Sports betting Q&A: On March Madness wagering, holdout states and in-stadium sportsbooks

Sports betting is legal in more than half of U.S. states. As a result, the gambling space is encroaching on basically every aspect of college sports. Barriers are coming down. Lines are being blurred. Partnerships are being secured. And Americans are wagering plenty of dollars, more than a reported $3 billion alone on March Madness. Where are these trend lines headed, and what does it mean?

On3 caught up with Brett Smiley, the editor-in-chief of SportsHandle.com, to delve into a variety of sports gambling issues and how they relate to college sports. SportsHandle provides reporting and analysis on sports betting legislation and regulation at the state and federal levels, plus broader coverage of the landscape. Among the most interesting issues are whether we will see a sportsbook inside a college football stadium in a few years and whether we’re close to a tipping point with too much betting-focused content.

The interview has been lightly edited for clarity and context.

Q: Can you give us the lay of the land? How many states have legalized sports gambling? Which states will likely be next?

SMILEY: A lot has happened in not a long period of time. I know a lot of your audience is focused on collegiate sports, so I’ll point out that the longtime prohibition on legal sports betting outside of Nevada is in large part thanks to the NCAA, as well as the other major pro sports leagues. They helped get that law enacted. But to answer your question, when the Supreme Court struck down that law in May of 2018 – so it hasn’t even been four years – there are now 26 states plus the District of Columbia that allow legal sports betting in some capacity. That does not include other states such as New Mexico, Florida, Wisconsin, where there are tribal gaming entities that are offering sports betting in some capacity. It is not through the state, per se.

The majority of states that are doing sports betting or allowing sports betting at this point, mobile is included. Now I think it’s the obvious reality that people are doing everything through their phones these days, whatever it may be. That’s where all the sports betting activity is occurring; about 90 to 92 percent of all the handle is coming through mobile.

As far as which states are next, I would guess that Kansas is probably likeliest and seems more likely than not to occur this [legislative] session. They have been talking about it for – this will be the fifth year now but seem to be getting close to consensus. And there’s also conversations in Missouri; same story, no consensus yet. And Kentucky, similar story. Minnesota is now having more conversations, but they’ve got a lot of committees that would need to get through. And Massachusetts, I would have thought that they would have legalized four years ago but, inexplicably, it has not. Nobody is seeing eye to eye there.

Q: Why are some states holding out?

SMILEY: Holding out for different reasons. A state like California, where there’s a lot of cardrooms and horse racing, as well as the tribal gambling, those properties and tribes are not wanting to give up any exclusivity. They are hearing how great sports betting is but still its exclusivity is worth a lot more to them. Whereas in Texas, very little, if any, gambling is legal, they have a lottery and they might have a few isolated tribal properties, but it’s conservatism down there. And the lieutenant governor has said it is just not going to fly. Some of the gambling companies are starting to spend some money. Jerry Jones has come out in favor; he owns a piece of one of the Oklahoma casinos. But in a lot of states, the issue is just a lot of stakeholders pulling in different directions, as in California. … So everybody’s kind of wanting to get what is theirs.

Q: The NCAA tournament always attracts substantial betting activity from individuals, either casual bettors or otherwise. With more states legalizing sports gambling, how did that impact betting on the NCAA tournament and how will it further impact it in the future?

SMILEY: The numbers are only going up. I mean, New York, they legalized and the first sportsbook was launched in January. And there was a national record very quickly in New York with $1.6 billion wagered in like three weeks in New York. So it’s still very new, legal sports betting for New Yorkers. So the national handle, year over year and year over two years, it’s going to be substantially higher than it’s ever been.

Q: For a few years now, I’ve been told that micro-wagering – the ability to bet on a single pitch in baseball or a single play in football – will become all the rage, much as it has been in Europe. I have my doubts. Do you think this will happen? And if so, which sports are likely to benefit?

SMILEY: I heard a lot of the same commentary that you have, waiting for the enormous wave. A lot of the same issues are persisting. The latency issue, between the field and the TVs, the bookmakers making the lines for the consumer. I don’t think it’s ever going to be as big as it is in Europe because soccer really just lends itself perfectly to it with the pace. In baseball, the pitches are coming too quickly, in my opinion. Also, for somebody to be betting on every single pitch, I mean, that’s worse than a coin flip. So that’s an easy way to blow your bankroll quickly.

The numbers that I’ve seen right now, the in-game handle, or in-play or live betting, it’s probably at least 50 percent. Or right around 50 percent. … I don’t see the numbers getting up to the 75 or 80 percent range where it is in Europe around soccer. The popular U.S. sports here just don’t lend themselves as well to allowing the bookmakers and the bettors to be making that volume of semi-informed bets in a short period of time.

Q: Why would any state legalize sports betting but not legalize wagering through use of the mobile device, considering the phone is where everyone does everything?

SMILEY: It kind of goes back to why some states have not legalized it, period. The more powerful political interests don’t want it to be. Washington state is probably the best example. There’s about 15 to 20 tribes or so, give or take, and about as many casinos, and if you have your DraftKings coming in or FanDuel or BetMGM, or whatever, they’re going to be opening themselves up to competition from these larger commercial interests as opposed to just having their casino.

