November Nightmare Underscores Challenging Year For U.S. Sports Betting

November 30, 2022
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The end of this month cannot come soon enough for the U.S. sports-betting industry, which is enduring its worst year since 2018 and suddenly faces an uncertain future.

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The end of this month cannot come soon enough for the U.S. sports-betting industry, which is enduring its worst year since 2018 and is suddenly facing an uncertain future.

Everybody knew November was going to be difficult after the chief executives of DraftKings and FanDuel acknowledged in October they were likely to lose the vote on their online sports-betting proposition in California.

Instead of a mere loss, however, the November 8 election result turned out to be more of an annihilation.

More than 83 percent of voters in California, the nation’s most liberal and most populous state, rejected online sports betting in the sixth biggest blowout for ballot initiatives in the Golden State’s history.

The lopsided outcome sets a damaging precedent for industry lobbyists who already are targeting Texas, arguably the nation’s most conservative state, as a key expansion opportunity in 2023.

The glory days following the U.S. Supreme Court decision on May 14, 2018, which triggered an explosion of sports betting across the nation, appear to be over.

On November 20, less than two weeks after the disaster in California, the New York Times unleashed a series of articles sharply criticizing the sports-betting industry, including its lobbying practices, regulatory oversight and marketing tactics.

It was no coincidence five days later when Democratic U.S. Senator Richard Blumenthal of Connecticut voiced concern about certain sportsbooks partnerships with the athletics departments of two colleges — Louisiana State University and Michigan State University.

The carpet-bombing approach to advertising for daily fantasy sports, which triggered a congressional hearing in May 2016, is being repeated for sports betting, according to Marc Edelman, who teaches law at Baruch College, City University in New York City and has been a long-standing critic of how fantasy sports providers FanDuel and DraftKings grew their initial operations in the U.S.

“Upon the Supreme Court’s issuing of the [2018] decision, many states rolled out a relatively unregulated, underenforced, revenue-driven, lobbyist-appeasing form of sports gambling,” Edelman said.

“And now, some people are expressing unhappiness with the regulation-lite approach and are pushing for the opposite extreme.”

Almost overlooked in all this month’s bad news is the November 14 statement by the U.S. Department of Justice that former major league baseball player Yasiel Puig agreed to plead guilty to lying to federal agents about making almost 900 wagers on sporting events in 2019.

In November, the third operator this year, Carousel Group's MaximBet, withdrew from the U.S. market due to economic and capital-market conditions and the high cost of trying to compete.

As far back as January, it became clear that 2022 was not going to be a banner year for sports betting.

On January 28, a DraftKings and FanDuel coalition abandoned a flailing campaign in Florida to collect enough signatures to put a sports-betting referendum on the November 8 ballot.

As in California, DraftKings and FanDuel met fierce opposition from tribal gaming interests in Florida, specifically the Seminole Tribe.

The year is set to end with just three states passing laws for sports wagering, compared with ten in 2021.

The inability of commercial sports-betting operators to find common ground with gaming tribes may continue to stall the expansion of sports betting in other states that have yet to pass legislation.

“Gaming tribes have a bottleneck in states like Minnesota and Oklahoma,” said Steve Brubaker, an Illinois lobbyist and sports betting analyst.

Brubaker said future lobbying for sports betting in state legislatures could become as difficult as lobbying for internet gaming, which has so far been approved in just a half-dozen jurisdictions.

“In any state that has not passed sports betting already, it’s going to be a hard fight,” he said.

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