With the Supreme Court ruling in New Jersey’s landmark case set for October, iGaming Business North America caught up with the Competitive Enterprise Institute’s Michelle Minton, one of the more vocal proponents of the type of state autonomy New Jersey is seeking.
iGaming Business North America: Why do you think states are better positioned than federal authorities to regulate sports betting?
Michelle Minton: It is a state-based issue. Federal authorities are too distanced from what is happening in individual states. State lawmakers are better equipped to react to changing situations and scenarios. They can test out different restrictions of licenses and different tax levels, and if those don’t work they can modify them fairly easily compared with the federal government.
iGBNA: Is there a danger that giving individual states the right to legislate on sports betting might still limit some Americans' ability to gamble as some states may not consider themselves qualified or able to take on the regulatory work required?
MM: Yes, that is highly likely. This is a fairly unique situation for our country because sports gambling has been technically illegal for most of the states for the last 25 years, so there is going to be an adjustment period of maybe 10 years or so where states work out what they are capable of.
But almost all of the states have some sort of gambling authority and they are well versed in the topic at hand, so most of those states that want to regulate sports betting will be fairly well equipped to do so.
They will also be able to work with states such as Nevada that have been regulating this type of gambling for many years, or with New Jersey or Delaware, which have been working with new forms of internet gambling.
iGBNA: Ten years would be a long adjustment period. But are you saying you don’t think it is really that long when compared with those 25 years?
MM: Assuming PASPA is struck down or repealed I think a lot of states will legalise very quickly, within three to five years. But there will be a bit of experimentation happening in the states over the next decade, or possibly longer, where they figure out what is right for their state and that should be the case.
Even if they figure out what is right at one time, the scenario will change as other states get into the market so they might have to adjust their tax rate or the number of licenses that they are offering.
iGBNA: What do you think should happen if PASPA is lifted but an individual state chooses not to take action – would you support the idea that a federal lifting of the ban would mean it was legal in those states that didn’t legislate unless they specifically prohibited it?
MM: Absolutely. The way our country’s laws are supposed to work is that we don’t have to have permission for everything that we do. Wearing red shoes on Sunday isn’t legal because there’s a law for it, it is just legal because it is not illegal.
Rights are reserved to individuals and states unless the states choose to prohibit something. If a state has no laws on the books regarding sports gambling and no language in its existing gambling laws related to sports betting then I think it should be considered legal in that state.
iGBNA: Some critics of a state-by-state approach have said they don’t feel intrastate models will be able to compete with big offshore sportsbooks, possibly because they might restrict some types of betting. What do you think state regulators would need to do to ensure this doesn’t turn out to be the case?
MM: Just like any other business they are going to have to figure out how they can be competitive in a global market for sports betting. That might involve lower tax rates, more offerings, different types of games, or even forming interstate compacts with each other, which in our country the states are very good at.
We already have an interstate regulatory body for certain types of lottery games like the Powerball and the Mega Millions, so we are already well positioned to do these sorts of things.
iGBNA: The AGA and leagues such as the NBA are bullish that the ban on sports betting will be lifted within three to four years. Do you think this is realistic given the deeply polarised views of politicians on the subject and what do you see as the main hurdles?
MM: The timeline I was thinking of was probably within the next five years. It is difficult as we don’t really know yet how this administration views this issue and there are a lot of other things that Congress has to consider. So it is not clear what will happen during this administration but I think it will definitely happen during this one or the next.
iGBNA: How do you see the casinos and leagues resolving their differences on the issue of sports betting should the Supreme Court find in favour of NJ?
MM: The leagues just won’t have a choice anymore. What needs to happen is that team owners need to start pressuring the leagues to get to grips with the reality that it is happening, and as states start to legalise it they need to do a better job at educating their members in terms of match-fixing. They need to be better at monitoring that and dealing with that if they want to protect their own reputation.
As to how the Supreme Court case might shake out, I think there is a big risk that what the Supreme Court will decide to do is end the exemption for Nevada and the other states that have sports gambling. I believe that the courts should always have ruled that federal regulation on a wholly intrastate matter is a violation of the constitution, of the 10th amendment.
But now they might see no other way forward than to deal with the problem of unequal footing — the idea of treating some states differently than other states — than to end the exemption that allows Nevada and a few other states to offer sports gambling.
That is a big risk, but I think that would only increase the pressure on Congress to repeal PASPA.
iGBNA: You mentioned match-fixing. How do you feel issues like sports integrity and match-fixing would be affected by a lifting of the sports betting ban?
MM: The leagues can no longer say it is the government’s job to deal with this. It becomes their job, which it always should have been. Nothing really changes in terms of incentives for the players and the officials. Professionals make a tonne of money; they have multi-year contracts; it would take a lot of money or blackmail to convince them to participate in one of these match-fixing schemes.
So that doesn’t change when you have licensed operators. In fact it becomes less because the licensed operators have more at stake — if they get caught in such a scheme they lose their license.
A lot the leagues are looking at this already. They should be looking at how the leagues in Europe, where there is a lot of sports gambling, handle this issue. They should be working with the gambling industry and working with lawmakers as the laws start being written so they have access to the information that the licensed bookies have.
That is the most useful thing the leagues can have if they truly want to identify and deal with any type of corruption scandal and this is particularly true for the non-professional athletes under the NCAA. They need to be extra careful because their players aren’t paid so they are more vulnerable to that kind of temptation and I do believe right now that a lot of leagues are talking about this.
They probably should have been looking at this a couple of years ago but it is good they are doing it now and figuring out how they can better educate their players and officials on this issue. I think it will be easier for them to deal with corruption scandals once the gambling industry is lawful and working with them.
Michelle Minton will be speaking on the '25 years of PASPA' panel at the inaugural Sports Betting USA conference, taking place in NYC from 14-15 November.
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