Legal sports betting set to explode after court ruling. But get ready for a battle over the dollars

May 14, 2018 2:08 PM PT

Suddenly, all bets are on regarding the future of American sports gambling.

A surge in betting caused by the Supreme Court’s lifting of a federal ban on sports wagering is expected to trigger new gaming opportunities and burnish existing sports books in Las Vegas casinos — but also spawn a battle in California among horse-racing tracks, Indian casinos and card clubs as they try to grab a slice of the added action.

“We are excited and we are ready to roll on this,” said Ernest Stevens Jr., chairman of the National Indian Gaming Assn., a trade group for Indian casinos.

The high court’s move overall could unleash a torrent of gambling nationwide that hitherto was illegal and totaled at least $150 billion a year, according to the American Gaming Assn., a casino trade group that estimates 97% of current U.S. sports betting is illegal.

And the amount illegally bet on sports might be as high as $400 billion a year, noted Brian McGill, a gaming analyst with the research firm Telsey Advisory Group. “The process will now begin for each state to pass a law to allow for sports gaming,” McGill said in a note to clients.

Assemblyman Adam Gray (D-Merced) said Monday he would pursue a constitutional amendment that, if approved by voters, would allow sports betting in California.

“It is time to bring this multibillion-dollar industry out of the shadows,” Gray said in a statement. Gray and other legislators had tried four other times since 2012 to allow sports betting in the state, but none of the bills reached the governor’s desk.

Approval will raise a list of questions for California legislators, including: What should the tax rate be on wagering? Where would that tax revenue go? Can the betting be done on the internet as well as at physical locations? What types of bets would be allowed and on what sports?

Meantime, DraftKings Inc., the leading player in the popular online daily fantasy sports business with nearly 10 million customers, announced it would jump into the sports-betting market in light of the ruling.

“DraftKings will be able to harness our proven technology to provide our customers with innovative sports betting products,” said DraftKings Chief Executive Jason Robins in a statement, adding that his firm also remained “fully committed” to continuing its fantasy sports business as well.

Robins said DraftKings would start working with states that allow sports betting and that “the addition of online and mobile sports betting holds the potential to generate billions of dollars annually for cash-strapped state governments.”

FanDuel Inc., DraftKings’ main rival in online fantasy sports, likewise signaled it would enter the sports-wagering field, saying “we will bring innovation to the sports betting space” and “create a sports betting product that fans will love.”

Indian casino representatives say they recognize that adding sports betting at Indian casinos will first require lawmakers to adopt regulations, taxes and fees in those states where it is proposed. But they expect those news laws will ensure that the tribes retain the exclusive rights to operate casino-style games.

“California voters have, on numerous occasions, confirmed the exclusive right of California tribal governments to operate casino-style games,” said Steve Stallings, chairman of the California Nations Indian Gaming Assn. “Legalization of sports betting should not become a back-door way to infringe upon that exclusivity.”

If the association’s stance is a warning to other state gambling interests to back off from pursuing a sports book, at least one major racetrack owner is having none of it.

“We would pursue [a sports book] at every one of our racetracks,” said Tim Ritvo, chief operating officer of the Stronach Group, which owns Santa Anita Park in Arcadia and other tracks.

Noting his tracks’ experience with betting, “this is a new form of gaming that we should be entitled to,” Ritvo said. “What we’d want is a level playing field.”

Kyle Kirkland, president of the California Gaming Assn, which represents card clubs in the state, said in a statement that the Supreme Court decision represents an opportunity for clubs to offer sports books.

“The decision provides a pathway to help eliminate illegal gambling occurring outside of gaming facilities and create an open, transparent, and responsible industry with fair consumer protections for fans who seek to enhance their sports-watching experience.”

But Indian casinos are not likely to give up their exclusive rights to operate casino-style games without a fight.

In 2004, Indian casinos in California spent about $33 million to defeat a measure that would have allowed racetracks and card clubs to also operate slot machines. The tribes won when backers of the proposition pulled the plug on their campaign a month before the election.

