North Carolina Switching Gears On Sports Betting, iLottery

September 20, 2023
Professional sports leagues, franchises and venue operators will essentially have the ability to choose which mobile sports-betting operators can obtain licenses in North Carolina under proposed changes to the state’s wagering law passed earlier this year.

Professional sports leagues, franchises and venue operators will essentially have the ability to choose which mobile sports-betting operators can obtain licenses in North Carolina under proposed changes to the state’s wagering law passed earlier this year.

The changes were included in a 611-page, two-year budget plan, which was released in the early hours of Tuesday morning (September 19) and includes tax cuts and private school vouchers.

The North Carolina House of Representatives is expected to vote as soon as Wednesday or Thursday on the $30bn state budget proposal.

Through legislation approved in June, North Carolina took a page out of Tennessee and Virginia's books by enabling online sportsbook operators to apply for licenses without generally requiring any kind of market-access partner in the state.

According to the revised language in the budget bill, however, sports-betting operators seeking a license would now have a “written designation agreement,” or partnership, with a professional sports team, sports facility, NASCAR racetrack or PGA Tour golf course in order to be considered.

The new language, if approved, would model North Carolina’s sports-betting market on Arizona and Ohio, where operators have reached market-access deals with professional sports teams and venues prior to licensure.

“The changes provide clarity on who and how operators can gain the rights to offer sports betting in North Carolina. We have seen this model in other states,” said Jeff Ifrah, managing partner of Ifrah Law in Washington, D.C. and founder of U.S. online gambling trade association iDEA Growth.

“The hope, however, is that newer and smaller operations are not burdened because they were outbid or forced to over-bid on the written designation agreement opportunities,” Ifrah said. 

North Carolina’s new mobile sports-betting law was passed earlier this session and signed into law by Democratic Governor Roy Cooper on June 14, 2023.

That mandated the North Carolina State Lottery Commission to move forward with crafting regulations and issuing licenses so mobile wagering can begin as early as January 2024 and no later than June next year.

As of Tuesday, the lottery commission had not yet promulgated implementing regulations, awarded any licenses or begun to accept applications. 

Currently, North Carolina only offers land-based sports betting at three tribal casinos.

Under the bill Cooper signed, the law allows for up to 12 mobile sports-betting licenses and effectively eight retail sportsbooks throughout the state.

The new language deletes the limit of 12 mobile licenses and specifies that only the designated sports wagering operator will be eligible to offer retail sports wagering at so-called "places of public accommodation" that are associated with the stadium, course or track of their partner.

Under the proposed legislation, each franchise or venue can only partner with one mobile operator. Each mobile operator would still be required to pay a $1m licensing fee to the lottery commission for a five-year license.

Other less controversial amendments to the sports-wagering law as proposed by the budget include adding platform and odds providers to a list of service providers required to be licensed.

Alex Kane, CEO and founder of Sporttrade, took to X, formerly Twitter, to express his displeasure with the proposed changes to the state’s mobile sports-betting law.

“North Carolina has created a scarcity in licenses,” Kane wrote. “They were designed to be direct. Now the leagues will get to control and monetize who gets a license. This would statutorily impose private business as the gatekeepers to tax and control who enters the state.”

Kane also described the proposal as “crony capitalism at work.”

iLottery Restrictions, Casino Hopes Fading

The licensing changes for sports wagering are not the only significant gambling provisions in the House budget bill.

In addition, the budget measure includes new statutory language that would appear to block the North Carolina Lottery from launching a full range of e-instant games as part of its expanding iLottery program.

The state lottery commission last month approved new rules to authorize digital instant games, which generate a vast majority of overall iLottery sales in U.S. states such as Pennsylvania and Virginia.

But the House budget bill would prohibit the lottery from offering any "simulated or an online interactive version of any game traditionally offered for play in a casino, including slot machines, roulette, blackjack, craps, or poker."

A digital instant game would be considered a casino-style game if it involves the use of a random number generator for each play, or includes cascading reels, among other features.

The proposed changes to sports wagering and iLottery also come as state lawmakers are evaluating an even grander shake-up to the state's gambling landscape in the form of further legislation to authorize up to four land-based casinos, as well as video lottery terminals (VLTs) across the state.

A draft bill to authorize casinos and VLTs, along with accompanying language to expand Medicaid healthcare benefits, has been circulating among senior lawmakers, although it is not clear whether there are enough Republican votes for the measure to pass and the state Senate president indicated late Tuesday that gambling expansion would not be part of a wider budget-related agreement.

The North Carolina State Lottery Commission has scheduled a meeting for Wednesday and could discuss the proposed changes to sports wagering and iLottery as proposed in the House budget bill. An agenda for the commission meeting was not publicly available as of Tuesday night.

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