Gaming & Sports Betting | The Stoler Report-New York's Business Report

Gaming & Sports Betting | The Stoler Report-New York's Business Report

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♪ [Theme Music] ♪ ♪ [Theme Music] ♪ >>> Michael: Boy, maybe I have my rabbit's foot. Okay. That's how I figure out who's going to win the race. Maybe I'm going to get involved with e-sports, gaming, casino betting. I don't know! But all I could tell you is, every minute I'm watching television, all I see is another commercial for gaming, or I find that about the horse racing. And then e-sports. I have no idea

how I could do e-sports. But these are topics of discussion, which are really important in 2022. So, with the help of a couple of people here, I brought together this group of distinguished leaders in the gaming, casino business, horseback, every industry. From California, we have Dennis Ehling, who is a partner at Blank Rome. From new germa-- New

Jersey, partner at Monmouth Park Racetrack, we have the chairman and CEO of Monmouth Park Racetrack, Dennis Drazin. Brought in from Czechoslovakia, we're not sure why, but okay. Martin Lycka, who is the senior vice president, regulatory affairs, at Entain. And last but not least, the man without a sports jacket, the quiet lobbyist, the main who pled the case with the supreme court, Bill Pascrell of Princeton. >>> William: Princeton Public Affairs Group, Michael. >>> Michael: Princeton Public Affairs Group. Okay. Martin,

you're the newbie in town. Okay? You're new to the Stoler Report. You haven't been here. So, let's talk about the gaming business. You, you come to America a couple of months ago, and it's become booming in New York. I mean, it's a major business. Dennis always knew about it. What's happening? What do you see happening today? >>> Martin: First of all, thanks for having me, Michael. It's

great to be here today. And clearly, we already having a lot of fun. So put it briefly and simply it's been hell of a ride. I might have finally perhaps the dismay of homeland security and certainly Mr. Pascrell relocated to the New York, New Jersey area only three, four months ago by now might have actually been with the gambling industry for over 12 years, by now. Indeed,

the momentous decision of the U.S. supreme court and Bill and Dennis were very kindly and very efficiently involved with that for a number of years, dating back to 2018, was a sea change moment for the U.S. sports betting and gaming industry. So, sports betting, it's legal. New Jersey as always has led the way, and other states, most recently, New York and prospectively, the likes of Ohio and -- -- Dennis, the other Dennis on the, on this panel, we're hopeful that California will join the ranks. And --

>>> Michael: Let's talk about our friends in California. Dennis Ehling, what's, what's happening with sports betting in California? >>> D. Ehling: California is a, a different animal, always has been. Right now, we are in the process of putting together the referenda that are going to go before our voters in this November, to address how we're going to legalize sports. I

think all of the, all of the polling suggests that strongly supported, but there's going to be a variety of options. You know, California, casino style gaming, it's currently limited to re-- to that, excuse me, to the tribal casinos. There's about 54 of them in the state. And only the tribes can do

house-backed gaming. So, one of the proposals, the one we're certain is going to be on our ballot in November would allow retail only, no online, retail only sports betting at those tribal casinos. A lot to be determined in the next six months.

>>> Michael: Let's talk about New York and New Jersey. Dennis, you're the first one who got involved with New Jersey a couple of years ago. How big is sports betting today in New Jersey? And what are the rules? >>> D. Drazin: In New Jersey, the past four months consecutively we've handled over 1 billion each month. When we started on this process in 2012, and we probably lost eight times before the supreme court ultimately overturned PASPA and declared it unconstitutional, everybody said, you'd never get it done, but I was a believer and continued to press forward. And when I said that we'd probably handle 10 billion in New Jersey, everyone laughed.

But the proof is in the pudding. And that's what we're doing. And it's a thriving business here in New Jersey. And now we see New York now has finally gotten their act together and launched and they're thriving also. So, it'll be interesting to watch as all the states in the country that elect to do sports betting continue to go on with their legislation and referendums and constitutional amendments. And it will be a thriving U.S. business with plenty of opportunity for everybody.

