In 2019, the first full year of legalized sports betting since the Supreme Court invalidated a federal law that prohibited its legalization, approximately $13 billion was wagered in 11 states.
That is still just a fraction of the total amount wagered, most of which is still done illegally, through offshore sportsbooks and bookies, estimated to be $150 billion by the American Gaming Association.
While it is difficult to quantify the amount of money wagered on sports in Connecticut, it is easy to calculate the tax revenue the state receives on it: $0. The legislature can and should fix that problem this session by legalizing in-person and online sports wagering
With two major tribal casinos, off-track betting and a state lottery, sports betting isn’t illegal in Connecticut because of our Puritan history or concerns about gambling addiction. Rather, it is part legislative intransigence and complexities — or at least confusion — surrounding the gaming compacts with the Mohegan and Mashantucket Pequot tribes and pressure from the tribes themselves.
Gov. Lamont said in this year’s State of the State address that we should not surrender legalized marijuana, sports betting and internet gaming “to out-of-state markets or even worse, underground markets.” He called for legalizing sports betting in 2018 during his campaign and before the previous two legislative sessions. New Jersey, New York, New Hampshire, Pennsylvania and Rhode Island have already legalized sports betting.
Under gaming compacts, the Mohegan and Mashantucket Pequot tribes have the exclusive right to operate casinos in the state; in exchange for a quarter of the casinos’ gross slot machine revenue, the state will not allow anyone else to operate “video facsimiles or other commercial casino games.”
Sports betting is not mentioned. The tribes indicated that they consider “commercial casino games” to include sports betting. In written testimony to the legislature’s Public Safety and Security Committee last year, sports gaming lawyer and professor Daniel Wallach opined that sports wagering is not a casino game, a position shared by several state attorneys general and supported by federal regulations.
Still, the tribes will likely litigate any attempt to legalize sports betting without being guaranteed exclusivity or some other favorable treatment. The Mashantucket Pequot tribe has also threatened to withhold its slots payments to the state. So far there is one filed bill that would legalize sports betting but only in the existing casinos. That would likely be challenged by off-track betting venues and other companies that want in on the action.
The driving force behind the legalization of sports betting is money. Everybody wants it. Gamblers want to win their bets, bookies and sports books want to collect, and governments want their share in taxes and license fees. The revenue would benefit the state. The casinos, whose revenues have fallen due to the pandemic, would also benefit, even without exclusivity. The time is right to make a deal. In order to do that, sports wagering must be legalized.
Lamont and the tribes have been stuck in a standstill for two years. With sports betting still illegal, Lamont has minimal leverage. The legislature can give him more by passing a bill that he could sign. Negotiations can continue while the regulatory and licensing schemes are set up.
New Jersey made approximately $36 million in sports wagering tax revenue in 2019 and $28 million through the first three quarters of 2020, even though sports seasons were shortened because of the pandemic. Rhode Island has earned more than $20 million in taxes on sports wagering since legalizing it in 2019.
The tax revenue Connecticut would generate would not be enough to cure all of our budget woes, but it’s better than raising existing taxes. Legalizing sports wagering is a bet the state really cannot lose.
Christopher DeMatteo is an attorney at West Haven-based DeMatteo Legal Solutions.