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Virginia Sports Betting Already A Mess But Not For FanDuel

James Murphy
by in Gaming Industry on
  • Sports betting in Virginia went live on Friday–at least for FanDuel.
  • FanDuel somehow gained preferential treatment via a partnership with the Washington Football Team.
  • Virginia made the big mistake of letting the state lottery run sports betting instead of establishing a gaming commission.

A few years back when the Supreme Court struck down PASPA I made the rounds of the media and they all wanted to know what I thought about the future of US sports betting. I said that I was only guardedly optimistic since the individual state’s governments would more likely than not find a way to screw things up. Asked for an example of how a state could screw things up and my kneejerk response was always “by letting the lottery run sports betting.”

I might as well have billed myself as a clairvoyant. I’m amazed that so many US states have done sports betting so badly. I guess the more appropriate statement would be that I’m surprised that so few states have done it right. All a state needs to do to make a ton of money with sports betting is to create a competitive market by offering low taxes and fees, minimal restrictions on the betting menu and not requiring players to jump through silly hoops like ‘in person registration’. You can look at a list of the states with the highest sports betting revenue and the overwhelming majority of the top ten will have a regulatory framework similar to what I describe above.

The states that constantly underachieve are the ones that relegate sports betting to being just another gimmick game for the lottery. Just as bad are the ones that put oversight of sports betting under the auspices of the state lottery commission instead of creating a gaming commission. That’s how you get unmitigated dumpster fires like the District of Columbia or Tennessee with their downright laughable ‘10% hold requirement’. Eventually every state with one of the scenarios I’ve mentioned above will be forced to scrap the lottery run or regulated disasters and start from scratch. Oregon is already looking to do that–credit to Governor Kate Brown for figuring out that a competitive sports betting ecosystem will make the state a ton more money while providing a better product for players.

This brings us to the State of Virginia which officially launched mobile sports betting today. Well, sort of. They gave one sportsbook provider a ‘head start’ letting them launch before their competitors. FanDuel was the lucky beneficiary of a relationship with the NFL Washington Football Team. Under Virginia’s sports betting regulations, pro sports teams based in Virginia were given “substantial and preferred consideration” in opening a sports book, and were allowed to partner with an established operator to do so. Seriously. For that reason, FanDuel was allowed to launch today. Their chief marketing officer Mike Raffensperger sounds almost sheepish when discussing this perk of their partnership with the ‘football team that shall remain nameless’:

“The way the Virginia legislation is written, there is preferential treatment to the team, which is one of the reasons why we’re privileged to be the first sportsbook live in the state of Virginia.”

You can’t blame FanDuel for accepting this preferential treatment but the rationale behind it is essentially the type of backroom deals that represent politics at its sleaziest and most cynical–only in this case the state of Virginia is doing it out in the open. You see, the state wants to ‘strongly encourage’ the Washington Football Team to build a new stadium in Virginia….

“The NFL team, which is based in Ashburn and pays about $14 million a year in state taxes, is considering locations for a new stadium and headquarters facility, and the gambling perk is intended to be another reminder that Virginia is interested in building the new stadium in the commonwealth.”

It’s not a bribe…it’s just a “reminder”! One of the sponsors of this God-awful sports betting setup tries a similar tactic to spin away the sleaze:

Del. Mark Sickles, D-Fairfax, who was a sponsor of the betting legislation last year, said Thursday morning that no deal has been struck for a new stadium; rather, the preferential treatment is a “sign of good faith on our part.”

Saying it’s ‘a sign of good faith’ is more of an insult to the intelligence than the ‘reminder’ gibberish as it implies a quid pro quo. The Richmond Times-Dispatch stirs the pot a bit more:

Gov. Ralph Northam’s administration is not actively pursuing a stadium project for the Washington Football Team in Northern Virginia or considering direct taxpayer incentives to attract it to the state, sources said.

However, the administration has discussed with the NFL franchise its potential infrastructure needs — such as land, road access and utilities — for a larger “live, work, play” entertainment district around a new stadium.

The state government doesn’t *need* to ‘consider direct taxpayer incentives’ when they can just use an out and out bribe. They’ll even through in some infrastructure work, no doubt as a ‘show of good faith’.

I don’t blame the Washington Football Team for taking advantage of the State of Virginia’s shameless influence peddling either. But that’s just the way it’s going to be in Virginia. Here’s another blurb from the Richmond Times-Dispatch with some emphasis added:

National companies MGM, Draft Kings, Barstool Sports and Wynn, among others, have also applied for licenses but, as of Thursday morning, at least one of those companies had not received word on its status, according to a source who did not want to be named so as not to anger the lottery and jeopardize his company’s chances.

Nothing says ‘effective and professional regulatory oversight’ like the fear of retribution for pointing out that a government entity is not doing their job. But wait–it gets worse. Here’s a bit from the essential Legal Sports Report about how Virginia codified an environment favorable for influence peddling–if not out and out corruption–in the sports betting regulations. Once again, I’ve added the emphasis:

There will be a minimum of four online sportsbooks and a maximum of 12 in the state. The total allowed will be based on what creates the best economic environment for Virginia determined by the Lottery.

That’s a brilliant idea–let a state agency that knows nothing about sports betting and even less about marketplace economics. What could go wrong? Virginia will be licensing some land based casinos in the near future and–no surprise here–they went with the ‘limited number of licenses’ like every other corrupt state that wants to transform what should be a simple bit of regulatory paperwork into a financial and political bargaining chip:

Separately, the House General Laws Committee approved legislation on Thursday to make clear that casinos licensed in up to five cities, including Richmond, will be entitled to a sports betting license in addition to the dozen that the lottery will award.

Like every other jurisdiction that’s more interested in advancing pet agendas than they are creating a new industry that would benefit everyone in the state they’ll have the requisite double digit tax rates (15%) and absurdly high fees. Of course, bettors won’t be allowed to wager on Virginia college teams for…uh….reasons.

The population of Virginia is roughly the same as New Jersey but there’s every reason to think that their sports betting ecosystem will underperform badly relative to that of the Garden State. Unfortunately, they probably don’t care since it looks like the primary goal of Virginia sports betting is to serve the purposes of government and politicians and not the interests of the state or the people that live therein. The state is likely too populous for sports betting to completely crash and burn but the way they’ve set it up it definitely won’t come close to what it could be were it run properly.

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