Place Your Bets: A New Means of Economic Activity in Louisiana through Sports Gambling

John Frey

Introduction

Louisiana is consistently one of the poorest states in America. There are different metrics for what makes a state “poor”; however, Louisiana earns the label regardless of how it is defined. For example, when using the percentage of the population living at or under the poverty line as the standard for whether a state is poor, Louisiana ranks second to last.[1] When ranking states based on a combination of variables, including state finances, state economies, and state job markets, Louisiana ranks, once again, second to last.[2]

Logically, a state struggling financially might want to embrace a new stream of income. For Louisiana, sports gambling provides just that.[3] In November of 2020, Louisiana voters in 55 out of 64 parishes voted to make sports betting legal within their parish, which will lead to the legalization of sports betting in a majority of the state.[4] This result was not a surprise, as Louisiana is no stranger to gambling.[5] In 2020, Louisiana’s gambling offerings, such as casinos, video poker machines, and racetracks, generated $609 million in state taxes, which accounted for roughly 5% of Louisiana’s overall revenue.[6] For comparison, Louisiana is also a prominent oil and gas producer, and oil and gas production only accounted for $550 million in state taxes, which was 4.5% of the state’s revenue.[7] While Louisiana voters may not consider potential tax revenue as the driving force behind their voting decisions, the legalization of sports gambling provides Louisiana with both a new stimulus to its struggling economy and a new pool for state taxes.[8]

I. Sports Gambling in Other States

Until recently, Nevada was the only state with legalized sports betting.[9] Nevada’s legal sports betting dates back to 1931, although sports betting was not treated as its own form of gambling until 1949.[10] In 1992, Congress enacted the Professional and Amateur Sports Protection Act (PAPSA), which effectively made it illegal to gamble on the outcome of competitive sports.[11] However, the PAPSA contained a grandfather provision to allow Nevada to continue its sports betting operations.[12] In 2018, the United States Supreme Court’s opinion in Murphy v. National Collegiate Athletic Ass’n rendered the PAPSA unconstitutional, which opened the door for other states to follow in Nevada’s footsteps and legalize sports gambling.[13]

Since the Murphy decision, many states have legalized sports gambling, and these states have seen increased economic activity and tax revenue as a result.[14] Currently, Arkansas, Colorado, Delaware, Illinois, Indiana, Iowa, Nevada, New Hampshire, New Jersey, New York, Michigan, Mississippi, Montana, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, and West Virginia have fully functioning, regulated sports betting industries.[15] Interestingly, New Mexico’s lawmakers have yet to pass a sports betting bill, but patrons of tribal casinos throughout the state have been able to place legal sports bets since October of 2018, making sports betting effectively legal in New Mexico as well.[16] North Carolina, Maryland, Louisiana, and South Dakota’s voters have approved the legalization of sports betting, and the residents of these states are now waiting on their lawmakers to enact a structured bill.[17] Currently, 24 states have either legal or soon-to-be legal sports betting—an impressive increase from only one state in 2018.[18]

Sports betting does two things for states that have legalized the activity. First, a state’s economy is stimulated simply by providing a new way for money to circulate.[19] The term “handle” is used to describe the total amount of money wagered on bets, and the sports betting handle for states that are not necessarily known for gambling—states other than Nevada and New Jersey—is quite impressive.[20] For example, Pennsylvania residents have spent nearly $6 billion on sports-related betting since 2018.[21] Further, the entity streamlining the betting process, known as a “sportsbook,” makes money from the process through taking a small percentage of the total bets placed with the sportsbook.[22] This percentage is referred to as the “hold percentage,” and it ranges anywhere from 6.1% in Virginia to 17% in Washington D.C.[23]

Second, sports gambling allows states to tax the money flowing in and out of the sports betting process, and the taxes generated can be very valuable. Nevada has collected nearly $57 million in taxes on sports betting activities since 2018.[24] While Nevada did not have to build its sports betting infrastructure from the ground up, as sports betting was legal there prior to 2018, even states that were late to the game have realized significant tax revenue.[25] Delaware, Illinois, Indiana, and Rhode Island have already collected $20 million in taxes since the legalization of sports betting, and none of those states had a near-hundred-year head start.[26] Most surprisingly, Pennsylvania’s sports betting tax has surpassed a nine-digit figure—nearly $110 million since 2018.[27] Needless to say, through economic stimulation and collection of a new source of tax dollars, there is money to be made for a state through the legalization of sports betting.

II. Sports Betting in Louisiana

While voters in 55 of 64 Louisiana parishes voted to legalize sports betting, there are currently no licensed physical sportsbooks in the state.[28] Likewise, there are currently no online sites licensed to operate as sportsbooks in Louisiana.[29] The timeline for when sports betting will be fully operational, and what it will look like once it is operational, is not yet certain. However, given Louisiana’s gambling background, the ability to consider physical gambling and online gambling as separate ideas, which both implicate different licensing and regulatory issues and can provide two distinct avenues for citizens to place sports bets, and the ability to look to other states that have already gone through the regulatory process, the process should not be particularly difficult, and Louisiana should see positive results.

