Why Illegal Sportsbooks Will Still Have Advantages Over Legal US Sports Betting
The Supreme Court will issue an opinion that will determine the fate of sports betting in the United States in the coming days/weeks/months. It?s widely believed the Court will rule in favor of New Jersey, and lift the federal prohibition that currently prevents every state not named Nevada from offering traditional sports betting: the Professional and Amateur Sports Protection Act, better known as PASPA.
Six states have already enacted laws in anticipation of PASPA reversal, and no less than 14 others are contemplating sports betting legislation.
Everyone has their hand out
It was relatively smooth sailing for the states that passed legislation prior to December?s oral arguments in the NJ sports betting case that tipped the scales in favor of a PASPA repeal.
With the proverbial writing on the wall:
States are angling for their slice of the pie via licensing fees and taxes.
The sports leagues have switched from opposition to asking for an integrity/official-data/just-because fee.
And of course, the sportsbooks need to make money.
There?s a growing concern that appeasing all of these disparate interests will undermine legal sportsbooks, and make it difficult for them to convert existing black market bettors to legal books.
But pricing isn?t the only thing that could keep current bettors in the black market. Three other factors will play a role in the decision between the black market and legal betting options:
Convenience
Credit betting
Anonymity
How big a factor these three things depends on which black market a person currently bets in.
The two black markets
There are two types of ways to bet on the black market, through a local bookie or online through an offshore sportsbook.
The local bookie isn?t going anywhere
Bookies offer certain services that legal sports betting simply cannot. They tick off all three boxes:
They?re local, and typically a phone call or bar visit away.
Credit betting. Bookies work in cash and take bets on credit and collect or pay out after the fact.
When you deal with a bookie, everything is handled discreetly, for obvious reasons.
Even if sports betting is legalized, it will be difficult for a casino or racetrack to provide a more convenient way to place a bet than making a phone call or driving ten minutes to the nearest bar/club without the need to exchange money, or leaving a paper trail of the person?s bets.
Short of online wagering, bookies will almost always have a convenience advantage over legal sportsbooks. And legal books will never accept wagers on credit.
That being said, there is something to be said for the atmosphere of a sports book, and legal books could get an assist from a law enforcement crackdown on illegal betting. But by and large, legal sportsbooks are going to have a hard time converting people who currently wager with local bookies.
Offshore sportsbooks, on the other hand?
Offshore online sites are a different beast, and more closely resemble what the legal sports betting industry will look like. As such, these two industries will be fierce competitors.
Offshore sportsbooks do everything online. Customers need to set up an account and fund it, not with cash, but with a credit card or ACH check.
Furthermore, unlike bookies, most offshore sites don?t extend credit to players; the funds need to be posted in advance. One exception is when enterprising bookies set up online accounts and extend credit to players. But in these instances, the actual payment and collection is usually handled face-to-face, in cash.
Either way, these transactions are handled very discreetly. That means offshore books tick off two, and in some cases three of the three boxes: convenience, credit, and anonymity.
If legal sports betting is confined to brick-and-mortar locations, offshore sportsbooks will still have a convenience advantage. And that?s on top of their large pricing advantage.
If online sports betting is legalized, the only customers that will stick it out with offshore books are the ones who prefer the more anonymous interaction (the ones that don?t want casino mailers and communications), and the bettors who are shopping for the best price.
--Steve Ruddock
The Supreme Court will issue an opinion that will determine the fate of sports betting in the United States in the coming days/weeks/months. It?s widely believed the Court will rule in favor of New Jersey, and lift the federal prohibition that currently prevents every state not named Nevada from offering traditional sports betting: the Professional and Amateur Sports Protection Act, better known as PASPA.
Six states have already enacted laws in anticipation of PASPA reversal, and no less than 14 others are contemplating sports betting legislation.
Everyone has their hand out
It was relatively smooth sailing for the states that passed legislation prior to December?s oral arguments in the NJ sports betting case that tipped the scales in favor of a PASPA repeal.
With the proverbial writing on the wall:
States are angling for their slice of the pie via licensing fees and taxes.
The sports leagues have switched from opposition to asking for an integrity/official-data/just-because fee.
And of course, the sportsbooks need to make money.
There?s a growing concern that appeasing all of these disparate interests will undermine legal sportsbooks, and make it difficult for them to convert existing black market bettors to legal books.
But pricing isn?t the only thing that could keep current bettors in the black market. Three other factors will play a role in the decision between the black market and legal betting options:
Convenience
Credit betting
Anonymity
How big a factor these three things depends on which black market a person currently bets in.
The two black markets
There are two types of ways to bet on the black market, through a local bookie or online through an offshore sportsbook.
The local bookie isn?t going anywhere
Bookies offer certain services that legal sports betting simply cannot. They tick off all three boxes:
They?re local, and typically a phone call or bar visit away.
Credit betting. Bookies work in cash and take bets on credit and collect or pay out after the fact.
When you deal with a bookie, everything is handled discreetly, for obvious reasons.
Even if sports betting is legalized, it will be difficult for a casino or racetrack to provide a more convenient way to place a bet than making a phone call or driving ten minutes to the nearest bar/club without the need to exchange money, or leaving a paper trail of the person?s bets.
Short of online wagering, bookies will almost always have a convenience advantage over legal sportsbooks. And legal books will never accept wagers on credit.
That being said, there is something to be said for the atmosphere of a sports book, and legal books could get an assist from a law enforcement crackdown on illegal betting. But by and large, legal sportsbooks are going to have a hard time converting people who currently wager with local bookies.
Offshore sportsbooks, on the other hand?
Offshore online sites are a different beast, and more closely resemble what the legal sports betting industry will look like. As such, these two industries will be fierce competitors.
Offshore sportsbooks do everything online. Customers need to set up an account and fund it, not with cash, but with a credit card or ACH check.
Furthermore, unlike bookies, most offshore sites don?t extend credit to players; the funds need to be posted in advance. One exception is when enterprising bookies set up online accounts and extend credit to players. But in these instances, the actual payment and collection is usually handled face-to-face, in cash.
Either way, these transactions are handled very discreetly. That means offshore books tick off two, and in some cases three of the three boxes: convenience, credit, and anonymity.
If legal sports betting is confined to brick-and-mortar locations, offshore sportsbooks will still have a convenience advantage. And that?s on top of their large pricing advantage.
If online sports betting is legalized, the only customers that will stick it out with offshore books are the ones who prefer the more anonymous interaction (the ones that don?t want casino mailers and communications), and the bettors who are shopping for the best price.
--Steve Ruddock
