H2GC Reports The US and Sports Betting | Page 13

Regulatory Change – Courts or Congress?
Analysis
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Many within the sector – and significantly also some within the US Major League Sports – who favour a change would prefer a Federal
solution via Congress, not the Courts. The reality, however, is that the SCOTUS case is the most likely place where that opening up of
the US sports betting market will begin.
That said, H2 believes a significant period of time will be required before we see a fully regulated sports betting market in the US
because there is other legislation that impacts on the sector to unravel – notably the Wire Act 1961 which will come under likely legal
challenge over where operators’ technical hardware and gaming servers can be located, and UIGEA 2006 which currently makes it
illegal for players to place deposits/get pay-outs from online sports betting sites.
We also believe the pace of change will be slower rather than quicker because:
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Each of the States’ regulatory gambling authorities are not currently geared up for legalised sports betting;
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No Federal template exists and an appropriate product mix will need to be considered State-by-State;
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A sensible level of tax rate will need to be set. If the currently proposed 36% GGR is pursued within Pennsylvania for example, it
will be the highest tax rate in world gambling (H2 believes the industry’s online tax rate ‘sweet spot’ exists between 15-20%, and
that at 30-35% all profitability begins to be driven out of a market); and
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Strong law enforcement will be required to drive down the already significant illegal market.
Fundamentally, the NJ case is more a ‘States’ rights’ issue, than a sports betting matter. It should be a significant milestone,
however, in driving change within the US industry. No two markets are the same, but the most mature sports betting nations today
have ‘something for everyone’ market equilibrium – where the government has player security and taxation; the operators have
market protection and profit; the sports see greater coverage, global audience reach and a professional integrity system; and the
consumer enjoys choice, value for money and player protection.
In short, the US has a unique opportunity to put in place a ‘gold standard’ regulation for sports betting if it chooses to, drawing on
the lessons learnt by those markets that have gone before it.
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