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August-01-2009,
The Big Gamble: The NFL Versus Delaware...By Jay Graziani

Delaware is known as the "First State" of the Union, but in the 21st century it looks to be first in something else - first state east of the Mississippi to offer full-service sports gambling, leveraging its existing racinos and its key location in the hub of the Mid-Atlantic to capitalize on a captive audience of about 30 million people in the Northeast who have no other legal opportunity to make a bet on a sporting event.

Delaware made its case to re-open sports betting in May, much to the chagrin of the "moral majority," as well as the major professional sports leagues. With an anticipated September 10th roll-out date, Delaware's racinos are ramping up their activities in anticipation of the kickoff of the NFL season. The recently passed state budget anticipates over $50 million in revenue from sports betting operations this fiscal year alone.

Naturally, the powers-that-be are determined to stop the rapid proliferation of gambling across the U.S. In April, a lawsuit was filed challenging the constitutionality of sports betting in Delaware. That case concluded with the state Supreme Court ruling that parlay bets were based predominantly on chance rather than skill, and therefore permissible under state law.

But Delaware's ambitious plans hit yet another roadblock last week when the major professional and amateur sports leagues sued the state over the gambling issue. The NFL, NCAA, MLB, NHL, and NBA banded together to argue that Delaware's sports gambling operations should be limited solely to services that had been offered by the state prior to the passage of the federal Professional and Amateur Sports Protection Act (PASPA) in 1992. That would mean Delaware wagering is limited solely to parlay bets on the NFL, as Delaware previously offered them (albeit only briefly in 1976) and is therefore "grandfathered" under PASPA.

While the legal case seems to be yet another roadblock towards widespread acceptance and legalization of sports gambling, advocates of expanded wagering must not overlook the sunny side of this dispute: regardless of the outcome of the legal case, state-sponsored parlay bets this football season are a slam dunk. The NFL has not even opposed parlay betting in the current lawsuit. As Michael Barlow, legal counsel for Delaware Governor Jack Markell put it, "it is clear some form of sports betting will go forward in Delaware".

So why even bother suing if some form of NFL wagering will go forth, regardless?

One way to look at it is that the leagues are making a gigantic wager themselves. Blocking wagering options might significantly reduce the customer base of the Delaware sports betting operation. The less leeway Delaware has in establishing its sportsbooks, the more likely they are to fail. If the system is not profitable enough to sustain itself, it will quickly fall apart and this whole gambling issue will be swept under the carpet. Why would other states bother to go through the legal hassles and start-up costs to establish wagering only to see it fail miserably?

In this sense, Delaware is a test case, and the outcome of this experiment has potential to completely shape the gambling environment in the U.S. for years to come.

The crux of the sports leagues' gamble seems to be that the lack of single game wagers will kill a large part of Delaware's potential business, and therefore its profitability. Delaware's earlier attempt at booking sports, all the way back in 1976, lasted only a few months and was widely accepted as a failure. Will it be any different this time around?

The leagues hope Delaware flops, reducing the attractiveness of state operated sportsbooks, making future legal challenges easier, and maintaining the leagues' stranglehold on the stateside sports gambling industry.

Of course, the big gamble is that Delaware succeeds, and the NFL's passive acceptance of parlays works against them further down the line. If parlays are OK, much of their argument about gambling wrecking the "integrity of the game" goes right out the window. Setting pointspreads on a 2-team parlay is, after all, not very different from setting pointspreads on each game individually. And what exactly is the fundamental difference between betting parlays on the NFL and parlays on, say, the NBA, MLB, or NHL? Not much, and so allowing NFL parlays in Delaware is one small, but tremendously significant, step on the path to full acceptance of sports gambling.

If successful, Delaware's efforts may spur other states to offer legalized sports gambling and set off a chain reaction that expands gambling throughout the U.S., much like the rapid expansion of state-run lotteries, now established in 42 states since the first was offered in New Hampshire in 1964. Montana and Oregon are also grandfathered under PASPA, and other states such as New Jersey have already started legal maneuvering to get themselves exemptions as well. Expect more cash-hungry state governments to join the cause if Delaware is able to come anywhere close to its revenue estimates.

The sports gambling movement has been slowly and surreptitiously gaining momentum. The past decade has seen the rise of online sportsbooks; the Unlawful Internet Gambling Enforcement Act is still being disputed within the WTO framework; and individual states, feeling a cash crunch due to the stagnant economy, are starting to realize that sports gambling can work to pad their budgets. On the federal level, U.S. Representative Barney Frank's Internet Gambling Regulation, Consumer Protection and Enforcement Act (HR 2267) has been gaining traction, attracting 50 co-sponsors. With the more socially liberal Democrats in power and an economic crisis on hand, the time is ripe for big changes in the legal structure of betting in the U.S.

Let's hope Delaware can actually execute this coup and start the dominoes falling for a long-overdue legal system for sports gambling in the U.S.

08-01-09
Jay Graziani
MajorWager.com
graziani@majorwager.com

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