Illegal Market Remains A Concern As U.S. Sports Betting Turns Five

April 26, 2023
The U.S. Supreme Court’s decision almost five years ago to overturn the federal ban on sports betting created a booming market that today faces challenges that include a need for fresh innovation and enduring offshore competition.


The U.S. Supreme Court’s decision almost five years ago to overturn the federal ban on sports betting created a booming market that today faces challenges that include a need for fresh innovation and enduring offshore competition.

As the five-year anniversary of the decision of the U.S. Supreme Court approaches on May 14, regulators and operators believe legal sports betting has not reached maturity yet even in the states that have had it for the last several years.

“It seems to have reached a temporary lull in at least some of the jurisdictions where it has either declined slightly or the growth has slowed; I still see good times ahead,” said David Murley, deputy director of the Michigan Gaming Control Board (MGCB).

Murley said one of the trends in Michigan is a drag on revenue as neighboring states legalize and launch sports betting in their own jurisdictions.

“It’s great when they have to come to you but once they have their own it doesn’t destroy it but nibbles around some of the numbers we’ve been seeing previously,” he said.

Murley did not identify Ohio in his remarks, but Michigan’s neighbor to the south successfully launched retail and mobile sports wagering in January, along with a network of kiosks at retail locations.

Michigan launched retail sportsbooks in March 2020 before mobile sports wagering kicked off in January 2021.

“Sports betting has only been legal [in the U.S., outside Nevada] for a handful of years,” said Howard Mittman, president of 888 U.S., whose Sports Illustrated Sportsbook is licensed in New Jersey and Michigan.

“As an operator, I can say even the best in our industry can be a lot better. We are going to evolve from Betting 1.0, the enthusiasm about legalization, to Betting 2.0, a number of innovations. When that happens, you’ll start to see a lot more consumer utility.”

At that point, Mittman said, an app will become something more than “a place where you just go to make a bet.”

He warned that consumers are still confused by the process, and the industry “wrongly assumed a higher level of knowledge at the start than what was warranted.”

“The enthusiasm and hype might die … but I don’t think it will abide anytime soon,” Mittman said.

Mittman and Murley participated in a panel discussion at East Coast Gaming Congress on Thursday (April 20) in Atlantic City with David Rebuck, director of the New Jersey Division of Gaming Enforcement (DGE), and Jane Bokunewicz, faculty director at the Lloyd Levenson Institute of Gaming, Hospitality and Tourism at Stockton University.

“From New Jersey’s perspective, we have been at it for five years next month,” said Rebuck. “As far as the mass market is concerned, we weathered the storm of the expansion of sports betting in our neighboring states and region.”

As of last year, online sports betting is offered in neighboring New York and nearby Maryland, as well as in neighboring Pennsylvania.

“We are not going to flatline because of our very attractive tax rate,” Rebuck said.

New Jersey taxes mobile sports betting at 14.25 percent, while mobile betting is taxed in New York at 51 percent on gross gaming revenue and an effective rate of 36 percent in Pennsylvania.

Rebuck expressed confidence that operators in New Jersey were skilled enough to identify their VIP patrons and were able “with a little more creative marketing in attracting VIP candidates to come into New Jersey for special events or interesting sporting events that generate a significant amount of handle."

“As long as our tax rates are two or three times lower than neighboring states then the operation of these folks will have an opportunity to drive more business in New Jersey,” Rebuck said.

Bokunewicz asked Rebuck if there were new opportunities to bring more consumers from the illegal market or whether that has that already happened.

Rebuck replied that despite online sports betting being live for almost five years in New Jersey, “the illegal market is still here in our state.”

He told conference attendees that the American Gaming Association (AGA) did a survey a few years ago that found 95 percent of wagers in New Jersey were made through legal operators.

“I don’t know where they got that [percentage]. That would make me very happy,” he said. “I still see the illegal market as … competition to the legal side of the house.”

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