>>> Michael: Bill, since you've been involved -- you did the supreme court case. What -- how many states right now are allowing sports betting? >>> William: Over 30 states, including the District of Columbia. Not all of them online, but a good majority of them. New Jersey is now the third largest sports betting

jurisdiction in the globe. It's third -- >>> Michael: In the globe. >>> William: In the globe, globally. It's third to the UK and Germany. Michael, since we last talked, New Jersey has done some extraordinary things. Thanks in great parts to the leadership of Dennis Drazin and many elected officials, including Senator Lesniak, governor Christie, governor Murphy, Senator president Sweeney, speaker Coughlin. The

first state in the nation I worked in for online gaming was California. And Dennis Ehling will remember Senator Rice, who introduced the bill 20 years ago. And listen, I love Gavin Newsom. I've supported him multiple campaigns back when he was mayor. It's really unfortunate what California has been going through. And listen, quite candidly, New Jersey had

one advantage that many other states didn't have. Like New York and Michigan and California and Colorado. We don't have any federally recognized tribal gaming at all. None. No federally recognized tribes. So, we didn't have to get over that

hurdle. And the tribes have been slow and methodical about embracing online gaming. They're nervous about it, and rightfully so, because casino revenue brings in a lot of money to take care of their constituents for education and healthcare, etc. California is the eighth largest economy in the globe. California should embrace online while they're embracing retail. Unfortunately, as Mr. Ehling just greatly articulated, that's

probably not going to happen in the near future. At least we'll get retail up and running. I just hope they don't make the mistake that New York made. New York, at 51% tax rate -- >>> Michael: Which is something I want to bring up. Explain to

my viewers, the 51% tax. I mean, and what is the tax in New Jersey? >>> D. Drazin: Yeah, New Jersey, our tax rate is 8% on brick and mortar and 15% online. And New York is at 51%, which is astronomical. And it's going to be a tough market to play in

when the tax rate is that high. >>> William: New York is now the empire socialist gaming capital of America. When you tack something at 51% -- and I'm a yellow dog Democrat. Okay? I'm

not a big liberal commie, I'm a yellow dog Democrat. That tax rate is not sustainable. And everybody's going to be gaga about it while we're in the honeymoon phase. Why does that matter? New Jersey with a Democratic legislature and a Republican governor got it right. They've set a schematic

and a structure, regulatorily and tax-wise that's very sustainable. I remember Dennis e-- Isai Scheinberg, the founder of PokerStars, pillaring me, beating me up, when we got online gaming done with a 13% tax rate. He was upset about it. He'd be, he'd be like beating me with a baseball bat now. New York will revisit this tax rate, because you're not able to turn over enough to make a profit there with that tax rate. >>> Michael: So, I have a question for the two operators. We have Martin and we have Dennis. Okay? For the operators,

could you operate or would you operate at the 51%? >>> Martin: I'm happy to go fast. So, our U.S. facing brand BetMGM, ‘cause the joint venture BetMGM resorts international entered the New York market. Of course, Bill pointed out US own that -- this can ever be profitable. I do have my doubts. At the same time, to the honeyman honeymoon phase point, think New York, with all due respect on New Jersey, and I just moved to New Jersey, so I love the Garden State -- has such a totemic status that, every single investor, every single shareholder would expect us, so in this case BetMGM, to be in that market. And I can imagine that a lot will be invested going forward into changing that tax rate. Having said that, and that will be my final point, New Jersey, I can't agree more. New Jersey got it right. The other states that

have under 20% tax rates, they've got it right. And New York, I would definitely recommend that the New York authorities to revisit the rate. >>> Michael: I have a question. What is the cost of getting a new customer? I mean, as I alluded at the beginning to the show, with the amount of advertisements, with the, the cost of the print and the media ads and the internet and all these ads, what does it cost you to get a new customer to sign-on? Dennis? >>> D. Drazin: It's probably somewhere in the area of 800 to a thousand dollars a piece for acquisition of new customers. There's a ton of money being spent on customer acquisition.

And, you know, in the beginning, you know, I thought that was unsustainable. And you know, it's competition, free market. People are making offers, free bets, bonus money. But it's got to end someplace because it's not sustainable for the long run. >>> Michael: Now, what about e-sports, which many of the my viewers really don't know about? Explain e-sports and the gaming business and the e-sports business.