Louisiana has a long history with gambling, and the prospect of new jobs and new tax revenues made the November 2020 vote on whether to legalize sports betting a simple decision.[30] Louisiana currently boasts many forms of gambling, which bodes well for its ability to implement a new type of gambling, as the state has already accommodated different types and forms of gambling over the years.[31] Louisiana residents can gamble in the form of a lottery, in-person horse racing, off-track horse racing, charitable raffles, truck stop and tavern-style video poker, and at full-scale casinos.[32] Currently, the only form of regulated online gambling is off-track horse racing.[33] However, Louisiana lawmakers clearly understand how to facilitate online gambling, as the state already regulates off-track horse racing, which can serve as a template for regulations of online sports betting. Further, the wide range of in-person options evidences an ability to easily accommodate both in-person sports betting and online sports betting.

Now that Louisiana voters have established their desire to legalize sports betting, the two biggest questions that remain are when Louisiana residents will be able to bet on sports and what means they will have to place their bets. The exact timeline is uncertain, but there is optimism that it will not take long for Louisiana to develop the necessary sports betting infrastructure.[34] Senator Ronnie Johns, who sponsored the bill ultimately responsible for legalizing sports betting, believes a plan will be in place by April of 2021.[35] However, obstacles to the implementation of sports betting exist. In a world with COVID-19, it may be difficult allocating the proper resources necessary to fast-track something as unrelated to the pandemic as sports betting.[36] The ability of sports betting to create new jobs and stimulate economic activity, however, attracts Louisiana lawmakers’ attention.[37] Thus, Louisiana residents should not have to wait long until they can place their first bets.

While sports betting has the attention of Louisiana lawmakers, the question of how lawmakers will shape sports betting still remains.[38] At the very least, Senator Johns has made it clear that sports betting should be taxed at a lower rate than 21%, the rate levied upon casinos.[39] However, whether sports betting will be offered in-person, online, or through a mix of the two is yet to be determined.[40] If in-person sports betting is offered, it is likely that Louisiana casinos will open sportsbooks within existing physical locations.[41] Louisiana’s neighbor, Mississippi, currently operates its sports betting on an on-site-only basis; therefore, Louisiana can look to Mississippi for guidance on how to incorporate a sportsbook into its already operational casinos.[42] For online offerings, there are multiple established online sportsbooks, such as DraftKings, that Louisiana could utilize if it so chooses.[43] Tennessee is an example of a state that opted to offer only online sports betting, and it has seen great success from the choice to go strictly online.[44] Expect Louisiana lawmakers to consider both in-person and online options.

Ideally, Louisiana residents will have the ability to place sports bets both in-person and online. As lawmakers in Louisiana have already showed an ability to foster online gambling options and create firm infrastructure for in-person gambling, Louisiana stands to benefit from allowing potential sports betters to have access to either option.[45] The overhead should not be significant for casinos, as the processes already exist in other forms, and the easier it is for a resident to place a sports bet, the easier it will be for Louisiana to tap into this new form of economic stimulus.[46] This dual system benefits both Louisiana residents, with increased access to sports betting, and the State of Louisiana’s purse, as more sports bets will be placed.

Conclusion

Louisiana needs all of the financial help it can get.[47] Sports betting provides the state with a means of economic activity through new jobs, new tax revenues, and a new consumer product.[48] Louisiana citizens believed sports betting to be a worthwhile endeavor and successfully voted to legalize the activity throughout the state.[49] While it is uncertain when Louisiana residents will get to place their first bet, the positive economic potential of sports betting is likely to provide Louisiana lawmakers with reason to get the process done quickly.[50] Louisiana lawmakers must decide whether to provide in-person options, online options, or a mix of both.[51] Regardless of the ultimate shape of sports betting in Louisiana, a dual system of in-person and online sports books would allow Louisiana to obtain the most benefits from this new gambling activity.

 

[1] Top 10 Poorest States in the U.S., Friends Committee on National Legislation (Oct. 5, 2020), https://www.fcnl.org/updates/2020-10/top-10-poorest-states-us [https://perma.cc/ZX7H-X46R].

[2] Samuel Stebbins, Grant Suneson & Michael B. Sauter, Best and Worst Run States in America: A Survey of All 50, 24/7 Wall St. (Dec. 20, 2020), https://247wallst.com/special-report/2020/12/08/best-and-worst-run-stateamerica-a-survey-of-all-s-in-50-3/11/ [https://perma.cc/DJX3-PGGW].

[3] US Sports Betting Revenue and Handle, Legal Sports Report, https://www.legalsportsreport.com/sports-betting/revenue/ [https://perma.cc/AV3G-U8JN] (last visited Mar. 3, 2021).

