Norton on Sports Betting: Not Really Helping Atlantic City?

Steve Norton: I am concerned that Sports Betting, as introduced in New Jersey, is not helping the casino industry, as much as expected. When proposed, Sports Betting was hoped to increase visitations to Atlantic City and the NJ racetracks.

But after adding all manner of in-game and proposition bets, to AC operators online gaming sites, roughly 60% of all bets are online and of the other 40%; the Meadowlands generates about 80% as much as all 6 live AC sites. And AC will see a further decline in live visitations, when Sugar House opens its Sports Betting Lounge and Pennsylvania allows it online.

Sports Betting in Nevada has a hold rate of about 5% of amounts bet, with the Federal Government getting about 0.5%, and states from 6.75% to 36% (in PA), with most understanding that a tax of 20% will take another 1%, leaving the operator an estimated 3.5% to cover marketing and operating costs, with hopefully something remaining as profit. But consider that customers to live operations, give them additional profit centers, from food and beverage sales, even if no overnight stay or casino play is involved.

With much of NJ’s population, 2 hours or more from AC, it is likely we will sacrifice much Sports Betting to gaming in PA, NY and DE, as well as NJ racetracks, and currently online gaming sites that are more convenient than live gaming sites.

Sports Betting online, with hundreds of bets available for many games, could be a major problem for players with compulsive issues; and minors are now being provided free casino games on their computer, and could eventually develop their own problem gambling tendencies.

A real danger for NJ tax collections is Lottery players, diverting any of their gaming budget to the more convenient online Sports Betting, by phone or computer. Because in that case, the State is trading the 40% hold rom Lottery games, to the likely 1% tax on Sports Bets. I expect the State will keep a close watch on the amount of Lottery Play; looking past October, where a $1.5 billion prize greatly increased National play.

A possible compromise, to provide the necessary convenience, that would help Atlantic City casino operators, is to allow Sports Betting Parlors, much like OTB’s; where a superior sports viewing attraction, would also including a cafe and bar operations. And to provide a reason to visit these Sports Parlors, when no games are underway; a limited number of Video Gaming Terminals and possibly Poker could be added. These Parlors would be located in communities, approving their location; and be operated by the AC casinos; and a reasonable distance from racetracks, that now offer live Sports Betting facilities.

But, in order to be competitive with illegal overseas betting sites and US bookies, the US States should keep their tax rates reasonable; and the operators will need to return 90% to 95% of sports bets made, to players as winnings. Operators, in a State like Pennsylvania, with a tax rate of 36%; will be at a disadvantage in competing with the illegal sites, and may have to change their tax policy.

States, in order to protect their tax revenues, should consider some type of penalty, for players that bet on illegal sites; possibly a small fine. Most players should willingly convert their play to legal US sites, as they will be properly overseen, offer fair odds, and the player will know that a large bet is actually going to be paid. But the Sports Betting Parlors need to be within a 30 minute drive of most players, to keep them off the illegal sites. Most American players should want to play legal US sites; for a more reliable, well protected product; and realizing that illegal sites, pay no taxes, provide no US jobs; and all revenues, less winnings, leaves the Country.

My proposal for New Jersey, would require the operators or the State to stop Sports Betting on online gaming sites; or at least restrict online betting just to game outcomes.

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