Many sports fans rejoiced when they learned they could bet on sports legally for the first time in two decades. This did not excite everyone, however. Some casinos, such as the ones in New Jersey and Pennsylvania, jumped on the bandwagon immediately. They applied for casino licenses that allowed both on-site and online gaming. It is unclear how online sports betting will effect casino revenues, but we do have a few ideas.
A Little History
Congress passed the Professional and Amateur Sports Protection Act (PASPA) in 1992. It had the support of the professional sports associations in the United States. The NCAA, which is the major national conference for college sports, also supported the law. The law effectively allowed single-sports betting to take place in one location: Nevada.
For decades, this was the status quo in the United States. Then, New Jersey decided to challenge the law. The state wanted to put revenue in its coffers and work to prop up Atlantic City. The city was in the midst of an economic freefall.
This past May, the U.S. Supreme Court ruled that PASPA was unconstitutional. States should decide for themselves whether to allow sportsbooks, it ruled. The constitution does not specifically allow the federal government to prohibit or legalize gaming. Therefore, according to the High Court, that right belongs to the states. In additional to New Jersey, Delaware, Pennsylvania, Mississippi, and West Virginia also quickly legalized sports gaming.
Legal Gaming Markets
In the United States, legal gambling takes place primarily at casinos. These casinos are either Indian casinos or ones that a gambling company owns. In addition, many Americans gamble in state or multistate lotteries. Experts expect the gambling industry to see $208 billion in revenue. If we remove lotteries from the overall gaming picture, the casinos generate $128.5 billion. Let’s look at Nevada, the only state where sports betting took place before May. The sportsbooks took in $248 million in 2017. There were 212 sportsbook locations in Nevada before the Supreme Court decision.
World Gaming Markets
It has been estimated that the world sports betting and lotteries industry will generate $213.8 billion in 2018. Industry experts predict 48.8 percent of the gambling revenue for the world gaming market will come from sports betting.
No one is sure how the sportsbooks will fully develop in the United States. But, we can look across the pond for what may possibly happen. Let’s look at the United Kingdom as a model. In the United Kingdom, where sportsbooks are legal, the market totals $19 billion. Online sportsbooking contributes 45 percent and 24 percent comes from betting shops. For some U.K. businesses, more than 80 percent of their revenue is in online or mobile sports betting systems. This signifies that the U.S. sportsbook market has the potential to be worth billions of dollars in revenue.
The Market Potential of Sportsbooks in the United States
While again, it is difficult to forecast the future for sports gambling in the United States, there are some indicators. First, the Vegas market appears to be the focus of sports gambling. This is because most states have not legalized sports gaming yet. Another reason is Las Vegas is a large tourist destination. The city draws an average of 42 million visitors per year. Research indicates that the bettors average about $1,500 yearly on sports betting.
However, these figures represent the number of legal bets, rather than the number of illegal bets. But, it goes without saying that many Americans are continuing to gamble illegally. No one knows for sure how much money these illegal ventures make. However, estimates have put the number at between $38 billion and $114 billion.
How Casinos Could Benefit From Sportsbooks, Or How Casinos May Lose From Sportsbooks
There are some impediments to the sportsbook estimates of revenue. First, there is some concern that gamers may not want to switch from their illegal gaming markets to legal sportsbooks. The reason is they have become comfortable with gambling outside the legal system. In addition, while legal sportsbooks will have to charge for taxes and other fees, illegal sites will not. In fact, each state will charge the sportsbooks differently based on its tax structure. The tax structure may affect the betting lines with regard to sportsbook bets.
How Sportsbooks Will Affect Casinos
From the research, it appears casinos could benefit from sportsbooks and sports gambling if casinos had them in their facilities. Currently, William Hill, a British bookmaker, has a presence in Nevada. It has also opened sportsbooks at Monmouth Park in New Jersey. Companies that have an established presence in the United States have an advantage. Smaller companies or those located overseas will have a harder time breaking into the market.
The Downside for Casinos
Casinos that are in larger cities, such as Las Vegas and Atlantic City, do better than casinos in smaller cities. And, casinos in large areas where tourists gather do better than in smaller Midwestern towns without as much tourist traffic. This scenario represents the problem with casino gambling in the United States, and why it is on the decline. The decline is especially visible in the Midwest and casinos that do not have a tourist draw.
Interestingly, the rise in online gaming has fueled this problem with casinos in the Midwest. It occurs in places where casino online gaming and sportsbooks are legal and where they are not legal. For example, Illinois, which has casinos on Lake Michigan, as well as riverboat casinos, has reported a decline in casino revenue. Although Chicago is a large tourist draw, the large number of tourists is not visible in the nearby casinos. In addition, the Chicago area has a large number of fantasy sports players on FanDuel and DraftKings. These are as close to sports gambling as is possible currently in Illinois.
Sportsbooking is not legal in Illinois, despite the state having a long history of sports betting. In the 20th century, organized crime handled the sportsbooks. They were lucrative for those criminals who dealt with organized crime. Even in areas without organized crime, the sportsbooks were thriving, lucrative businesses. Research has estimated, that in Chicago alone, gamers in the metro area bet $100 million yearly on illegal sports bets. Illinois represents one source of the problem that casinos are facing. First, there’s the pressure of casinos to somehow find a way to eke out a living in a declining market. Second, there is the pressure to open sportsbooks in the state of Illinois. Third, there’s the volume of illegal sports betting in the state. There are a number of people who might not be willing to let it go.
Sportsbooks are gradually becoming more legalized across the United States, and many states have celebrated the beginning of sports gambling. But, there are actually some pitfalls for some states. There are some states that have a large number of tourists who visit their attractions. These states also have a large gambling industry that is also thriving. These two factors mean the casinos have a better chance of surviving. And, that’s especially true if the casinos add sportsbooks. If the casinos are in areas not frequently visited by tourists, they will not survive long if sportsbooks enter the arena.
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