Let me put it more simply: They don’t want the competition. Sports betting is a low margin proposition. It varies month to month, but you might be taking 5 to 7 percent of the total handle, whereas a slot machine is like 15 percent, and there’s no variability there. They view it more as an amenity: “We have a sportsbook, people will come in who may not have come in, and maybe they’ll eat at the restaurant or sit down for a table game.” But that’s as far as some are wanting to go. Or maybe they’ll start there. And in a year or two, they’ll open it up and legalize mobile betting secondarily.

Q: Maybe five years ago, there was a clear separation between media-rights holders and the sports betting world. Now there is this warm embrace. Commercials are everywhere. Partnerships are everywhere. Where do you see this going? Do you envision the line continuing to blur?

SMILEY: I am not sure what lines are left at this point except MLB sportsbook. I mean, there’s going to be a sportsbook in Wrigley Field. In Louisiana, Caesars is now the official sportsbook of LSU. So I think there’s few lines to be crossed. It is happening. The NFL, they’ve licensed their official sports books. The NCAA, that’ll be maybe the last bridge to cross over. I think for a lot of entities, just figuring out the best way to monetize. So ESPN, they’re not sure if they want to make a bid for DraftKings sportsbook, which is right now a sponsor, or if they want to license it out to another party or potentially kind of build out their own sportsbook. So there are still some questions left to be answered in that regard.

Q: Some fans may not be as interested in watching a game and seeing all of the data and numbers related to wagering. And if it is thrown in our face to the degree it is now, and even more in the future, is there a tipping point? Because it may not be for everybody. 

SMILEY: It is definitely not for everybody. The volume of advertisements on now – the national or local NFL broadcasts, or even sports radio if I’m driving with my kid – I mean, you can’t get out of the way of it. I’m in New Jersey, and we’ve been dealing with this for four years. In new markets like Arizona, they’re dealing with it. Maybe you don’t have it down where you are yet [in Texas]. But it’s a lot.

Q: Could there be an opt-in feature for fans who want to see all that data as they consume a game?

SMILEY: There are some alternate broadcasts, like NBC in some regions, like NBC Washington, D.C., or NBC Philadelphia; they are trying out these alternate broadcasts, which do have their own set of statistics for whether or not they’re likely to cover the spread at this point or are putting in-game prop markets. Will Joel Embiid go over 32 points after scoring 20 in the first half? I guess they are just gauging appetite for that type of stand-alone thing.

I don’t think the national broadcasts will ever get too heavily painted in some of the betting stuff. [Troy] Aikman and [Joe] Buck will occasionally and certainly [Al] Michaels makes a reference, but they are not going too much further than that. And ESPN, they delved into the waters. Another example here: MSG is trying three new programs.

Right now, everybody’s a little drunk on wanting to get in and offer something at least, but I think they’ll find that maybe there isn’t as much appetite. Or the large audiences, some of them are turned off by it. So I think there is definitely a tipping point and backlash is here or coming.

Q: On the college front, we are seeing partnerships between schools and sports betting operators coming with increasing regularity. Some have told me we could see a sportsbook inside a college football stadium within a few years. Do you agree?

SMILEY: I agree with whichever sources you’ve spoken to. It seems hard to fathom. If you had asked anyone five years ago, clearly the answer was “no.” But there’s been a steady erosion of the animosity toward it. And there is increasing acceptance that this is the new reality. I can see it happening maybe in the next two to three years. I think NCAA corporate is going to have to take a position that at some point each school is its own board of governors in deciding what to do.

I could see it happening. And like you said, it’s money and money talks. The University of Colorado is with PointsBet. And the Colorado one allows for signage, so the signs are already there. How much further are they going to go if they put up a kiosk? It seems crazy. And it’s kind of hard to process, but I think it’s slightly more likely than not to happen in the next two to three years.

Q: For the rest of 2022, what’s the biggest top-of-mind issue that you are focusing on in the space?

SMILEY: We’ve kind of reached a point where there’s starting to be consolidation within the market. Some of the kind of also-rans are realizing that this is an extremely competitive industry. There are barriers to entry, and even Caesars is deciding that they’re spending too much on marketing costs. But there’s going to be more merger and acquisition, some people deciding to bow out. Secondarily, though, we kind of touched on it earlier with the advertisement backlash; I think there’s going to be and certainly watching for discussion around problem gambling.

In each state that has legalized, there’s an uptick in the amount of calls into various hotlines, which I guess, in one sense, is a good thing if people are being channeled to resources. But on the other end, how many of these people might not have been gambling in the first place? So I’m just kind of waiting to see when public opinion really turns strongly against it, if it does. It’s free will and adults can gamble if they want to and maybe already were. But there certainly is a large populace that’s being negatively affected, and some people gambling that may not have or had not already.

Q: How surprised were you with the early dollar figure amounts coming out of New York state, and do you think that’s sustainable?

SMILEY: Not surprised. We knew that when they eventually legalized that the numbers were going to be pretty enormous. I’m interested in how much of it is driven by New York City and investment bankers just throwing around money that I can’t even fathom. So that’ll be interesting to see if it just is really heavily skewed towards the larger bettors. But I think probably not. I think maybe the median bet is still pretty large. I think FanDuel said something like $100 for the Super Bowl. I think maybe they get to the point where it’s over $2 billion monthly during the football months. There was some discussion or thinking that New York legalizing might knock down New Jersey a peg because a lot of people were coming from New York, but at least so far that hasn’t quite happened. I think New Jersey year over year was down only about 5 to 10 percent in the months where they overlapped.