Report Highlights Gaming’s Economic Contributions in Maryland

By: Christopher W. Hinckley

@chinckley_HB

As reported by The Washington Post’s Annhys Shin, according to researchers from Oxford Economics, a forecasting firm based in Oxford, England; Maryland’s casino industry contributed $1.4 billion to the state economy and added nearly 8,000 jobs in 2013. And, while generating $359 million in profit, the industry provided the state with $543 million in tax revenue.

In 2013, four casinos opened in Maryland:  Hollywood Casino Perryville, Casino at Ocean Downs, Rocky Gap Casino Resort and Maryland Live. Maryland Live, a Cordish Companies casino property, is the state’s largest and most successful. These casinos collectively employed nearly 4,000 people, and indirectly supported thousands more.  The analysis did not include the $442 million Horseshoe Casino Baltimore, which opened in August 2014 and employs approximately 3,000. A sixth casino, the $925 million MGM National Harbor, is being built in close proximity to Washington and is scheduled to open in 2016.

Maryland numbers reveal it as a success story in the burgeoning casino development sector on the eastern seaboard. While Maryland’s gaming market grows in size and revenues, neighboring destinations once popular with East Coast gamblers have seen decreasing economics, including West Virginia and Delaware, with the most dire signs of the impact of fresh competition hitting Atlantic City, where four casinos will have closed by year’s end.

Additional facts from the report:

  • The average Maryland household would pay an additional $252 in taxes each year if not for the casinos.
  • Without the commercial casino industry, the unemployment rate in Maryland would rise from 6.3 percent to 7 percent.

Maryland is certainly strong out of the gate with projects that are definitely connecting with gaming customers. Whether older casino establishments in the region are able to recover and compete or not remains to be seen. How Maryland positions itself to stay at the front of the pack while Pennsylvania, New York and northern New Jersey plan to open new casinos appears to be the challenge for Maryland.  

Decision Day for NY Casinos Announced; Siting Board Recommendations Set for Dec. 17 at 2:00 p.m. in Albany

By The Editorial Team

The New York Gaming Facility Location Board announced it will meet on Wednesday, December 17 at 2:00 p.m. at the Empire State Plaza in Albany, NY. At the meeting the board will make its “Recommendations of Facility Applicants for Gaming Commission Licensure.” The meeting is open to the public. 

Effect of China’s Anti-Corruption Measures on Macau

By The Editorial Team

As reported by numerous media outlets last week, Macau reported a 19.6 percent (or $3.03 billion [U.S.]) year over year decrease in gross gambling revenue (GGR) for November.  Last month’s numbers follow a 23.2 percent year over year decrease reported in October, Macau’s largest single-month drop since 2004.  Such results have Macau prepared for its first-ever yearly decline in GGR.

Perhaps most interestingly, many financial analysts and reporters are pointing to the Chinese government’s recent increase in anti-corruption measures as a driver of this decrease.   More specifically, Stuart Leavenworth – a foreign correspondent for McClatchy — attributed a decrease in junket operations to a decrease in “corrupt government officials, trying to beat the odds with pilfered public money.”  Leavenworth cites additional concerns regarding Macau, including money laundering and casino companies’ heightened risk of exposure under the Foreign Corrupt Practices Act.

China’s anti-corruption efforts, however, are just one of many factors driving the decreases.  As noted by the Las Vegas Review-Journal, other factors such as “political unrest… in Hong Kong, economic concerns, and VISA restrictions” are also contributed to the recent decreases in GGR.

 As the global, national and regional gaming markets like the Northeast continue to evolve, these latest events underscore the highly regulated environment that gaming occupies. As the industry continues to wrestle with expansion and the prospects of market limitations, effective integrity measures will serve the dual purpose of inoculating companies from costly government investigations while maintaining brand reputation in an increasingly competitive sector.   

Gaming Facility Location Board to Meet Tuesday

By The Editorial Team

The New York Gaming Facility Location Board announced it will meet on Tuesday, December 9 at 9:30 a.m. at the commission’s New York City Office. Based on the agenda, the majority of the meeting will take place in executive session where the board will consider the financial and employment histories of the applicants for a state casino license. The board also announced that their final meeting of the year will take place on December 17 when the board is expected to announce its recommendations to the Gaming Commission concerning casino applicants.

