Tribes Hold Key to Connecticut Sports Betting
Connecticut legislators and Governor Ned Lamont (l.) would like to see legislation that would legalize sports betting. But first they most reach an agreement with the state’s gaming tribes, who claim they would have a monopoly guaranteed by their gaming compacts.
Connecticut lawmakers have so far failed to agree on legislation that would legalize sports betting, something that many of them have hoped for since the Supreme Court lifted the federal ban in May.
But most legislators acknowledge that the state’s two gaming tribes, the Mohegans and Mashantucket Pequots, hold the key to legalizing sports book. While no bill is pending, other states in the region are raking in whatever sports betting profits there are to collect.
Before any bill can be passed Governor Ned Lamont needs to negotiate an amendment to the state’s tribal state gaming compacts. This is almost a non-starter, the tribes say, until the state concedes that those compacts already guarantee them a monopoly on sports betting.
That would freeze out other interested players, such as racetracks and OTB operations. They and their legislative allies, note that the compacts guarantee exclusivity on casino gaming, whose definition has never included sports betting, except in Las Vegas. The tribes argue that allowing other entities to participate would cut into their bottom line. By implication this would also cut the revenue sharing payments they make to the state that is based on 25 percent of slots revenue.
The tribal interpretation of the compacts wasn’t shared by former Attorney General George Jepsen who, back when he was still in office, penned an opinion that said legalized sports betting wouldn’t violate the compacts, but conceding that the tribes could make the opposite argument.
The newly sworn Attorney General William Tong is remaining mum on this issue except to say “The office of the attorney general issued a formal opinion in 2018 and there has been no change to that position.”
Former Solicitor General for the US Department of Interior Hilary Tompkins recently weighed in on this controversy.
“A threshold point of debate with states is whether or not they need to renegotiate a compact,” she said. “I do believe a lot of tribes feel they have the exclusive gaming market and that their current compacts allow for the addition of sports betting — as long as the state legalizes it and it doesn’t affect the current revenue sharing rate.”
“In that general language, there’s an argument that can be made that that could encompass sports betting,” Tompkins said. “I don’t think the omission of it necessarily means it’s not part of the deal.”
Leaders of the General Assembly say they intend to pass such a bill once the governor gets a signed compact with the tribes.
“Sports betting is a priority for me,” declared House Speaker Joseph Aresimowicz last week. “The sooner we do it, the better it will be for the state of Connecticut from a competitive aspect with neighboring states.”
A tandem goal is eliminating illegal sports betting, he says, and keep some of the money wagered in other states in Connecticut. “Our residents are doing it, and the question is are we as a state reaping any benefits from that?” he added.
Although several states have legalized sports betting, it still remains largely illegal in the U.S. According to the American Gaming Association $6 billion was wagered on this year’s Super Bowl, with 97 percent of that being illegal.
Those bets were made without consumer protections, according to Dave Forman, AGA senior director of research. He told Connecticut Public Radio, “The problem with that, especially the bookies and the online sites, is that there’s no consumer protection for these folks, no assurance that their bet is going to be paid by some of these shady operators.”
Senate President Martin M. Looney added, “It’s certainly very important,” in terms of raising funds in a state where lawmakers are wary about raising taxes to try to pay down the red ink in the budget.
Figuratively looking over their shoulders is Rhode Island’s two casinos, owned by Twin River Worldwide Holdings Inc., where sports betting has been legal since the day after Thanksgiving and where the governor Gina Raimondo just signed a bill adding mobile sports betting to the services offered. The state collects 50 percent of sports revenue, which is figured at $23.5 million the first year.
Lawmakers inclined to call the bluff (unless it isn’t a bluff) of the tribes and push forward with sports betting legislation with no compact amendments are given pause by hints from the tribes that they would put the annual payments into an escrow account while the courts sort out all the arguments.
Working against the tribes is the fact that their annual contributions have been in a slow but steady decline since the peak of 2007 when it was $430 million to last year, when it was $270 million, with no braking in sight. Of that $50 million went to municipalities. So any loss would be immediately felt by local governments.
Aresimowicz prefers a comprehensive gaming bill that would include sports betting and other expansions to gaming, including a structure for adding casinos and internet lottery sales.
That’s the governor’s preferred approach too. A spokesman released this statement last week: “Governor Lamont is committed to a global resolution of all gaming issues, including sports betting, and remains actively engaged with the key stakeholders.” He has been in talks with the tribes since being sworn in as governor in January.
