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CEO Letter to Arkansas Racing Commission

Published: February 18th, 2019, 09:30am CET

RE: Casino gaming regulation and mobile sports betting

Members of the Arkansas Racing Commission,

My name is Charles Gillespie and I am founder and CEO of Group, which is one of the world’s largest and fastest growing performance marketing companies in online gaming and sports wagering. We work exclusively with regulated and licensed gaming operators in twelve countries, including the United States. I applaud the Commission on their efforts thus far in the tremendous task of responsibly regulating casino gaming. However, I feel there is one crucial missed opportunity that the Commission must be prepared to undertake immediately– online sports betting.

My comments pertain specifically to Rule 20.140, which states that only patrons physically located on the premises of a casino may place a sports bet. I believe this policy leaves a lot to be desired for Arkansas customers, and leaves a lot of money on the table in terms of state tax revenue.

The simple fact is that legal sports betting will never be able to compete with the offshore if the only legal outlet for placing a wager requires a Little Rock citizen to drive 30 minutes or more to a casino. States that authorize sports betting but do not make it readily accessible are simply perpetuating the illegal offshore gambling market, meaning that millions in taxable revenue will continue to flow out of the state and Arkansas consumers will remain vulnerable to exploitation by unregulated operators that do not provide problem gaming assistance and may not adequately protect player funds and information.

During my more than 15 years in this industry, I have seen first-hand how offshore sports betting websites have thrived in the absence of convenient legal sports betting alternatives. Offshore companies that do not act in the interest of public safety and do not pay taxes should not benefit from sports betting legalization, but, unfortunately, that is exactly what happens when a state authorizes sports betting but restricts its availability to only a handful of locations across the entire state.

Online sports betting is already widely accessible through more than 100 offshore sports betting websites that target US customers. The American Gaming Association estimates that US residents bet approximately $150 billion each year through illegal and offshore channels. I invite you to read an excellent recent ESPN article on the subject of offshore sports betting. Notably, offshore operators expect their customer base to grow by as much as 25% in the coming year simply because the media attention surrounding the repeal of PASPA and subsequent legalization activity has driven interest in sports betting. Approximately 90% of the US population does not have access to legal sports betting, yet sports betting is constantly mentioned in the news, sports coverage and throughout the media. When people do a web search for “sports betting” they are likely to find and interact with one of the dozens of sports betting sites of questionable origin masquerading as legal operators. Until states catch up and get serious about creating legal alternatives to illegal sports betting websites, the offshore market will continue to grow and take advantage of Arkansas customers.

There are tremendous revenue considerations for Arkansas as well. I ask the Commission to carefully examine the policy choices made by legislators in New Jersey and Mississippi, and the resulting outcomes. Mississippi authorized casino-only sports betting, and while the results have been a minor uptick in overall casino gaming, sports betting has not provided the fiscal stimulus many expected it to. In 2018, Mississippi sports betting tax revenues totaled just $1.8 million. Meanwhile, a much more positive scenario is playing out in New Jersey, where state lawmakers authorized online sports betting and raked in $10.5 million in sports betting tax revenues. Perhaps more importantly, mobile sports betting also has lifted the entire casino industry in New Jersey, increasing revenue year-over-year by over 9%.

The fact that Mississippi legislators are now considering legislation to authorize mobile betting should speak volumes. They understand that they have simply not made as much of sports betting authorization as they could, and are now hoping to increase revenues and bring more customers back from the online, offshore markets that still dominate in Mississippi.

The Arkansas Racing Commission has a difficult task, and I understand the concern that too much gaming expansion too quickly could lead to unintended consequences or regulatory mistakes. However, this should not keep Arkansas from making the best policy choices today with the future in mind. With online sports betting already upon us, it only makes sense to create a framework for online sports betting now, even if the commission feels the need to delay the implementation of sports betting while it deals with more pressing gaming issues. However, Arkansas should not delay the rollout of mobile sports betting for too long. If Arkansas does not have mobile sports betting by 2020, it is very likely that Tennessee, Mississippi, Missouri, and even Louisiana will have a first-mover advantage over Arkansas and attract customers and their dollars from across state lines.

Thank you for the opportunity to share my thoughts. I would like to continue to be part of the conversation as the Commission studies these important policy and regulatory choices.

Sincerely yours,

Charles Gillespie
Chief Executive Group