[4] Matt Amato, Louisiana Sports Betting: Voters Enable Regulators to Decide State’s Fate, Lineups (Feb. 22, 2021), https://www.lineups.com/betting/louisiana-sports-betting/ [https://perma.cc/T9TM-JWH2].

[5] Tyler Bridges, Modern Gambling in Louisiana Began 30 Years Ago. Now, It ‘Would Take a Crowbar’ to Take It Away, Advocate (Nov. 14, 2020), https://www.theadvocate.com/baton_rouge/news/politics/article_776b5c30-2506-11eb-986c-ffc1b2280259.html [https://perma.cc/K963-2KXV].

[6] Id.

[7] Id.

[8] See generally US Sports Betting Revenue and Handle, supra note 3.

[9] Jeremiah Booker, History of Sports Betting in Las Vegas, Best US Casinos (Jan. 26, 2020), https://www.bestuscasinos.org/blog/history-of-sports-betting-in-las-vegas/ [https://perma.cc/8J7R-4Q69].

[10] Id.

[11] 28 U.S.C. § 3702.

[12] Id.

[13] 138 S. Ct. 1461 (2018).

[14] See generally US Sports Betting Revenue and Handle, supra note 3.

[15] Legislative Tracker: Sports Betting, Legal Sports Report, https://www.legalsportsreport.com/sportsbetting-bill-tracker/ [https://perma.cc/ST98-D9F8] (last visited Mar. 3, 2021).

[16] Legal Sports Betting in New Mexico, US Betting Report, https://usbettingreport.com/sports-betting/new-mexico/ [https://perma.cc/SL8D-EAJS] (last visited Mar. 3, 2021).

[17] Legislative Tracker: Sports Betting, supra note 15.

[18] Id.

[19] Mark Skousen, Consumer Spending Drives the Economy?, Foundation for Economic Education (Sept. 22, 2020), https://fee.org/articles/consumer-spending-drives-the-economy/ [https://perma.cc/9Z46-HELD].

[20]  US Sports Betting Revenue and Handle, supra note 3.

[21] Id.

[22] Id. To operate in a profitable manner, sportsbooks structure the betting process in a way that ensures overall that the sportsbook will make money in the long run, Profitability is ensured through slightly manipulating the odds of a certain bet. For example, if the sportsbook believes a sporting event has a fifty-fifty outcome, the sportsbook will set the odds in a manner that results in a $10 bet paying out $9. This way, assuming an equal number of bets are placed on both the winner and the loser of the sporting event, which should be the case long-term, the sportsbooks still profit after paying out the winning bets.

[23] Id.

[24] Id.

[25] See generally id.

[26] Id.

[27] Id.

[28] Amato, supra note 4.

[29] Id.

[30] Bridges, supra note 5.

[31] See generally Louisiana Casinos, Online United States Casinos, https://www.onlineunitedstatescasinos.com/states/louisiana-gambling/ [https://perma.cc/WU7C-D2ZB] (last visited Mar. 5, 2021).

[32] Id.

[33] Id.

[34] See generally Ryan Nelson, Matthew Bennett & Mahogani Counts, When Will Sports Betting Be Allowed in Louisiana? It May Not Happen This Year, Daily Advertiser (Feb. 10, 2021), https://www.theadvertiser.com/story/news/local/louisiana/2021/02/11/sports-betting-louisiana-rules-taxes-details-may-take-time/4460311001/ [https://perma.cc/UG5Y-H8YK].

[35] Id.

[36] See generally State Fiscal Responses to Coronavirus (Covid-19), National Conference of State Legislatures (June 30, 2020), https://www.ncsl.org/research/fiscal-policy/state-fiscal-responses-to-covid-19.aspx [https://perma.cc/DA2B-J9C6].

[37] See generally Nelson, Bennett & Counts, supra note 34.

[38] Id.

[39] Id.

[40] See generally Amato, supra note 4.

[41] See generally id.

[42] See Mississippi Sports Betting Information – Sportsbooks, Betting Sites, Sportshandle, https://sportshandle.com/mississippi/ [https://perma.cc/4MAN-D6VB] (last visited Mar. 7, 2021).

[43] See generally Amato, supra note 4; Draftkings Sportsbook, Draftkings, https://sportsbook.draftkings.com/featured?category=live-in-game [https://perma.cc/56H5-SHWZ] (last visited Mar. 7, 2021).

[44] Calvin McAlee, Tennessee Sports Betting: Ranking the Top Sportsbooks Apps 2021, Lineups (Feb. 1, 2021), https://www.lineups.com/betting/tennessee-sports-betting/ [https://perma.cc/DX8W-QVGP].

[45] See generally Louisiana Casinos, supra note 31.

[46] See generally id.

[47] See generally Top 10 Poorest States in the U.S., supra note 1.

[48] See generally US Sports Betting Revenue and Handle, supra note 3.

[49] Amato, supra note 4.

[50] See generally Nelson, Bennett & Counts, supra note 34.

[51] Amato, supra note 4.

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