DELAWARE: Bettors get best of state parlays

[clevfan]

November 1, 2009


Bettors get best of state parlays

Unusual outcomes lead to heavy losses last week

By CRIS BARRISH
The News Journal

For six weeks, Delaware's new sports betting venture was cruising, generating more and more money for the state's treasury each week -- a total of $491,000.

Then sports betting hit an iceberg. Suddenly, what had appeared to be a growing, steady source of revenue to the state became erratic and unreliable.

Gamblers won big in the seventh weekend of the National Football League season, which concluded Monday and saw 11 of 13 favorites pay off -- sinking much if not most of the state's profits.

Officials of the Markell administration said the state accounting system had not yet calculated the damage.

The losses were so high, though, that on Sunday night, computers at Delaware's three racetrack casinos stopped processing winning tickets on Half-Point Parlay, one of three sports betting games.

The state's written policy, printed on the back of the betting cards, was to cap weekly losses on each game to twice the amount bet plus $100,000. The state ultimately decided not to cap losses, a move that would have caused Half-Point Parlay winners to receive less in winnings. Winners did not get paid until after 1 p.m. Monday.

Officials did reveal that nearly $600,000 was wagered on last weekend's games, but provided no other information about the week's results. If one-third -- $200,000 -- was bet on Half-Point Parlay, the casino losses would have exceeded $500,000 and the loss to the state would have been about half that amount.

That loss was likely exacerbated by bets on the other games -- Teaser and Super Teaser, which are easier to beat but pay less. In addition, Sunday's losses likely continued into Monday night, because the Philadelphia Eagles, a betting favorite in Delaware, covered the point spread against the Washington Redskins. A point spread, also known as the betting line, is the number of points by which one team is expected to win.

Consider one bettor's luck last week. The unidentified man from Magnolia won two 10-game parlay bets that featured 800-1 odds, and won $96,000 on the $120 he wagered.

While sports betting was never seen as a solution to the state's budget troubles, when the Legislature approved the venture this spring, it was expected to directly add about $3 million to the approximately $200 million a year that Delaware Park, Dover Downs and Harrington Raceway contribute to the state treasury. Another $14 million was anticipated from "crossover" bets by sports gamblers who play slot machines.

That hope has steadily eroded, first by a costly lawsuit and federal court ruling that limited Delaware's betting to parlay wagers on pro football, and now by a wipeout weekend that casts doubt on its ability to generate much money.

P. Gary Ward, a sports betting lobbyist who advocated its legalization in Delaware, said sports betting was never going to generate much money for the state. But in a year when many of the NFL teams are losing by big margins, bettors may have more chances to beat the casinos in coming weeks, he said.

"With sports betting, you don't have to make money, you can lose money," Ward said of the casinos. "I've said this all along that they have to have more action. They need college betting and other sports. Having just one sport is not very profitable."

James Karmel, an assistant history professor at Cecil Community College who has written a book about gambling in Atlantic City, said the volatility Delaware is experiencing is a consequence of being able to offer only pro football parlay bets.

"Serious bettors are going to blow off three-game parlays," Karmel said. "Until Delaware is able to get single-game betting, it's never going to be a huge revenue generator for the state."

Bettors skeptical

Now some bettors also are wary about the integrity of the enterprise, casting doubt on whether the delay in payments could lower the amount of money bet each week, and kill the lucrative crossover traffic to slots.

"I'm going to be skeptical, especially with what happened," said Wayne Campbell, who shortly after noon Monday feared he would have to wait weeks or perhaps a year to be paid his $4,000 in winnings after Delaware Park announced that they still could not cash tickets.

Told that the state could have reduced his and other winners' payments under its rules, Campbell said: "Oh, man, that wouldn't have been good at all. There would have been some real irate people out there. People would have been arguing and they probably would have had to get more security."

Last weekend's fiasco was the first operational problem that has surfaced in Delaware's return to sports betting after a failed venture that lost money in 1976.

But it was the latest in a series of blows to Gov. Jack Markell's highly publicized effort this spring to bring Las Vegas-style sports books to Delaware's casinos and tens of millions of dollars a year to Delaware's treasury.

Markell initially sought to have up to 10 sports books sprinkled up and down the state. But, under pressure by the casinos, lawmakers quashed that effort.

