2021 is going to be an interesting year for sports betting with new states legalizing sports betting and sports event coming back. Several states are already discussing new gabling bills and sports betting revenue is growing in may markets.
What regulatory challenges lie ahead of us this year? And what about those key states we are all wondering about – when will they join the legal sports betting club?
To get a better understanding of where the biggest sports betting market on the world is headed, we chatted with Tamara Savin Malvin, an gambling attorney based in South Florida.
About Tamara. Tamara Savin Malvin focuses her Florida practice on gaming and hospitality, as she represents casino, parimutuel, and resort operators in regulatory, litigation, appellate, and other matters impacting their business. Currently serving as the Chair of the American Bar Association Business Law Section‘s Gaming Law Committee, Tamara wrote the Sports Betting chapter of the published book, The Law of Regulated Gambling: A Practical Guide for Business Lawyers, has been named a 40 Under 40 Emerging Leader of Gaming, and often speaks on panels and webinars about the state of this highly regulated industry within the United States.
Congratulations on your latest appointment as Chair of the Gaming Law Committee for the ABA Business Law Section. What work will you be focusing on within the sports betting sector?
Savin Malvin. Thank you. Sports betting has certainly been a hot topic for several years now, and increasingly so since 2018. We plan to continue to present educational content regarding U.S. sports betting. I wrote the chapter in our book and often joke that it was outdated before it was even published! The industry is rapidly taking shape across the country and we still have significant evolution to witness.
As a committee, we can serve our members (and the interested public more generally) best by doing what we can to keep everyone informed on the latest developments, challenges, and of course legal issues. I also firmly believe in collaboration and enjoy my role in facilitating beneficial connections between lawyers and advisors.
What are the biggest legal challenges that your clients face that want to enter the sports betting industry, or expand their current activities?
Savin Malvin. Nevada aside, U.S. sports betting is still very much in its infancy. Entering and/or expanding in a market that is yet to be fully developed and tested from a legal and regulatory perspective has its challenges, particularly in that there is a lack of predictability and consistency.
This is compounded with the fact that here in the U.S., we have fifty unique jurisdictions—actually, 52 including D.C. and Puerto Rico—with which clients must grapple to fully understand where they can lawfully enter and how. Plus, we have overarching federal law, but a lack of a detailed framework, to further complicate matters and leave some issues open to interpretation. There are typical challenges and costs to entering markets, but here in the U.S., compliance is an extremely complicated yet crucial one to navigate.
The Wire Act has been discussed at length since the DOJ’s memorandum in 2019. What aspects of the memorandum should operators pay attention to when interpreting the Wire Act today? And, do you think we will see shared liquidity evolve among neighboring states like in some European regions?
Savin Malvin. In 2018, when the United States Supreme Court opened up the country to sports betting—on a state by state basis—by ruling that a particular federal law (PASPA) was unconstitutional, the Court also made note that other federal laws—namely, the Wire Act—would come into play in the discussion and proliferation of the activity. Soon thereafter, that Wire Act memorandum came out not only concluding that sports betting is subject to the federal law and thus cannot cross state lines, but that all wagering activities are subject to the Wire Act.
It is important to note that (1) these memoranda are not law and (2) the stance taken was a complete 180 from a prior memorandum issued during the prior administration. It has long been agreed that the Wire Act implicates sports betting, but the rub in the latest memo was in its sweeping treatment of all wagering activities so that it had implications affecting interstate compacts and agreements relating to other forms of gaming and even the lottery. That led to relatively short-lived litigation that has now ended with a lower court ruling aligning with prior interpretation that the Wire Act only implicates sports betting.
So, currently, if states desire to do so, there is a path for achieving interstate liquidity for certain gambling activities—but not sports betting. For certain states, shared liquidity is pretty necessary to make the market viable for operators and interesting for consumers. We do have established agreements in online poker and lottery already here in the U.S. that serve as good examples for what I believe will develop and grow over time. And, I do think the sports betting conversation happening in an already mobile-focused world in tandem with a pandemic forcing remoteness has really revived that corollary conversation regarding other forms of gambling that could be available online—and which don’t have the attendant Wire Act issues.
While the states are almost completely free to decide if and how to accomplish that growth in online and interstate play, when it comes to the sports betting sector, it will require some more changes (legislative and/or by virtue of litigation) at the federal level.
The predictions for 2021 is that as many as 15 states will legalize sports betting this year. Which states do you think are the most likely – and less likely – to do so? What are your thoughts on Texas, Florida, and California?
Savin Malvin. Generally speaking, change tends to be more easily made when there are less stakeholders already in existence. In states where there are multiple and varying interests, it is harder to see legislation pushed through.
Another legal issue that impacts the state of affairs is whether a state constitution impedes the change. It tends to be easier to modify statutes than to amend constitutions. Gaming is one of those industries that is exciting to watch and, at least here in Florida, there is always some murmur about it during each legislative session.
Texas, Florida, and California are all very interesting prospects because their individual populations would provide great liquidity and their geographic landscapes in terms of sheer size and layout would support the growth of the industry well, too. I wouldn’t hold my breath for any of those states right now, though. Despite economic concerns, I think it will take more time to get everyone on board.
I also want to point out that even in the event of legislation, there are other factors that slow down the process of opening the state. Putting together a working regulatory framework takes time and negotiation. And, I wouldn’t be surprised at all to see litigation challenging new laws if legislation is pushed through without consensus building first.
Media plays a big part in educating the U.S. audience about legal domestic sportsbooks but we keep seeing endorsement for offshore betting sites. Why is that? How can we make sure the right information is spread across the country and move away from offshore betting?
Savin Malvin. I’m a rule follower, so the ease of access to offshore betting sites really irks me. I believe in competition, but fair, lawful, regulated competition. Consumers and operators alike are better protected in a market operating within a well thought out and tailored framework. And the state of course benefits financially by chipping away at that black market.
As sports betting continues to proliferate across the country, I believe that the public in general will naturally become more educated, or will at least gravitate toward the lawfully operated sportsbooks, by virtue of (1) access and (2) exposure. But offshore sites will continue to thrive in jurisdictions where there is no legal framework for betting, especially in places where there is no easy solution (like taking a short train ride across a bridge into a jurisdiction where a bet can be placed lawfully).
I believe that the private sector can really shift the narrative here, and we are already seeing that happen with highly publicized partnerships and deals across industry sectors. In that regard, it makes educating the public easier as to lawful sports betting as opposed to other forms of online gaming (poker, for example). But perhaps with time and change to those forms of gaming as well, continued exposure to lawful operators will have the same impact.
Ultimately, the more people are exposed, the more they’ll understand. Sports betting is no longer the elephant in the room, and that’s a good thing.