Author: Casino Connection Staff

AGA: Legal market could replace $150 billion in illegal wagers

A new study published by GamblingCompliance.com predicts that, should the U.S. Supreme Court strike down the federal ban on sports betting, the U.S. sports betting market would reach $2 billion in annual gross gaming revenue within five years of the end of the ban.

The U.S. Supreme Court is scheduled to hear arguments this fall in the appeal of a lawsuit challenging a New Jersey law authorizing a state-regulated sports betting program. The state—as well as the American Gaming Association, which filed an amicus brief in the case—argues that the 1992 Professional and Amateur Sports Protection Act (PASPA) is unconstitutional, in that it violates states’ rights by forbidding states from passing sports-betting laws.

PASPA bans sports betting in all but four grandfathered states. Of those states, only Nevada has full single-event sports wagering; the others have multi-game parlay bets.

The Gambling Compliance report, titled “Outlook: U.S. Sports Betting,” maps the likely size and scope of the sports-betting market should the justices strike down PASPA. It predicts a state-by-state rollout of sports betting, with Pennsylvania likely the largest market initially, followed by Illinois, Massachusetts and New Jersey, all surpassing the current size of the Nevada legal sports-betting market. The study predicts that California, potentially the largest sports-betting market, would experience more difficulty in passing a sports-betting law.

The report uses $2 billion as a baseline prediction, but includes a second, more optimistic projection stating that a best-case scenario could see sports-betting revenue reach as high as $5.8 billion within five to seven years. The revenue projections are based on data from Nevada and from established sports-betting markets in Europe.

The AGA, meanwhile, has predicted the income from sports betting could ultimately be much higher than $2 billion, citing the fact that some $150 billion is wagered illegally on sports in the U.S. every year.

The case before the Supreme Court is a lawsuit initially filed by the major sports leagues and the NCAA after New Jersey Governor Chris Christie signed a bill into law authorizing sports books at Atlantic City casinos. Lower courts sided with the leagues in ruling that New Jersey’s law violates PASPA.

Most of the leagues have softened their stance on sports betting, with commissioners of the NBA and NHL in particular stating that the federal ban should be re-examined. The National Football League, however, has been steadfast in its opposition to legal sports betting. After NFL TV ratings were down 13 percent for the first week of the season, media analysts commented that legal sports betting could be a remedy to sagging viewership. (The NFL blamed the recent hurricanes for the dismal debut week.)

Roughly a dozen states have introduced legislation this year that deals with sports betting. Gambling Compliance assumes 21 to 37 states will offer legal sports betting within five to seven years after PASPA is lifted, producing the revenue range of $2 billion to $5.8 billion.

The American Gaming Association brought its Small Business Jobs Tour to Schenectady, N.Y., last week, where local politicos turned out in force to tout the benefits of the new Rivers Casino & Resort.

“Rivers Casino has fast become an important part of our community,” said Mayor Gary McCarthy. “Not only does the casino provide jobs, but the entire facility enhances the hard work we’ve put into making downtown Schenectady a fun place to be and a great place to do business.”

State Senator John Bonacic, a vocal gaming advocate, chimed in with praise for the private-sector investment and job creation spurred by Rivers since it opened in February as one of three new full-scale commercial casinos in the state.

The September 19 event, the third stop in a nationwide AGA road show titled “Get to Know Gaming,” also featured speeches by Jeff Stark, president of the Greater Capital Region Building Trades Council; Ray Gillen, chairman of the Schenectady Metroplex Development Authority; Rivers General Manager Mary Cheeks; and executives from several local businesses.

All spoke warmly of Rivers’ “economic ripple effect,” as Bonacic termed it, as one of the anchors of an economic revitalization under way along downtown Schenectady’s Mohawk River waterfront.

“I think it’s a great thing and we’re seeing all the benefits of it,” the senator said.

Those benefits include $2.6 million in revenues for local governments and $21 million in revenue for the state’s schools.

“Casino gaming is a strong community partner in New York and across the country where hundreds of thousands of small business jobs are supported,” said Geoff Freeman, president and CEO of the Washington, D.C.-based AGA, the industry’s federal lobbying arm.

Research sponsored by the association says casinos employ 14,000 people in New York and account for $827 million wages and $3.6 billion in total economic impact.

