GREAT BETTIN'
In the U.K., sports gambling has been legal since 1961, so we went across the pond to see how it works
LONDON — In London’s Hammersmith neighborhood on a recent Wednesday evening, 54-year-old Benjamin Ahmed stood in a betting parlor called Paddy Power in front of a wall of television screens. With a betting slip in his hands, Ahmed tensely watched, glued to a horse race out of Perth, Australia while the broadcast played loudly on the shop’s sound system. As the seconds ticked by it became clear he backed the wrong horse. Ahmed finally balled up his losing wager and threw it toward the screen, where it fell to the floor with a half-dozen just like it. What should Americans know about legalized sports betting? “It’s addictive,” Ahmed said wryly. Like any of the old Off Track Betting shops in New York City, in London’s betting stores you have a wall of racing forms. But that’s just the beginning — you can find slips to bet this summer’s World Cup, from matches to the side bets like half-time score and goalscorers. You can bet whether a team will win on penalties, whether the game ends in a shut-out, or the high scorer. You can place as many bets as your wallet allows. You could even bet, on the day of the Royal Wedding, what color the Queen’s hat would be. How many of you had lime green? “Betting is pretty massive,” said British freelancer Simon Cambers, who wrote a betting column. “It varies between two extremes. You have people who bet a few times a year, on the Grand National and the World Cup final, maybe the Darby at Epsom, and on the other end you have people who bet all the time.”
And it’s big business. Every neighborhood in London has a bank, a fish-n-chips and a bookmaker. There are Ladbrokes, Paddy Power and William Hill storefronts among the 8,531 licensed betting shops in the United Kingdom. Gambling is a £13.8 billion (approx. $18.2B) gross yield industry annually here according to regulators, and that’s just a fraction of the hoped-for $150 billion a fully-realized US market could generate.
“I think the UK model, on a global basis, is one of the gold standards for a mature betting market,” U.S.-based gaming and sports attorney Daniel Wallach said.
With the Supreme Court’s ruling on May 14 to strike down the Professional and Amateur Sports Protection Act or PASPA, states can officially legalize sports betting at casinos and racetracks. Before, only Nevada had an expansive sports betting market. Now, gaming companies domestic and abroad are racing to get a piece of the projected pie even as states work to puzzle together what their own regulatory framework will look like.
But there is so much potential revenue in sports betting that the incentive is to rush. According to U.K.-based H2 Gambling Capital’s May report, the U.S. market could be worth $4.9 billion annually in gross win by 2023 — which is the amount bet minus the payouts. H2 projects California, New York and New Jersey will see the biggest growth among states by 2030.
“U.S. sports are made for betting on because they’re more statistical,” said H2 founder Simon Holliday.
Leagues like the NFL are reluctantly realizing they will need to be involved as billions of dollars in partnerships and endorsements could flow from betting companies to players and teams. The Premier League has nine teams wearing the names of gambling companies on their jerseys, and those teams charged a combined £47.3 million (approx. $63.2M) for the rights, according to a Daily Mail story last fall.
The NBA and other leagues are pushing for a 1 percent integrity fee from betting firms to educate players, referees and staff as well as fund the investigations that will ensue. Although 1 percent seems like a low number, as a percentage of the gross it could represent 20 percent of revenue sportsbook generate, firms say, though that percentage appears to be coming down to around .25
percent. There is no corollary in the UK outside of horse racing, though in Australia, bookmakers and leagues negotiate a financial reward for the leagues behind closed doors, says Laila Mintas, the U.S. deputy president of the Swiss-based SportRadar, a data collection firm that owns and sells data from major U.S. sports leagues including the NFL and NHL, and works with regulators internationally on sports integrity. But critics argue that integrity fee demands in effect undermine the league’s integrity due to their appearance as a simple cash-grab.
Sponsorships are just the opening salvo. Betting commercials could easily make the FanDuel-Draft Kings advertising battle of 2015 look subtle by comparison. Online casinos in the U.K. are a regular — and not always welcome — presence in televised advertising.
“This will be even more in your face than fantasy sports,” Wallach said.
And with so many entities poised to make money — from broadcasters and leagues to the states that will benefit from tax revenue — there is concern about problems that legalization brings.
As obvious as it was to Ahmed after his losing bet, gambling is not without cost. A Times of London series noted that the U.K. had seen a 50 percent increase in gambling addiction in just three years. The report last fall sparked calls for a crack-down on betting firms that target the vulnerable, and the country’s Labour party proposed a tax on firms to fund treatment. The firms already pay a tax that fund awareness campaigns.
