Controversial rules that will allow for mobile sports betting in Arkansas but could also keep major national operators on the sidelines cleared the first of two legislative hurdles on Thursday (February 17).
A joint administrative rules subcommittee approved the mobile sports-betting regulations, following approval from the Arkansas Racing Commission in December.
The rules would allow for state-wide mobile wagering in Arkansas, with each casino licensee permitted to partner with up to two operators, meaning a maximum of eight skins in the state after a fourth casino licensee begins operations.
However, that market access comes with a significant caveat, as the rules also require the casinos to keep 51 percent of the revenues in any market access agreement, a provision unlike any in the United States to date.
National sportsbook operators, including FanDuel, DraftKings and BetMGM, have spoken out throughout the rulemaking process, arguing that the regulation makes it financially unfeasible for the operators to enter the market, even in the unlikely event that the casinos, which have backed the rule, would want to partner with them at all.
“What we’re asking for is to be able to go negotiate our own contract with those casinos to be a subcontractor and a third-party vendor without the state putting their finger on the scale dictating a profit margin, and that’s what this rule does,” said John Burris, a lobbyist for FanDuel and DraftKings, among others.
Casinos and attorneys for the Arkansas Racing Commission have argued that allowing third-party operators to retain a majority of revenue would effectively make them the operator of a form of casino gaming rather than the casino itself and would violate Amendment 100 of the state constitution.
But Burris cited an opinion by attorney general Leslie Rutledge from December where she was asked to weigh in on whether it would be a violation of Amendment 100 for operators to contract with a third-party vendor to operate an online sports pool where the vendor retained a majority of revenues.
“No, Amendment 100 is silent about such contracts or contractual arrangements,” wrote Rutledge. “It is well-established that the Arkansas Constitution is not a grant of enumerated powers or an enabling act, but instead is a limiting, restraining document.”
“Because Amendment 100 does not speak about — much less prohibit — the kinds of contracts or contractual terms you have described, I cannot say that they would violate Amendment 100.”
Burris also argued at a hearing Wednesday that the rule violated the federal Commerce Clause by discriminating against out-of-state operators, but a state lawyer said Thursday that the attorney general’s office believes that the rule would hold up against a legal challenge.
“After review of the rule, we feel that the rule can be defended if challenged,” said Brian Bowen, chief of staff for the Arkansas attorney general’s office.
The rule needs one more approval from the Joint Budget Committee, which is scheduled to meet Tuesday. Should the rules receive that approval, they would come into effect ten days later, setting the stage for a launch as early as March.