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Thursday Thoughts - Legalized Sports Betting Could Benefit Racing

by Al Cimaglia

August 24, 2017

In early July, former MLB commissioner Fay Vincent remarked legalized sports betting is not far off, and I couldn't agree more. Although the exact timing is difficult to ascertain, many states could be lined up in the not too distant future to get involved. 

The lynch pin will be a court ruling that opposed legalized sports gambling in New Jersey, which has been challenged and the U.S. Supreme Court has agreed to rule on the appeal. It appears more likely than ever before the high court will side in favor of the State of New Jersey and allow legalized sports betting there. The reason for hope is the high court grants less than 2% of petitions, so a big hurdle has been past. If the Supreme Court rules in favor of New Jersey it has been reported things could be sorted out there by this time next summer. How soon other states will follow is a matter of conjecture. But the revenue that would be generated on sports betting could make a tremendous difference to each state. 

A positive for race track operators is sports betting could be allowed on track, just like at a casino in Las Vegas. Will a more accepted stance on gambling nationwide grow the handle for horse racing, or will the increased competition for gambling dollars hurt? A case could be made either way, but there should be a hyperawareness of the possibility of more legal gambling options coming in the United States. Maybe the quickest path won't be to allow Internet wagering but rather to house sport books at local race tracks. Most reading this would agree finding extra space at their local track would not be an issue.

Those who follow the money have been aware of legalized sports betting becoming a reality. In reference of the reported stunning valuation of $1.2 billion for the Florida Marlins, Vincent told an ESPN reporter in a recent interview, he is sure MLB franchise values are going up because legalized sports betting is going to happen. Vincent commented he is surprised the possibility of legalized gambling has not gotten more attention considering the amount of money that will be bet. Marlins owner Jeffrey Loria purchased the team for $158.5 million in 2002, which included an interest free $38.5 million loan from Major League Baseball. In 2013, Forbes estimated the Florida baseball franchise to be worth only $520 million.

The table has been set for legalized sports gambling for a while. The U.S. seems to embrace gambling more than ever.  The increased popularity of fantasy sport leagues, mega lottery games, poker on TV and the fact many states need to find a way to generate more tax revenue opens the door for substantial change. 

Sports leagues are opposing the move today, wink-wink, but there is no doubt they stand to gain a windfall of benefits if gambling were to be allowed. The value of sports franchises continues to rise to the sky even though TV ad revenues have not, so in my view Vincent's claim makes a lot of sense. The money trail may indicate legalized sports betting is on its way. Once a ruling is in place major sports leagues and individual states will look to agree on substantial regulations. Once that happens and the betting public feels they are protected from any shady doings, sports gambling will likely be embraced in a big way.

The NFL, MLB, NBA and NHL have dipped a toe into sports gambling but in a less obvious fashion. They have become the main promoters of sports fantasy companies DraftKings and FanDuel. Sports and fantasy gambling are joined at the hip and to think the next step will be a wide variety of sports betting in most states is not a stretch. Whether the leagues will be able to make a substantial return on their commitment to DraftKings-FanDuel will remain to be seen. Either way major sports franchises will likely increase in popularity and in value. That's also the opinion of mega millionaire Mark Cuban the owner of the Dallas Mavericks. In comments, Cuban has cited increased data licensing fees a potential direct benefit from legal sports betting as well as increased viewership.

Interestingly the only state with a poorer credit rating than New Jersey's A- is my home state of Illinois with a BBB rating. The main reason Illinois may not jump in with both feet immediately is because of the political upheaval that has existed here for decades. Make no mistake Illinois sorely needs the added tax revenue that could come with sports betting as do many other states. 

In Illinois, proponents of horse racing have been waiting for years for slot machines to be approved at their local track. Although it's a Band-Aid in many ways, slot machine revenue in Indiana, New York, Ohio and Pennsylvania has helped boost purses. What will happen if casual gamblers who are content to pull on slot machine arms now, like their chances of picking winners in a sporting event better? 

Those who enjoy gambling know there is a stigma attached to their pastime. By legalizing sports betting more people could embrace gambling as a form of entertainment. That can't hurt the horse racing industry and it shouldn't be a foregone conclusion betting pools will shrink if folks can also bet on their favorite teams. That said, hundreds of slot machines at a  racinos haven't helped to grow the betting handle at nearby tracks. But by getting new faces inside a race track many more people can be exposed to the sport.

Horse racing has needed a spark to grow a younger fan base. If only by being in the right place at the right time the racing industry may get a much needed shot in the arm if sports betting is legalized.   

It seems like there could be a lot more to gain for horse racing with sports betting on site rather than having one-armed bandits next door. 

You can follow me on Twitter @AlCimaglia