 

EquiLottery: Thinking Outside the Box

By Karl J. Sleight and Christopher W. Hinckley
@ksleight_HB    @chinckley_HB

Horseplayers and lottery fans are considered two very different kinds of gamblers.  The former wades happily through the Daily Racing Form past performances, the latter enjoys the instantaneous results that come with random number games.  One company may have figured out a way to fuse equine sports and the lottery to grow the gaming market.

Combining Horse Race Betting With the Lottery

EquiLottery uses a parimutuel wagering system combining the randomness of the traditional lottery with the sport of horse racing. Polls have been conducted and reports have been generated by Gaming Laboratories International (GLI) and Cardinal Communications that offer encouraging data, and have led to discussions with lotteries to introduce the product. Initial research suggests that by combining horse racing and the lottery, a greater interest is generated for both, resulting in higher revenues for race tracks and lottery corporations.

Benefits of using the EquiLottery system include development of a new revenue stream to support the equine industry, which polls show is an encouraging concept for both non-lottery players and current lottery players. Nearly 15 percent of non-lottery players see betting on live horse races as incentive to participate.

How EquiLottery Works

Like any lottery, EquiLottery starts with a ticket. The price of a ticket is $2 and the wager is a standard straight trifecta. When a ticket is purchased, the money goes into a horseplayer wagering pool, after going to the local lottery fund first, and the payout will depend on the actual performance of horses in a live horse race. Ticket buyers do not pick their own horses. Selections are made at random like a “quick pick” ticket at the racetrack. The ease with which the wager is made, while still integrating horse racing, is designed to open the door to developing interest in the sport of horse racing. Moreover, EquiLottery dispenses with the investment of time necessary to understand the elaborate information that can be daunting to casual horseplayers. The EquiLottery participant can also enjoy the social aspect of the game, as well as the progressive payout structure that is not available with all lottery games.

The $2 paid for the ticket is distributed as follows: the first dollar goes into a pari-mutuel pool commingled with horseplayer funds and payouts will be paid based on the results of that particular race. The second dollar goes into a lottery-only supplemental pool that is supported by the lottery corporation and paid into only by EquiLottery players. This pool is triggered by the same racetrack results and will pay out to winning EquiLottery players. Additional integrations like second-chance raffles and on track incentives for bringing losing EquiLottery tickets to the racetrack are also possible here.

Real Revenue Potential

If the development of EquiLottery continues to move forward, large lottery corporations that generate billions of dollars may join the effort. According to reports by Gaming Laboratories International, projections are in the range of three-to-four percent of annual revenue from corporate funded lotteries from EquiLottery. This translates to $100 million of annual revenue in Ontario, Canada, $25 million for the Commonwealth of Kentucky and a whopping $270 million in New York. If it is implemented with a multi-state approach in conjunction with big race days, such as the Kentucky Derby and the Breeders Cup, revenue increases could be even higher.

 

New Jersey’s Latest Sports Wagering Law Part II – The Legal and Practical Reasons Fighting the Law’s Success

By Christopher W. Hinckley 

@chinckley_HB

The Department of Justice (DOJ)

The DOJ has remained on the sidelines during the recent challenge of New Jersey’s latest sports wagering law, possibly to distance itself from some injudicious concessions made during its challenge of the 2012 law. The DOJ will not, however, remain idle if New Jersey attempts to actively move forward to implement its current sports wagering law. Opposed to any efforts designed to circumvent federal authority, expect the DOJ to utilize its power, influence and laws, including the Professional and Amateur Sports Protection Act (PASPA) and the Wire Act, to block New Jersey’s attempts at allowing intra-state sports wagering. 

Possible Exception

The Wire Act bans the interstate transmission of bets or information assisting in placing sports wagers. Intra-state sports wagering, like that of New Jersey, requires the use of interstate communications and transfer of information across state lines. Supporters of New Jersey’s latest sports betting law see an exception to the Wire Act’s restriction on interstate activity in the Unlawful Internet Gambling Enforcement Act (UIGEA). UIGEA provides an exception for interstate transactions collateral to intrastate gaming, but only for those cross border transmissions connected to intra-state activity authorized under state law. Since New Jersey’s newest sports wagering law has not, according to state officials, been authorized by state law, then UIGEA’s exception for cross border transmission isn’t applicable and the Wire Act would come into play.