The Pechanga band of Indians, which in March opened a $285-million expansion of its resort and casino in Temecula, said they consider sports betting a “potential amenity” to the gambling already offered in its casino.

Pechanga Tribal Chairman Mark Macarro said in a statement that “we look forward to engaging in a conversation with fellow tribal leaders, policymakers and industry stakeholders to see if there is a path forward for sports betting in California.”

Stevens, chairman of the National Indian Gaming Assn., dismissed suggestions that adding sports betting at Indian casinos would require big investments and the type of expertise that many small, rural casinos don’t have.

“I would think the overall industry is prepared to jump into this,” he said, adding that sports betting could boost revenue as much as 5% on Indian casinos.

However, Kate Lowenhar-Fisher, chairwoman of the gaming practice group at law firm Dickinson Wright, said California would probably be a “tricky jurisdiction” for legalized sports betting, largely due to the compacts negotiated between the state and the Indian casinos.

Tribes with compacts that do not specifically mention sports betting may decide to renegotiate those agreements, and that could take years, she said.

“There was gridlock over internet poker, so I shake my head, wondering whether the state gaming authorities and tribal gaming authorities can actually agree on something,” she said. “I wouldn’t necessarily bet on it.”

Gaming stocks jumped as investors saw the ruling as fueling additional revenues for the major casinos’ sports books. The gainers included MGM Resorts International, Caesars Entertainment Corp. and Boyd Gaming Corp.

“We’re embracing it and looking at it as an opportunity, not a threat,” said Jay Kornegay, director of the sports book at the Westgate Las Vegas Resort & Casino.

“We’ve been preparing for this,” Kornegay said. “With the expansion, we might reach a demographic we’ve never seen before, with a lot of people introduced to sports betting for the first time.”

MGM Resorts also applauded the ruling, saying it gives the states “the opportunity to protect consumers and benefit the public by regulating and taxing sports betting.”

Nevada was exempt from the sports-betting ban that was lifted by the Supreme Court. The Nevada Gaming Control Board, which regulates the state’s industry, said it supported the court’s ruling and “looks forward to acting as a resource and sharing our model” with states that choose to legalize sports betting.

The American Gaming Assn. likewise praised the ruling as “a victory for the millions of Americans who seek to bet on sports in a safe and regulated manner.”

“Today’s ruling makes it possible for states and sovereign tribal nations to give Americans what they want: an open, transparent and responsible market for sports betting,” the group said.

The professional athletes on which the legal bets would be made also are paying close attention to ensure they aren’t left out of any financial bonanza in wagering.

The players unions for Major League Baseball, the National Basketball Assn., the National Football League and the National Hockey League last month said in a joint statement that “the athletes must also have a seat at the table to ensure that players’ rights and the integrity of our games are protected.”

Major League Baseball and others also made a point Monday of saying they want to ensure the integrity of all sports involved in legal wagering.

Asked if the spread of legal sports betting places games more at risk to being fixed in any way, Westgate’s Kornegay replied: “Absolutely not. It’s a better deterrent and more protected being open and regulated than being underground.”

But some are troubled that as legal sports betting widens, so does the prospect of gambling addiction among Americans.

“Torn on the recent court ruling allowing gambling,” NASCAR driver Brad Keselowski said on Twitter. “Should be great for our sport but I’ve also seen gambling ruin lives.

“If you choose to gamble on me or anyone else please be responsible and if you need help, get help,” he said.

Los Angeles Times staff writers Samantha Masunaga and Patrick McGreevy and correspondent Mike Tierney contributed to this report.

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Twitter: @PeltzLATimes

UPDATES:

3:25 p.m.: This article was updated with comments from Ernest Stevens Jr., chairman of the National Indian Gaming Assn., Steve Stallings, chairman of the California Nations Indian Gaming Assn. and Kyle Kirkland, president of the California Gaming Assn.

This article was originally published at 2:05 p.m.