After the General Assembly approved casino sports betting in May, Markell declared that the state wanted to offer single-game bets on pro and college football, basketball, NASCAR and other sports -- even after America's major sports leagues threatened to sue, saying the plan violated federal law.

The leagues filed suit in July, and a month later a federal appeals court declared the leagues victorious and limited Delaware to bets on a minimum of three NFL games at once. The lawsuit cost the state about $500,000 in outside legal fees.

Beyond that expense and the potential political cost to Markell, the court decision had already forced administration officials to reduce initial revenue estimates from sports betting and crossover bets. Though the initial forecast in June called for $17 million in new state revenues, that figure had already dropped to $6.7 million early in October.

Now officials just don't know -- or won't say -- how much they expect to reap.

Losses mount

Tom Cook, the state's acting finance secretary, said officials don't know how much the casinos lost last weekend -- yet. The revenue figures Cook provided, showing a $491,000 profit to the state, were through Sunday -- before the state paid off the big winners.

Though the state will be able to calculate last weekend's losses by Monday, Cook said he won't provide the public an update until early December, under a state policy not to disclose lottery revenues until after the last Sunday of each month.

Adding to the confusion that prevailed Monday, when winners flocked to the casinos to get paid, lottery director Wayne Lemons initially said a computer "glitch" had halted payments Sunday night.

Nearly seven hours later, though, Cook revealed what actually had happened -- that heavy losses had triggered payment capping software, and stopped casino betting machines from processing winning tickets.

Though the system worked exactly as designed, Cook said, officials from the state's sports betting vendors, Scientific Games and Brandywine Bookmaking, had said before the football season that to their knowledge, the capping software had never been activated anywhere. Cook later said the "glitch" was the computer system's inability to override the halt in payments. The system has been reprogrammed not to halt payments in the future, he said.

Cook added that the state still expects to make money this year, but stressed that it cannot lose money from sports betting because its contract with Scientific Games requires the vendor to reimburse any deficit.

Markell did not return calls for this article. Spokesman Joe Rogalsky issued this statement: "The sports lottery appears to be popular and appears to be generating additional traffic for the casinos. Obviously, just like in Las Vegas, there may be some ups and downs depending on the games in a given week."

With more competition coming from neighboring states, however, the opportunity for Delaware to capitalize on sports betting has diminished.

Though Delaware is poised to authorize table games such as blackjack and roulette next year, New Jersey already has them and Pennsylvania is planning to add them. Maryland also has authorized slots casinos.

Beyond the specter of more competition, Delaware casinos have recently been hurt by the struggling economy. Dover Downs last week reported that third-quarter revenues were off nearly 6 percent, and that the inability to offer more than pro football parlay bets has forced them to scuttle construction of a $100 million sports parlor and parking garage.

Cook noted that sports betting, which drew nearly 40,000 wagers last week, gives Delaware something other states don't have.

"The sports lottery has always been a tool in the toolbox to differentiate Delaware from surrounding competition," Cook said. "It creates and generates foot traffic and exposure to our product that may not have existed without it."

House Speaker Bob Gilligan agreed, saying that even with Sunday's losses, sports betting is an asset to Delaware.

"I still think we're going to make money. They wanted to get people in the casinos and eventually play slots," Gilligan said. "What happened last week isn't going to happen very often."

Jay Kornegay, who runs the sports book at the Las Vegas Hilton, said last week was the "worst weekend I have experienced" with pro football games in the 22 years he has been involved in sports betting.

Casinos in Nevada with sports books, however, don't have to rely solely on pro football parlays to make money or cushion against losses. They offer bets, single-game and parlays, on multiple sports. This week, they're taking bets on pro football, college football, baseball's World Series, basketball, golf and hockey.

Kornegay encouraged Delaware to stay the course, though, saying that over the long run, the state will make money.

"The beauty of sports betting," Kornegay said, "is that they are going to come back -- and probably betting with both fists full. The odds are in favor of the house and the books will be OK."

Additional Facts
State revenue estimates from sports betting

June: $3 MILLION


*October: $500,000


Current estimate: UNKNOWN


State revenue through the games of Oct. 19: $491,000


Estimated loss in state revenue the weekend of Oct. 24: $250,000


•After court rules the state can only offer parlay betting on NFL games