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Massachusetts Senate Passes Sports Betting Bill, But Don’t Get Your Hopes Up

Despite heated pleas for changes to make a sports betting bill not only more palatable to operators but also to truly stamp out the black market, the Massachusetts Senate Thursday evening passed a bill that looked largely the same at 6:30 p.m. as it did at 11 a.m. The bill, SB 2844, includes a ban on wagering on college sports, tax rates of 20% for retail wagering and 35% for digital wagering, and uncommonly strict guidelines around advertising.

The bill was passed to be engrossed, but is not headed to Gov. Charlie Baker for a signature. Rather, SB 2844 will go to conference committee with the House’s HB 3977, which passed last summer. The committee will attempt to iron out key differences. Some in the industry believe the bill is headed to conference committee to die, and given the timeline and issues, bettors shouldn’t expect to be able to wager in Massachusetts anytime soon.

Sen. Eric Lesser, long a proponent of legal wagering and now a candidate for lieutenant governor, spoke about the benefits of having waited to act on legislation — three of the six New England states have live, legal sports betting, and Maine has a bill sitting on its governor’s desk.

“This is a comprehensive bill that tackles a lot of the most important topics,” he said. “It includes, most importantly, very, very strong consumer protections.

“Massachusetts is obviously not the first state to legalize sports betting, and won’t be the last. … But because we waited, we learned what works and what doesn’t work.”

Thursday’s discussion went more than seven hours and was, in part, presided over by Senate President Karen Spilka, who opposes sports betting. Lawmakers offered up more than 40 amendments — down from the original 69 filed — though most fell on deaf ears.

Taxes, colleges, and advertising key issues

Those within the industry view the Massachusetts Senate bill as a bad deal that would limit competition, allow the black market to thrive, and create unique technical challenges. Though not a key topic Thursday, the Senate bill allows for one skin per retail location, which translates into three digital platforms — far fewer than other legal states of similar size.

The hope is that a conference committee will be able to agree to a more mainstream model with a lower tax rate, betting on at least some college sports and events, and removal of advertising restrictions that one senator called “impractical” and potentially “unconstitutional.”

The Senate-passed bill calls for a 20% tax rate on retail gaming and 35% on digital gaming. An amendment to lower those rates to 10% and 12.5%, respectively, failed 35-4 despite efforts to convince the chamber that the high rates would stunt competition in the market. The House-approved measure contains rates of 12.5% for brick-and-mortar wagering and 15% on digital betting.

One senator opposed to lowering the rates pointed to neighbors New Hampshire, New York, and Rhode Island as having significantly higher rates, but failed to point out that DraftKings got a monopoly in exchange for the 51% tax rate it pays in New Hampshire, and that Rhode Island’s two platforms are both run by IGT in partnership with the state lottery, rather than as independent operators. In New York, operators did agree to a 50% tax rate, but operators have already shown they won’t go into other states at that rate — Arkansas legalized with a 51% rate, and there are no major commercial operators in the state.

College ban will cost state tax dollars

The other high-profile issue is college sports betting. Sen. Patrick O’Connor proposed three amendments that would have allowed for some form of wagering on college sports, and potentially amateur sports and esports, but his amendments were easily struck down. O’Connor argued that not allowing for betting on college sports would cost the state 25% of projected gaming tax revenue and continue to drive bettors to the black market.

“Legal, regulated sports betting is the best way to protect integrity,” he said. “Prohibiting and restricting betting on sporting events can cause the opposite unintended effects. It drives people back to the illegal market with no protections.”

Of the 40-plus amendments offered, the vast majority failed. Lawmakers asked their peers for everything from loosening advertising requirements to earmarking 9% of tax revenue for K-12 mental health programs to tighter minority business guardrails.

The only major amendment to be approved was No. 68, which further strengthened a ban on the use of credit cards to fund accounts. The Senate bill had already stipulated that credit cards could not be used to directly fund sportsbook accounts, but in arguing for the amendment, one senator pointed out that  credit cards could be used to buy sportsbook gift cards or fund accounts like PayPal, which could, in turn, be used to fund sportsbook accounts. The Senate unanimously supported the change to tighten the restriction.

Is this idea even doable?

In terms of advertising, the key issue is a ban on sportsbook advertising during live television events. A group of casinos addressed the matter in a letter to Senate leadership Wednesday. On the floor, O’Connor referred to it as a “whistle-to-whistle” prohibition and backed the operators, pointing out that the prohibition would be nearly impossible to comply with.

“Legal sports betting occurs in our neighboring states and on TV, so how do we ensure that ads in [New Hampshire] don’t reach a Massachusetts resident?” O’Connor asked. In wondering how to prevent in-game mentions of sportsbooks by commentators and how to handle national broadcasts, he asked, “Are we going to require national networks to create technology to strip Caesars ads from an ESPN broadcast? Can we even do that?”

O’Connor suggested that rather than mandate how ads are handled, lawmakers should allow the state’s gaming commission to make the call. His amendment failed, but O’Connor did raise key points that will surely enter into discussion during conference committee.

Debate started and stopped throughout the day, as senators heard arguments for amendments, continued to lobby for support, and reworked offerings. For the most part, amendments that would require studies or additional transparency passed, while most others failed, though Amendment 12, which removes the possibility of emergency rules, was also among those that passed.

The current Massachusetts General Court session ends on July 31, but the body does meet year round, so that is not a hard stop date.


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