Q&A: Frank Fantini on the future of sports betting in Delaware

Frank Fantini, a former reporter and editor, was first attracted to the gaming industry in 1995. That was just three years after the federal government effectively banned sports betting outside of a handful of states, including Delaware, that were grandfathered into the new law.

Fantini’s firm has tracked the gaming and gambling industry for nearly two decades. This has prepared Fantini for the sudden changes brought on by a Supreme Court decision this month that lifted the ban on sports betting. We talked with Fantini about the implications here in Delaware, the response from sports leagues and the possibility of online betting.

Frank Fantini
Fantini Research

Delaware has held a regional monopoly on sports betting for years. How did the state come into this position? Give us some of the history.

When Congress banned sports betting in 1992, several states had some form of sports betting, including Delaware, whose state lottery offered a game based on NFL game results. Those states maintained the right to continue offering those games through a grandfather clause in the legislation. That is why Delaware has offered parlay betting on NFL games in recent years.

The recent Supreme Court decision changes the landscape entirely. How do you predict Delaware will adapt?

Does it have an advantage over other states? Delaware will have a first-mover advantage as it can start up quickly already having an experienced odds-setter under contract, technology platforms and regulation in place.Pennsylvania has enacted legislation but has to set up regulations and infrastructure. Pennsylvania also has a problematic law with a too-high 36 percent tax on revenues.

Maryland has three bills in its legislature. All three require a statewide referendum to legalize sports betting, so while probably on the way, sports betting is not guaranteed.

Until Pennsylvania and Maryland start up, First State casinos can look forward to greater visitation on game days, especially Delaware Park, given its proximity to southeast Pennsylvania’s big population. Obviously, those advantages diminish if and when neighboring states have sports betting.

What kind of change in revenue from sports betting do you anticipate?

Revenue in the casinos will not be huge in of itself. If you use Nevada as a comparison, less than 2.6 percent of casino gaming revenues come from sports betting. Sports betting is more an amenity and a magnet to draw players, who then spend money elsewhere in the casino. Of course, that is still added business that the casinos will be glad to have.

However, online sports betting, and allowing wagering during games on mobile devices, can create a much bigger audience. If you look at the United Kingdom, the big bookmaking companies now generate much more revenue from digital sports betting than they do in their chains of retail sports betting shops.

Federal law still restricts sports betting from taking place across state borders. Do you anticipate pressure to change this as more and more states implement betting systems?

The Supreme Court said that Congress can establish national policies on sports betting and, frankly, the industry would welcome the uniformity around the country. Whether Congress can achieve a consensus is another issue, and the Court also was clear to say that states are free to act in the absence of federal action.

As for the 1961 Wire Act that prohibits sports betting on telephones (and thereby the internet) across state lines, I would be surprised if enough votes could be gathered to amend that, though the industry would love it. The internet has the ability to significantly expand the potential of sports betting, especially in so-called “in-game” wagering where bets can be placed on mobile devices during a game on thing like which team will be the next to score, or who likely will win now.

All of the big professional sports leagues urged the Supreme Court to uphold the federal ban. Going forward, what kind of response should we anticipate from the sports industry?

Sports betting will be a financial boon to the major leagues. The gaming industry has long thought that the leagues’ opposition to sports betting was less about integrity concerns than how they could get a slice of the pie. And that seems to be playing out now. The major leagues have proposed a so-called “integrity fee” of 1 percent on all monies bet, saying that would offset costs of assuring integrity. The NBA, in what might be considered a more honest approach, calls the proposal a royalty for sports books making money off its product and trademarks.

The industry has responded strongly against a 1 percent fee on wagers, saying that it amounts to a 20 percent revenue tax considering that sports books generate just 5 percent of revenue on each dollar bet. There appears to be room for compromise, with bills in several legislatures proposing a 0.25
percent fee.

Finally, sports betting will lift broadcasting revenues as betting motivates more people to watch games and watch them longer, especially with in-game wagering holding interest to the very end of the contest. Plus, betting companies will become significant advertisers.