The DOJ and the Four Major Sports Leagues

As for PASPA, the DOJ agrees with the four major sports leagues’ (NHL, NFL, NBA and MLB) position that New Jersey’s newest sports wagering law violates PASPA. Expect the DOJ to adopt the Leagues’ position that New Jersey cannot escape the restriction of PASPA by exempting certain venues from the state’s ban on sports wagering. Further, expect the DOJ to argue that since the state constitution prevents the legislature from offering gambling in Atlantic City’s casinos unless the games are specifically authorized by law, that the wagering taking place under the new law is authorized by law and, therefore, a violation of PASPA.

Practical Considerations

The specter of federal prosecution for violations of the Wire Act, PASPA, or both, will likely deter licensed entities within and outside of New Jersey from becoming active participants in the sports wagering business under New Jersey’s latest sports betting law.

The individuals and entities associated with New Jersey’s casino, internet gaming, and racetrack businesses all hold New Jersey gaming licenses and are regulated by the state’s Casino Control Commission and Gaming Enforcement Division. Like most states, a New Jersey gaming license is a privilege under constant scrutiny and revocable for many reasons, including but not limited to, incidents that cast doubt on the integrity of the state’s gaming business that may betray the public trust in gaming as a strictly regulated activity. 

Potential Consequences

Regardless of the jurisdiction(s) in which they are licensed, gaming entities and individuals are expected to uphold the licensing criteria for every state in which they operate. In every case, the standards of behavior include obeying all state and federal laws. Legal violations regardless of where they occur will be reported to and considered by every other jurisdiction in which the individual or entity is licensed and could, depending on the severity of the unlawful conduct, result in disciplinary action.

The regulatory scheme throughout the country illustrates the implausibility of change in the status quo. In New Jersey, if a licensed individual or company involved in the state’s sports wagering business were to be investigated and possibly prosecuted by the Department of Justice they would be required to report the federal action to every jurisdiction in which they operate. Depending on the outcome and the severity of the offense, a licensee would face punishment ranging from fines and suspensions up to and including the revocation of their gaming license.

In several jurisdictions, including New Jersey, felony convictions preclude licensure. In every gaming jurisdiction, however, individuals or entities with felony convictions for activities related to gambling, can never be licensed and if licensed, will almost assuredly have their license(s) revoked. 

Short of a DOJ opinion or language from a federal court ruling providing the individuals and entities in question profoundly clear direction that takes the possibility of a federal investigation off the table, it is highly unlikely that a holder of a gaming license would become involved in the sports wagering business under New Jersey’s current law. 

The case is National Collegiate Athletic Association v. Christie, 14-cv-06450, U.S. District Court, District of New Jersey (Trenton).

New Jersey’s Latest Sports Wagering Law Part I – A Brief History and Current Status

By Christopher W. Hinckley  

@CHinckley_HB

Since it took effect on January 1, 1993, the Professional and Amateur Sports Protection Act (PASPA) has prevented the vast majority of states from adopting laws allowing for state-sponsored sports betting. Nevada and a handful of states were grandfathered in under the law due to the legality of sports betting in jurisdictions when the PASPA was signed. New Jersey was not one of those states. Since that time, New Jersey has made several efforts to challenge PASPA’s restrictions and each time has fallen short.

Even without sports betting, from 1978 until the mid-late 2000’s Atlantic City, New Jersey thrived, enjoying a period of substantial success as the East Coast’s gambling mecca. But the recession that began in 2008 combined with the growth in regional casinos led to a decline in gaming revenues from New Jersey’s casinos. At that time, and through today, New Jersey’s government leaders view sports betting as the tonic that will help turn around Atlantic City’s decline.  

In 2010, after a failed attempt led in part by New Jersey State Senator Raymond Lesniak to have PASPA declared unconstitutional, the state legislature proposed an amendment to the state constitution allowing for sports betting at Atlantic City’s casinos and the state’s horse racing and harness tracks. After voters approved the amendment, New Jersey amended the state’s gaming act and began putting together the regulations for licensing betting parlors in the state.