Yet, others wonder if the state isn’t in the throes of too much of a good thing.

When New York voters in 2013 approved a constitutional amendment allowing up to seven commercial casinos there was already a sizable tribally owned industry―now numbering seven full-scale casinos―and nine slots-only racetrack casinos in addition to pari-mutuel wagering and a state lottery. Real-money fantasy sports has since joined the mix, and Bonacic is pushing legislation to allow online poker.

The AGA reports that in 2016, the New York market grew by 3.4 percent year on year in terms of gaming revenue, and direct gaming tax receipts were up 3.3 percent.

But at the three new casinos―Rivers, del Lago and Tioga Downs Casino―results have been decidedly “underwhelming,” in the words of a recent New York Times report. And that’s without the impact of a fourth casino, the largest of the group, slated to debut in the Catskills early next year.

State Gaming Commission figures show del Lago, which opened in February near Rochester in the Finger Lakes region, on a pace for $151 million in gaming revenue in Year 1, well shy of its projection of $262 million annually. Rivers had projected $181.5 million to $222.2 million in its first year. To date, it has grossed $81.8 million, a lackluster showing amplified by its apparent cannibalization of the slot floor at Saratoga Casino Hotel in nearby Sarasota Springs, which reported a fall-off in revenue in August of nearly 25 percent compared to last year.

At Tioga Downs Casino, which opened last December in the Southern Tier region, owner Jeff Gural said recently. “I think the market is saturated, and we’ve got a lot of work to do to get the revenues where they need to be.”

Advocates, however, say focusing on early returns is deceptive because none of the three casinos is fully built out, and their hotels, a key revenue-driver, are only recently opened or still under construction.

“It is entirely premature to give credence to any analysis of how well the casinos are operating,” a spokesman for the Gaming Commission told the Times.

“You need a good three-year period before you judge expectations,” Bonacic emphasized at the AGA event. “And I say no matter what the expectations are, if they come out a little short, it’s a huge success because of the benefits I talked about.”

True as that may be, the pressures of competition aren’t going away. If anything, a costly dispute between the Seneca Indian Nation and the Cuomo administration over revenue-sharing, now in its sixth month, is certain to keep them in the spotlight.

The Senecas, a major operator with casinos in Buffalo, Niagara Falls and Salamanca, are concerned enough about the new commercial casinos to have halted $100 million-plus a year in payments to the state, touching off a fiscal crisis in communities across western New York that depend on a share of the payments.

The tribe says it’s no longer contractually obligated to make the payments―equivalent to 25 percent of its machine gaming revenue. The state disagrees. There has been a lot of posturing, but to date, neither side is budging. The Senecas say they’re willing to negotiate, probably in hopes of winning a reduction in the payments. Gov. Andrew Cuomo refuses. He insists the Senecas are in violation of the federally mandated compact that is the legal foundation of their gaming operations and is threatening to license a commercial casino in their most lucrative market, Niagara Falls.

The impasse is now in binding arbitration, but if it isn’t resolved soon municipalities like Niagara Falls will be hard put to fund their operations. Mayor Paul Dyster says non-essential spending has been frozen, telling the Buffalo News the city has “adequate reserves in place to last over the course of this current dispute”.

The state Comptroller’s Office says Niagara Falls will run out of money by year’s end.

According to a recent campaign finance report, in August, Disney Worldwide Services donated $600,000 to the Florida political committee

November 2018 ballot a constitutional amendment giving Florida voters the “exclusive right to decide whether to authorize casino gambling” in the state. If approved, the initiative would require the approval of voters—not legislators—to allow casino-style games in the future.

As of August 31, Disney had contributed a total of $1.75 million of the $1.98 million raised by Voters In Charge.

According to the Florida Division of Elections website, as of September 18, Voters In Charge had submitted 216,469 signatures; a total of 766,200 petition signatures are necessary for the issue to be placed on the ballot. The committee also reported it had spent $1.47 million as of August 31. Most of the money went to signature gathering and verification.

As Pennsylvania lawmaker grapple with measures to close a $2.2 billion budget gap, the issue of gaming expansion is on hold. Part of that expansion effort is the contentious issue of legalizing and regulating video gaming terminals, or VGTs, in bars, taverns and other liquor-licensed establishments across the state.