And there is opportunity for corruption. Even without an official betting market, U.S. sports have been rocked by scandal over the years. There were NCAA point-shaving scandals involving Boston College and CCNY, NBA official Tim Donaghy was found to have bet on games he officiated, and of course the granddaddy of unsportsmanlike conduct — when the White Sox threw the 1919 World Series.
Sen. Orrin Hatch penned a column for Sports Illustrated on Wednesday saying he would advocate for federal sports betting legislation. Similarly, NFL commissioner Roger Goodell requested Congressional oversight of the market, including involvement from law enforcement.
In Europe, those concerns have been acknowledged and addressed through a combination of national regulators, leagues, data firms and the betting firms themselves. The firms join forces to fund ESSA, a non-profit sports betting integrity organization.
Khalid Ali, ESSA’s secretary general, has already been meeting with U.S. leagues and proposes a few things to help states create the market. He says there must be a method of sharing information through the system, between states and leagues, and when necessary, law enforcement. Player education is key, as is mandatory reporting whenever a player is approached with a gift or potential bribe to fix a match. ESSA has formal meetings with players to make sure the expectations are understood.
“We have a lot of experience we can share and we’d want to be involved as much as possible,” Ali said.
The one major U.S. organization that ESSA hasn’t met with is the NCAA. Ali said that is an area that is most concerning due to the lack of a pay structure, since one of the best guards against match-fixing is a well-compensated work force.
“They’re the association we’d really like to reach out to because there’s an area that’s a red flag,” Ali said.
William Hill, one of the oldest betting firms in the U.K., already has 108 sports betting outlets at various casinos in Nevada. Given that some forms of sports betting were legalized by the United Kingdom in 1961, CEO Philip Bowcock has decades of trial and error to draw from, and his company has already been meeting with U.S. leagues.
“We have had dialog with pretty much all the leagues, certainly before last week,” Bowcock said. “And that dialog has been more about education than anything else, and that was because most of the leagues were under the false impression that legal sports betting could undermine the integrity of sport.”
Bowcock’s company made £190 million (approx. $254M) last year, so there’s a clear incentive for him to present the best side of an industry often stigmatized, but he isn’t alone in making this argument. Advocates for regulated sports betting say that an illicit market for sports betting is still a market, it’s just not monitored or taxed.
Part of every U.K. gambling licensing fee goes to the watchdog organization the U.K. Gambling Commission, which puts together a quarterly report on integrity. Last year William Hill alone paid roughly £300 million ($401M) in taxes, according to spokesperson Ciaran O’Brien.
Mintas notes the U.K. has a well-regarded approach, as does Australia, where bookmakers and leagues work closely together to communicate irregular betting patterns that could indicate match-fixing, fraud or even money-laundering.
“Everything is happening in the daylight,” Mitras said. “It’s very transparent.”
But that sunshine hasn’t been a cure-all. Match-fixing scandals abound. The Ukrainian police recently accused 35 pro soccer teams of match-fixing , and men’s tennis faces an ongoing issue of corruption. Do we hear about international cheating because betting inherently taints sports integrity? Or because more oversight brings these cases to light?
Here in the U.K., investigation and penalties are usually managed by the league directly affected, rather than law enforcement. So for example, the NBA would manage all the tips related to fairness in professional basketball, and suspend players or staff responsible. Ali notes that law enforcement is often slow to move on a match-fixing tip unless it involves money laundering or larger criminality, because match-fixing may not be the biggest fish they have to fry.
“I firmly believe the sports governing body is the best place to enforce infringement against its own sport,” said Bill South, the security director for William Hill who once worked in law enforcement and investigated horse racing.
Right now overseas firms are closely watching to see how the states will develop these markets, so that they can be best poised to take advantage. Paddy Power, an Irish bookmaker with shops across Ireland and the U.K. for example, jumped in last week to buy FanDuel.
Meanwhile, leagues and politicians are scrambling to come up with a regulatory framework before a few states ramp up their operations as soon as this NFL season. It’s a big change, and one that will likely change the way Americans consume sports.
“The gamblification of sports will certainly shift some of the interest away from rooting interest in our favorite teams to transactions,” Wallach said. “There will be a second screen experience and fans will be focused as much or more on sequences in a game than they’ll care about the outcome. But it will also increase interest in games from pillar to post, even during blowouts.”