Avoiding another Cali: overcoming tribal relationships and legislative hurdles for sports betting

SBC Summit North America

Five years on from the repeal of PASPA, the sports betting industry has made huge inroads in expanding across the US. There are 38 states plus DC with legalized sports betting, yet the industry has reached an impasse with the remaining states, with some of the larger ones proving particularly difficult to crack. 

It has proven difficult to pass legislation in states such as Texas, Georgia, and Missouri in 2023 despite plenty of vocal support for such sports betting legalization.

Jessica Feil, Vice President of Regulatory Affairs and Compliance at OpenBet, stated that the industry had reached a “twilight moment” in terms of legalization but that, ultimately, politicians have other priorities in this legislative session. 

This means, according to Feil, that the industry needs coherent messaging to persuade lawmakers that sports betting should be further up the legislative priority list. 

Speaking on a panel titled “Market Entry – A Fundamental Reset of Strategy” at SBC Summit North America 2023, she explained: “These legislators have so many competing priorities when they are looking at a sports betting bill or other gaming bills; they have health care to worry about. They have, you know, oil and gas, they have banking, all of these other priorities. Legislators are not experts in our industry so we have to constantly educate them.

“We’re all working together to some extent to legalize sports betting, because we want to see a safe legal market, we want the opportunities for business that are good for consumers. It’s good for state revenue. But at the same time, states will also look up and say, well, we’ve got 12 priorities right now, but only six are going to get done this year.”

The debacle in California last year was the prime example of the industry struggling to get over the line in key states, with two competing measures making it onto the ballot box. This caused fragmentation when the industry should work together to achieve its goal. 

Ultimately, the industry’s relationship, or lack thereof, with the tribes hindered the opportunities in California last year, and a group of industry minds came together to discuss how best to overcome these challenges in the future. 

Feil was joined on the panel by Stacey Stern, VP of Government Affairs at Underdog Sports, Chris Adams, Founder and CEO of SharpRank, and Todd Nelson, Director of Technical Compliance at BetMGM.

For Stern, it was key that constructive dialogue is opened up with the tribes to ensure there is no repeat of the 2022 election, given over $600m was wasted on both the Prop 26 and Prop 27 campaigns. 

Stern outlined: “Last year, the election got ugly and intense. There needs to be a way, whether it’s through government affairs at some of the operators and some of the suppliers, working with tribes or even getting down to talking to lawmakers who have relationships with the tribes, and where they can find that common ground to be able to deliver a product.

“I think the tribes (were thinking) ‘wait, we’re the stakeholders, we should get to decide’ – and they’re right. So you’ve got to work through the tribes and there are all the factions there that make it a little bit tricky.”

Adams chimed in on the debate and reflected on the situation in Texas, where sports betting measures failed thanks to Lt Gov. Dan Patrick, who is anti-sports betting. 

He turned to psychological theory to explain why and how legislators in Texas are reluctant to vote in favor of legislation that is not necessarily likely to pass. 

Responding to a vote in which 97 out of 100 votes were gained on a Texan measure, Adams explained: “What we’re looking at is the prisoner’s dilemma. You have two participants who may need to make decisions without the knowledge of the other one. The general theory is a tit-for-tat approach. 

“So I copy what my partner does, that tends to lead to the best outcome of where we go. But what I think we’re hearing generally is, you can break open a prisoner’s dilemma if you let them communicate. I think that that is going to be so important for Texas and California to have that one voice to say we are all on board with this set of guidelines.” 

Nelson fell back on his years of regulatory experience with the Massachusetts Gaming Commission to explain how BetMGM speaks with state regulators and legislature to navigate complexities when it comes to technical compliance. 

He noted that what works in one state may not necessarily work in others, but that dialogue between the entire ecosystem can benefit the industry from a compliance perspective and entering new markets when in the licensing process. 

“Let’s sit down and discuss it because it’s quite possible that where we have another solution and another state that worked really well for worked really bad,” Nelson told the panel. “For example, there’s a unique requirement in one of these jurisdictions – Ohio, and it had to do with authentication about a process. 

“So we booked a meeting with the Ohio Casino Control Commission, they took our meeting, we went and explained exactly what our solution was. They really didn’t care about our solution. And they’re able to educate us on exactly what they wanted so we weren’t searching trying to understand what (was required).”