Prominent members of the Republican-controlled state House of Representatives are pushing VGTs as a way to get additional revenue for their cash-strapped districts, with the state Senate pushing back on VGTs as a cannibalization of current casino revenues. House members, though, have argued that legalization and regulation of VGTs would simply allow the state to earn money from machines that are already in place illegally.

Republican State Senator Chuck McIlhinney last week held a public hearing aimed at taking a first step toward VGT legalization by eliminating the illegal games cited by House leaders. McIlhinney held a public hearing in Harrisburg last week to call for a crackdown on illegal VGTs in bars across the state.

The problem is twofold, he said: illegal gaming machines in bars, taverns and truck stops; and machines in so-called “stop-and-go” stores that exploit a loophole in the liquor-license law. Stop-and-gos are small establishments that may only sell candy or snacks, but obtain liquor licenses by saying they seat 30 patrons, a requirement for a liquor license. State Police Major Scott Miller told McIlhinney’s Law & Justice Committee at the hearing that many of the establishments meet the 30-seat requirement by stacking 30 folded chairs against a wall or in a back room.

According to a report in the Pittsburgh Tribune-Review, Miller told the panel that state police have seized around 650 illegal video gaming machines per year since 2011. “Despite these efforts, illegal electronic gambling devices are present in Pennsylvania licensees’ liquor establishments,” Miller said. “These cases take time to develop, they involve undercover operations and significant expenditures of time and money.”

Miller said his bureau recently tracked illegal gambling machines found over a four-week period. Of 890 licensed establishments visited, 376, or 42 percent, had at least one suspected illegal gambling machine, with 771 machines flagged in total.

“This is a multimillion-dollar industry, as machines generate $100 to $1,000 of income per week, while occupying a very small footprint — approximately 3 by 3 feet square—within the business,” Miller said. “These proceeds are usually paid to the business owners by the vendor in cash and may or may not be reported for tax purposes.”

According to the Tribune-Review report, police say liquor licensees know the machines are illegal, but feel they have to install them in their facilities because they are losing business to other liquor licensees who have the machines.

Progress for Maine, the campaign committee that seeks to persuade voters to approve, Question A, which would authorize a casino in York County that only a man named Shawn Scott could legally build, has released a study that claims the casino would create up to 5,000 jobs and generate $248 million in taxes.

The study was conducted by Evans, Carroll and Associates (ECA) which reported that the project could generate 2,165 permanent jobs and 2,767 temporary building jobs. It would inject about $183.2 million into the state’s economy in the form of salaries.

One of the authors of the report, Dr. Michael K. Evans commented, “Our analysis suggests that the economic impact of a gaming venue of the size being proposed would be significant – an approximate increase of $580.6 million in Maine’s GDP. That information, combined with the job and household income gains we project to accompany the project, suggests to us that development like this could have a long-lasting effect on York County and Maine as a whole.”

The campaign’s spokesman, Rebecca Foster, added, “New jobs and economic development are two of the top priorities for Maine voters right now, and this remarkable project will put more people to work and drive new money into our state’s economy. We hope residents will vote Yes on Question 1 this November.”

Rep. Louis Luchini, whose Veterans and Legal Affairs Committee is trying to dig up as much information on this proposal and its backers as possible and broadcast it widely before the election, reacted to the publication of the study with skepticism, and said that the report left a lot of things out: “Based on the first bullet point in this study, the impact is based on a resort casino with a hotel and a convention center, but none of those are required in the ballot question law as it is proposed,” he said in a statement. “These are the same empty promises of jobs and development that we have seen time and time again and they have not come to fruition.”

The firm that prepared the report is controversial and was in the news recently over its assistance of Jared Kushner, the president’s son-in-law, in his attempt to qualify a family owned building in New Jersey for a federal investment program that employs the EB-5 visa program.

Not coincidentally, one of the donors for Progress for Maine is American General Corp., whose specialty is EB-5 investments. The copy is headed by David Wilson, a partner of Shawn Scott, the sole beneficiary if Question 1 passes.

Scott, a casino developer with global connections, and whose Bridge Capital is based in the Northern Mariana Islands, a U.S. territory, was the man who qualified an initiative in 2003 that brought Maine its first casino, the Hollywood Casino in Bangor. The initiative was approved, but Scott, under intense scrutiny by state regulators at the time, sold the rights to the casino to Penn National Gaming, which owns it today. If Question 1 wins in November, it could be worth $200 million to Scott, even if all he does is sell the rights to it as he did in 2003.