Before any wagering began, the NCAA and four major sports leagues (NHL, NFL, NBA and MLB) (Collectively referred to as the “Leagues”) later joined by the Department of Justice (DOJ) filed an action in federal district court to stop the law’s implementation based on a presumptive violation of PASPA. The Leagues and the DOJ were successful in challenging the law’s implementation, which ended in 2013 when the Supreme Court declined New Jersey’s request for review.

Fast Forward to 2014

Earlier this year the New Jersey Legislature went back to work and passed the 2014 version of a sports wagering law. This law took a newer, more innovative, and perhaps antagonistic, approach to allow sports wagering in New Jersey. This time, the legislation called for a partial repeal of  the state’s prohibition on sports wagering, exclusive to casinos and racetracks, and for all sports wagering to be independently regulated; a move necessitated by PASPA’s prohibition against the state’s endorsement or involvement with the activity.  

The 2014 sports wagering law was signed into law by Governor Christie on October 17, 2014. Days later, Monmouth Park, one of the state’s four horseracing tracks, announced its intent to accept sports wagers starting on October 26. 

To the surprise of only a few, the 2014 sports wagering act was immediately challenged by the Leagues in Federal District Court. The Leagues’ now pending lawsuit, seeks to block the law’s implementation again citing violations of PASPA and the New Jersey Constitution. Judge Michael Shipp of the Federal District Court in Trenton, NJ, who ruled against New Jersey’s 2012 sports wagering law, has already granted the Leagues’ request for a temporary restraining order. Shipp will next decide whether to grant the League’s request for a preliminary injunction. A hearing on the matter is expected in the near future. Regardless of Shipp’s ruling and the possibility of a positive outcome on appeal, New Jersey’s latest attempt to bring sports wagering to New Jersey is likely to fail.

Yes, even with a positive decision from the courts, the legal challenges and practical implications facing the law will prevent its successful implementation. More specifically, the threat of legal action by the DOJ will prevent most, if not all, gaming companies from doing business in New Jersey under New Jersey’s latest incarnation of a sports wagering law.

Part II will be posted Thursday, November 20.    

NYRA Back in Black; Discusses Aqueduct

By The Editorial Team

As reported by the Daily Racing Form, the New York Racing Association Reorganization Board met on Wednesday, November 12, 2014, to discuss finances and the future of Aqueduct Racetrack.  NYRA’s chief financial officer reported that NYRA expects to show an operations surplus of $1.5 million for 2014 and even larger surpluses for the next couple years.  The $1.5 million surplus excluded revenues from video lottery terminals, which are being used to cover certain expenses such as federal taxes and pension obligations.  NYRA cited cost-cutting measures, the raising of prices at its three thoroughbred tracks, and larger than expected profits from Belmont Stakes Day as attributing factors for the first operating surplus in 13 years.

NYRA President and Chief Executive Officer Christopher Kay also reported that upcoming recommendations to be issued by the Reorganization Board will not include a proposal regarding the future of Aqueduct.  As noted by the Daily Racing Form, “the prevailing theory” since the creation of the Reorganization Board has been to move winter racing in New York state to Belmont Park, which would host all NYRA races other than the 40-days of racing in the summer at Saratoga Race Course.  Kay noted that the current Reorganization Board is only “temporary and transitional” and that the future of Aqueduct will be the responsibility of the next NYRA Board, which is expected to take over in the fall of 2015.

Karl Sleight to Appear on The Capitol Pressroom September 25

By The Editorial Team

New York Racing and Gaming Blog editorial team member Karl J. Sleight will appear on The Capitol Pressroom with capitol correspondent Susan Arbetter Thursday, September 25 at 11:00 a.m. to discuss casino applicant presentations, regional public hearings, the vetting process of applicants that will continue and time frame for recommendations for winners. You can listen to a live broadcast on The Capitol Pressroom web site.

 

Board Releases Details on Public Hearings

By The Editorial Team

This afternoon, the New York Gaming Facility Location Board released details concerning the protocol for three public hearings to be held across the state as part of the casino application and siting process.  Each public hearing is scheduled to last up to 12 hours and can be observed either in-person or through the gaming commission’s webpage.  The three public hearings will be held at the following locations and dates:

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