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Lottery Commission work session on sports betting ‘strictly educational,’ director says

By LINDA HARRIS

The State Journal

WHEELING, W.Va.  — With the U.S. Supreme Court slated to hear arguments in December on whether New Jersey can legalize sports betting at its casinos and racetracks, industry leaders in West Virginia began working Wednesday on “what if” scenarios for the Mountain State.

The afternoon work session at Wheeling Island Casino brought the state Lottery Commission and casino executives from around the state together to discuss the results of a study by California-based Eilers & Krejcik on how legalized sports betting could potentially impact West Virginia.

Lottery Director Alan Larrick said the session was “strictly educational.” He said it could be spring before SCOTUS issues its decision.

“If it becomes available, I want us to have enough information to make an informed decision,” Larrick said after the session concluded.

New Jersey officials want SCOTUS to strike down the Professional & Amateur Sports Protection Act of 1992, which allows sports betting in only the four states — Delaware, Montana, Oregon and Nevada — that had legislation in place making it legal prior to a 1991 deadline.

New Jersey has been trying for years to legalize sports betting within its borders. After its most recent effort, a partial repeal of the ban, it was sued by the NCAA, NFL, NHL, NBA and MLB to block them from legalizing sports betting. Last year a federal appeals court struck down the New Jersey law, saying it violated PAPSA.

SCOTUS agreed to hear New Jersey’s appeals over the objection of the acting solicitor general, who in May had recommended that the court not hear the case.

The question before the court in December will be whether PAPSA “impermissibly commandeers” a state’s power to regulate itself.

West Virginia led an 18-state consortium filing an amicus brief supporting New Jersey’s position. The Trump administration, however, has sided with the sports leagues.

The Eilers & Krejcik study estimates about 14 million Americans “bet $50 billion to $60 billion annually via illegal channels.”

“Our estimate is smaller than other industry estimates of the potential market for sports betting in the U.S.,” the Eilers & Krejcik report said. “The market is still quite significant and the success, or failure, of regulated operations to transfer the black market demand to legal markets is going to be critical in shaping the potential for regulated sports betting in the U.S.”

Eilers & Krejcik’s D.J. Leary said there’s “still a significant amount of potential for success.

“There’s also a lot of potential to potentially fail,” he added. “I think real success will be (in seeing) how much of that black market will transfer, will it really happen.”

Leary pegged the market for legalized sports betting in West Virginia at $34 million to $78 million but called that a “conservative” estimate since it “doesn’t include anything outside the state’s borders.”

“There’s definite potential, huge potential,” he said.

Eric Schippers, senior vice president of Public Affairs and Government Relations for Penn National Gaming, owner of Hollywood Casino at Charles Town, said legalized sports betting wouldn’t be a panacea for what’s ailing the Mountain State’s gaming industry, but it could attract a new demographic.

“Other states are taking a ‘wait and see’ approach,” he said. “It could be a significant head-start if West Virginia moves quickly enough. It could give us at least a year, a year-and-a-half head-start to build up a data base of players.”

Fred Guzman, regional general manager of Delaware North, said it’s the potential to attract a new user demographic, not new revenue, that should excite the industry. He said they need to “work on the assumption that every state will do it or every state is going to want to do it.”

“Sports gamblers have a higher propensity of wagering on other games,” he said. “As regional markets have been hurt by competition, this could be an important tool to keep regional casinos viable. So long-term, it’s very important.”

Guzman also sees the fact that the Supreme Court agreed to hear the case as a positive.

“Less than 1 percent of cases appealed before SCOTUS are accepted,” Guzman said. “All of the cases have to go through the solicitor general and the solicitor general recommended (that the court) not take it on. Yet, despite his recommendation, they took it. It’s huge, it’s a state rights issue.”

Delaware North’s Jack McNeill agreed, saying it’s unlikely the Supreme Court would have agreed to hear arguments “if they thought everything was hunky-dory and ready to go.

During Wednesday’s work sessions, casino executives also mulled the merits of mobile sports wagering vs land-based wagering.

“I can’t fathom taking this out of the hands of brick-and-mortar casinos,” said Bob Lang of Mardi Gras Casino and Resort in Cross Lanes. “We have a track record … we have safeguards in place. We’re accustomed to regulatory requirements.

Larrick, meanwhile, said West Virginia can’t wait until the Supreme Court decides the case to figure out what, if anything, it will do.

“We need to discuss this, discuss the models,” he said. “That’s the reason for this work session — to educate ourselves, the staff and the commission about what we would want in a workable proposal. I think the time to work on that is obviously now.”

With the Legislature’s interim meetings and 2018 session just around the corner, Schipper said the Racing Association will put together a draft proposal that the Lottery Commissioners and others could use as a starting point.

“Others are trying to be first out as well,” he added. “But I think West Virginia is in great position to be ahead (of the pack).”

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