Luchini says he believes that will happen this time. He told the Portland Press Herald, “This would be one of the various shell companies Shawn Scott operates, and if they were to get the casino, … they would flip to somebody else almost immediately because I don’t think this guy Shawn Scott would ever be able to get a license in the United States.”

Luchini says he prefers that if the state gets another casino it be done by competitive bidding. A recent study the legislature commissioned said that the state could absorb another casino, but it recommended that a competitive bidding process be used to approve it, one that would require a minimum investment of $250 million.

When asked about ECA’s Trump connection, a spokesman for Progress for Maine commented, “Evans, Carroll & Associates is a highly regarded economic consultant with a long list of clients. We can’t speak to their other projects, but they were hired on the basis of their reputation for quality work, and we believe their expertise is reflected in the study they completed yesterday.”

Other companies connected to Scott, and to the Question 1 campaign, include Capital Seven, based in Las Vegas, and Japan-based Regent Able Associate Co. Both companies have donated to the Question 1 campaign.

Donors to the campaign are being investigated by the Maine Commission on Governmental Ethics and Election Practices, which has tried to shake loose financial documents from all companies associated with the campaign. Backers are also being investigated by Luchini’s committee.

A new twist in the campaign is the attack by the Progress for Maine of Churchill Downs, the company that owns the other operating casino in Maine, the Oxford. It bought the casino in 2013. Churchill Downs is expected to take part in fighting Question 1, although so far, no opposition PAC has registered with the state.

The state of New York is taking the Seneca Indian Nation to arbitration to settle a compact dispute that has halted revenue-sharing payments from the tribe’s three casinos amounting to more than $100 million a year.

The state invoked the compact’s arbitration clause by declaring the Senecas in violation of the 2002 agreement, which requires the tribe to pay the state 25 percent of their machine gaming revenue in exchange for a casino monopoly covering 16 western New York counties.

The tribe claims the revenue-sharing provision expired at the end of 2016 and made a $30 million payment in March to cover the fourth quarter, announcing that the payment would be the last pending the negotiation of a new agreement with the administration of Gov. Andrew Cuomo.

Reports are the Senecas are miffed by the state’s authorization in 2013 of four full-scale commercial casinos, three of which have opened in the last 11 months―one of them in particular, del Lago Resort & Casino in the Finger Lakes region, straddling the tribe’s exclusivity zone. The Senecas have not addressed the competition issue publicly, but the tribe has used revenue-sharing as leverage before, halting payments in 2009 following the state’s authorization of machine gaming at racetracks. The dispute took four years to resolve and ended with the state waiving a portion of the revenue obligation.

However, this time around the state is refusing to barter, claiming a provision in the 2013 agreement extending the original compact by seven years obligates the tribe to continue the payments through 2023.

“The answer is clear: The nation has breached the compact,” lawyers for the state wrote in the arbitration filing, according to the Buffalo News.

The payments currently amount to around $110 million a year―$1.4 billion since 2002―with 10 percent of it plowed back to the Senecas’ host casino cities―Buffalo, Niagara Falls and Salamanca―and a slew of smaller neighboring communities which rely on the funds to pay for an array of municipal services.

In light of this, the tribe may have figured that local pressure would force the governor to join Seneca President Todd Gates at the negotiating table. To date, that hasn’t happened. Instead, Cuomo recently threatened to license a competing commercial casino in Niagara Falls.

“The nation seeks to retain the benefits of the compact, including exclusivity, but not the obligation to pay for them,” attorneys for the Governor’s Office said. “But the nation’s position is illogical and has no basis in the compact, in law or otherwise. The nation cannot pick and choose the terms that are renewed.”

Seneca spokesman Phil Pantano countered, “The nation was open to dialogue. Instead, we are now seeing a repeat of the same behavior as when the state previously violated the compact. The Seneca Nation is not intimidated. The nation will commit its resources to defending the agreement we made, which the state now wishes to disavow.”

The arbitration rule allows both sides to select a representative with a third representative agreed to by both sides. Their decision is binding, but it can be appealed to the federal courts, making it likely the dispute could drag on for years unless a settlement is reached.