The structure for adding casinos includes a bidding process, something the tribes say they will refuse to participate in, and will immediately withhold payments over.
The tribes are behaving as though they expect to win the sports betting negotiations. Mohegan Gaming and Entertainment, which operates the Mohegan Sun, announced last week reaching an agreement with Kambi Group to provide online and on-site sports betting at its casino. Kambi provides this service in New Jersey and Pennsylvania.
Looney said his understanding is that the sticking point in the negotiations is what kind of wagers could be accepted off the reservation and whether OTB facilities or the state lottery could participate. He would prefer as wide an offering as possible so the state collects more.
Even if an agreement was reached tomorrow, delays would be imposed by the need for any changes to the gaming compacts to be approved by the Bureau of Indian Affairs.
At recent hearings on sports betting, Chris Cipolla, an executive of DraftKings, which operates sports betting in two states, including nearby New Jersey, told lawmakers “The illegal market exists—estimates range but a number that people have seemed to migrate towards is a $150 billion underground industry.” He added, “We view it as how do you move that money into the regulated space, and that goes back to making it convenient enough for people to move into the regulated space.”
DraftKings favors mobile sports betting, the more convenient the better.
Some question whether the New England gaming market might be saturated. That’s the view of Joe Weinert, a casino and gaming analyst for Spectrum Gaming Group interviewed by the Hartford Courant, “The gambling prize is being carved up with lotteries online and sports betting. These are challenging times for casino operators.”
Fourteen years ago there were 13 casinos in the region, including the two Indian casinos in Connecticut. The gaming market has grown like an algae bloom until there are more than 1,000 in 42 states.
Clyde Barrow, a casino analyst who specializes in the region told the Courant, “The entire Northeast region is probably at or near saturation.” He continued, “That doesn’t mean there won’t be competition. … There’s still more being built. We’re talking East Windsor. We’re talking Massachusetts.”
As though to prove his point, revenues in the MGM Springfield, which opened August in Massachusetts, were lower than projected before the opening. Possibly because the MGM has a lot of competition. Add to that the Encore Boston Harbor slated to open in three months.
The two recently opened casinos in upstate New York also opened to less than predicted profits, according to Moody’s Investor’s Service. Keith Foley, senior vice president at Moody’s commented, “If you overbuild, you can run into problems. What you would think would happen isn’t happening. In the old days, you would build it, and it would do well. But with limited amounts of capital, if you make a mistake and you’re off by 25 or 50 percent of the revenue, you’re building yourself a problem. The mistakes are more costly than they were in the past.”
At the same time the Connecticut tribes have gotten the go-ahead to open their commercial satellite casino in East Windsor, a project that was held up for more than a year by maneuverings by MGM.
Barrow commented, “If I’m losing $200 million a year to Massachusetts, and I can build a smaller facility and recapture $100 million, it’s worth it to do that,” said Barrow, who has advised the tribes. “East Windsor is about recapturing market share. It’s not about growing the market.”
Add to this the sobering factor that Millennials are not entranced by gaming as their parents and grandparents were. So casinos must working even harder to squeeze profits out of the remaining adults who do like gambling. Or to recapture the younger generation with forms of gaming they will like, such as social gaming.
Longtime opponents of gaming in Connecticut, like Senator Tony Hwang, find such statistics useful in fighting the current movement to increase gaming. “We are in a declining and mature market for gambling,” Hwang said. He told the Courant, ”Connecticut had the unusual experience of being the first of its kind in New England when it came out, and the success was overwhelming, and the state benefited from it. But what we didn’t fully embrace was the expansion and states getting into the gambling game in Pennsylvania, Delaware, Maryland, Massachusetts, Rhode Island, and New York.”
Governor Lamont is willing to let the chips fall where they may in this controversy. “I’m the governor. I think the tribes know the market better than I do. They can figure that out.”
But there is another and important player. MGM, which has for years been fighting the tribes’ efforts to build a third casino while simultaneously proposing one of its own in the state’s largest city, Bridgeport. Despite the evidence of its own casino, MGM does not agree that the market is soaked.
Bridgeport isn’t, they say, because it has access to the New York city suburbs and their 3 million residents—directly accessible by railroad— who are currently underserved.
An MGM consultant recently told lawmakers that a Bridgeport casino would be the closest one available to New York City.