legal winnings as taxable income.

There is no federal law against betting on the Internet, but the U.S. Department of Justice has ruled that operating an online sports-betting operation is illegal, according to Nelson Rose, a professor with Whittier Law School in Costa Mesa, Calif. U.S. lawmakers have proposed but not passed bills in recent years that ban the use of financial instruments in Internet gambling.

About 1,800 Internet gaming sites have proliferated online since they first started appearing in 1995, and about 72 governments around the world - mostly in the Caribbean and South America - regulate and license Internet gaming.

Sixteen banks, including Bank One, MBNA and Household Finance, reject credit card purchases of online bets, according to the Wagering on the Internet report.

Ease of access and an improving reputation of Internet gambling have contributed to its popularity, said Sue Schneider, chief executive of River City Group, a St. Charles, Mo.-based Internet-gaming consulting firm.

"Concerns at the beginning were: 'Are these guys credible?' and 'Can they be fair?' " she said. "As it has gotten more regulated, some of the credibility issues have dropped."

Eadington said Delaware's lottery operation would have a hard time competing with the terms that are available on the Internet and through illegal bookmakers.

"The state would be terribly reluctant to offer credit, and illegal bookmakers offer credit on a regular basis. It's a major convenience for a lot of gamblers," Eadington said. "There would be a tremendous suspicion on the side of gamblers, who wouldn't want governments to know how much and what they bet on," he said.

"Add all these things up and it's pretty hard to see how substantial a market could be if the purpose is to raise tax revenues for the government," Eadington said.

Sports bettors different

Sports betting also attracts a smaller audience than slots.

"With sports betting, even though there's a following, it tends to be one of the more technically challenging to do it right," Eadington said. "There's quite a bit of analysis that is done and marketing, as opposed to a slot machine, which is a pure chance game."

Andy Glazer, a Hollywood, Calif.-based gambling coach, author and columnist for the Detroit Free Press, said slots players are a breed apart from sports bettors.

"Slot players prefer to have less pressure on them and to be able to proceed at their own pace," Glazer said. "They really don't like to be criticized for making a mistake and they don't want to look foolish if they make an incorrect decision. When they're sitting at the slots, it's just them and the slot machine. Slot play is just for people who are a little less outgoing, a little more afraid of criticism and people who want to set the pace of their own gambling."

Slots play also offers instant gratification; sports bets require some patience.

"You make a wager, and your money is completely out of your control for at least two hours," Glazer said.

Delaware still intrigued

Members of the sports-betting task force say they are trying to figure out the key elements of how sports betting would work in Delaware. But they said sports betting still is appealing, despite its small reach in Oregon and Nevada. They point to events such as the Super Bowl, which attracted $71 million in Nevada wagers in 2002.

At MGM Mirage, for example, Super Bowl weekend tends to be the second- or third-best revenue generator of the year. "But it's not because of revenues on sports wagering itself as much as it is the other revenues that the customers create who come into Las Vegas," said Alan Feldman, a spokesman for the Las Vegas-based company, which owns or operates 13 casinos. The casinos sponsor parties that spoil guests with free-flowing food and comfortable couches, and sometimes recruit celebrities for the occasion.

"It is there because it serves a purpose of creating a centerpiece of fun for an awful lot of other activities, like shows, restaurants, shopping and other forms of gaming," Feldman said.

Proponents said adding sports betting could help the state keep its slots revenue from being lost to neighboring states.

"It would be a competitive edge in Delaware's back pocket, when and if they need it," Bill Fasy, chief operating officer of Delaware Park, said.

"Since we have an opportunity here and a legal venue, then I think we owe it to ourselves - the state included - to investigate the possibilities," said Bruce McKee, general manager of Midway Slots at Harrington Raceway. "Hopefully, there will be some overflow of slot patrons. If it weren't for that, I'm not sure that it would be worth doing."

Salvatore DiMario, executive director of Delaware Standardbred Owners Association, is hopeful about what sports betting could bring.

"The competitive edge will preserve and give the Delaware racetracks something that the surrounding jurisdictions don't have, if and when they get Video Lottery Terminals," DiMario said. "To be honest, no one knew how well [the video lottery industry] would do, so even though in Las Vegas it's only 1 [percent] to 2 percent, there's no way to know what it would do here. It may surprise people. It may end up being 4 or 5 or 6 percent. And that's a significant amount of money."

Rep. Bill Oberle, R-Beechers Lot, who sponsored the legislation to form the sports-betting task force, said he is still interested. He said the same people who bet on sports may not play the slots, but their spouses could.

"It enhances the slots play and vice versa," Oberle said. "It's minimal, but there is an enhancement."

[MondoMan]

The only thing you'll see in Delaware are the "parlay cards". Delaware will have something similar to Oregon.

[wiley5]

With the two major Nascar races in Dover each year, they could bring in a substantial amount of revenue on Nascar alone if they allowed betting on it.

[MondoMan]

Delaware tried this about 25 years ago. They didn't even make it through a whole season. In fact, they cancelled and refunded wagers within he first few weeks.

[jdodger]

I guess this means no Delaware Tourism ads during the Super Bowl.