Nevada sports book operators will be allowed to offer betting on multiple eSports contests under plans by state regulators that will dramatically expand the industry’s presence in Las Vegas and beyond.

The change was announced by Karl Bennison, who heads the Enforcement Division of the Nevada Gaming Control Board.

As it stands currently, betting on only three eSports events is allowed since the Nevada Gaming Policy Committee, an advisory body to the Control Board and the Nevada Gaming Commission, cleared the industry for wagering last November.

Under the same rule, eSports are classified as “other events,” a category covering everything outside horse and greyhound racing and athletic events and includes propositions such as NBA Rookie of the Year or Cy Young awards or the winner of the World Series of Poker. As such sports books are required to obtain permission individually and in advance for each contest offered.

It’s expected the more liberalized scheme will afford books to offer possibly a year’s worth of competitions, basically treating the industry the same as NASCAR races or NFL and NBA games.

No timeline has been set yet for putting it into effect―and it comes with a couple of caveats: namely, that permissions will apply only if series are organized by single companies and run by operators that have passed muster with the Control Board.

This second point could prove key, as Bennison implied that regulators would be more comfortable if eSports had a governing body similar to the major professional and amateur sports leagues.

He cited the Esports Integrity Coalition as a “good example.”

“Not everyone is a part of ESIC,” he said, speaking at the Casino eSports Conference in Las Vegas earlier this month. “But at some point, say if you have something like ESIC oversight, it could be that you’re good to go (to offer regular bets). Now, that hasn’t happened yet. But it could be one way.”

Nevada’s lead in this area could pave the way for other U.S. states to consider similar reforms, observers say, particularly in states which have introduced or are weighing the legalization of real-money daily fantasy sports.

A couple of sizable theme-park-like attractions are being proposed near opposite ends of the Las Vegas Strip.

The first, billed as an extreme sports park, has been cleared by the Clark County Commission in concept for 130 acres at Las Vegas Boulevard and Sunset Road opposite the outdoor Town Square mall and McCarran International Airport.

Plans for The Edge, as Australian developer Josh Kearney calls his project, include a casino and 640-room hotel anchoring a white-water rapids lake, three cable wake-boarding lakes, an indoor mountain biking track, an indoor skydiving attraction, a pool with water slides and “dunk tank towers,” rock-climbing and bungee-jumping and zip rides throughout

The hotel component includes convention space, restaurants and two rooftop swimming pools.

Price tag: around $800 million.

Las Vegas City Council, meanwhile, has voted to approve plans for a science-fiction-themed attraction on 21 acres at Sirius Avenue and Rancho Drive, just west of the area where Interstate 15 intersects with Desert Inn Road.

Fischer Brothers, a New York property development firm, say their project, called Area 15, will feature 146,000 square feet of space for virtual reality attractions designed around comic book themes and the “Blade Runner” and “Mad Max” movies. The space also will include a food court for local chefs, an events area and retail space.

Opening is scheduled for March 2019.

Fisher Brothers is no stranger to Las Vegas. The firm partnered with Station Casinos on a mixed-use development near the latter’s Palace Station casino hotel and is involved in a Manhattan condo project with New York developer Steve Witkoff and Miami-based investment firm New Valley, the consortium that has bought the mothballed Fontainebleau on the Las Vegas Strip from Carl Icahn for $600 million.

The National Hockey League will not block Nevada’s sport books from offering action on the league’s newest franchise, the Las Vegas Golden Knights, when their maiden season commences next month.

The league had 30 days prior to the start of the season to ask the books to keep the team off their boards but declined to do so, according to an ESPN report. That means the games will be in play for bettors in the state’s casinos and via phone for spectators at the team’s home ice at the T-Mobile Arena on the Strip.

The Knights face off against the Dallas Stars on October 6.

NHL Deputy Commissioner Bill Daly said the league has discussed the issue with the team and with MGM Resorts International, which owns the arena, and “there may be some steps done in respect to that, but we didn’t feel like it was an appropriate time to make the global request”.

In the past, Commissioner Gary Bettman has spoken out against single-game betting. The NHL also has told Canadian officials that team owners oppose it. The league also has joined the NFL, the NBA and the NCAA in legal action to prevent New Jersey from legalizing sports betting. That case is scheduled to be heard by the U.S. Supreme Court this fall.