>>> D. Ehling: Those of us who were of a certain age probably are not used to the concept of how much time and, and real focus is spent on playing video games competitively. There is an entire ecosystem that is actually larger than, than television, music and movies combined. The industry of video games. People playing video games, people playing video games against each other, head-to-head, multi-person tournaments. E-sports is, is just formalizing that competition in a way that you will have teams that are designated, playing designated games in a controlled environment. It can be done in pre-COVID times. We had arenas

full. And, or it can be done purely online. It is possible, in a number of states, not every state, some states are wary of it, but it's possible in a number of states that are passing sports betting to actually bet on those e-sports events. It happens globally as well. You're betting against, you're betting on an individual team, how they're going to perform, you can bet on an individual player, how the individual player will perform. It's, it's nascent. It is very,

very young at this stage. There are a lot of regulators and a lot of operators, frankly, that are approaching it very cautiously. Because frankly, you know, sports betting depends on information. Depends on data, depends on knowledge about

what's happening. Not just what's happening today, but what's been happening-- what's the history. With a lot of these e-sports players and teams, developing the history over how they play and what their skill sets are and where they perform well is, is, you know, new, novel information that not a lot of people have. So, when you, as a regulator or as an operator, involved in taking wagers on an e-sport event, there's a little bit more risk. There's a little bit of more uncertainty of just how well is one team or another going to perform. So, setting

your lines and figuring out what's appropriate betting is a little more challenging. >>> Michael: I have a question with regard to brick and mortar casinos. Because the sports betting you don't need a brick and mortar facility. Do you expect to see freestanding sports betting facilities in these 32 states that you can have sports betting? >>> William: In order to get a sportsbook retail open, you have to be in a brick and mortar, either a casino or a track. In New York, New Jersey, Pennsylvania, and most other states. Tennessee is a state that doesn't have any brick and

mortar requirements, because they don't have any casinos. e-sports entertainment group at a -- to the UK in north New Jersey is doing a soft launch today. You'll be able to bet on things like Call of Duty, League of Legends and Dota 2, and in five days from now, you'll actually be able to put a full-time bet into that e-sports offering. Because until now, basically you can enter a tournament as, as Dennis Ehling was pointing out so articulately, but you couldn't wager on the game. Now you're able to do that. The New Jersey

division of gaming enforcement gave them their transactional waiver and they're off to the races. >>> Michael: Do we expect finally a casino to come to New York City? Dennis Drazin? >>> D. Drazin: You know, I think they should. The Atlantic City folks won't be happy about that. But seems like New York governor has indicated pretty strongly that they want to take another look at it. And I do think for New York, it makes

sense. Probably hurt a little business in New Jersey. But I think you'll see that sometime in the near future. >>> Michael: Mr. Lycka, what about the problem with gaming,

the gambling habits? How do you use social responsibility in the gaming business today? >>> Martin: Well, it's absolutely critical to address that matter. And we've been trying to help move the dial in that regard. Again, at this stage, sports betting been around, I mean, in the United States, for free and a bit, yes.

So, granted. Still at the initial stage and right across the river in New York, they've had it for about a month, if that. So, I think the industry can give itself little bit of benefit of the doubt. But in the meantime, we do need to be

planning for sustainable future of our individual businesses, as well as the industry. So, a long story short, in my view, it's absolutely imperative for responsible, or if you will, sustainable gambling, to become one of the key parts of the DNA of this industry. And I'm pleased to report that a lot of operators would have addressed this issue, or at least start it. You would typically see a lot of tools, customer facing tools on the operator's website, education campaigns, but there's much more to be done. That's one of the reasons why, for example, Bill and I will be hitting the road with Charles Oakley Foundation, to go and talk to people about responsible gambling. It's not the sexiest of topics, but if you've got somebody like Charles, New York City legend around, people listen. So, there are lots of tools they just need to be

deployed. And if I can, I will help in that -- to make this industry sustainable in the long run. And this is the only way.

>>> D. Ehling: One of the things that, we in the States, sometimes think is that we've, you know, we've created a lot of new things. Truth be told, online sports betting was not, at least legal online sports betting, was not created here. There's a lot of experience with it in, in the UK and, and, and in Germany, for example, as, as, as Bill mentioned. So, when you look at what their experience has been, they have built, after initial rocky start, they have built a responsible gaming component into their business practice. Sometimes a little

regulatory push. Sometimes it takes someone to, to flag for them and say, hey, you're not doing it well enough. But they have learned how to track what people are spending and help identify before someone gets in trouble. And that's been much more successful, I think, than a lot of people give it credit for. One of the advantages, frankly, and this I'll, I'll, I'll sing Bill's tune on this -- one of the, one of the advantages of having a, a mobile or an online gaming operation versus a retail operation is that with the online gaming operation, everyone has an account. Everyone has to bet using their account. They're not using someone else's. And every

one of those customers is KYC -- know your customer. And you know who that customer is, what their, frankly, capacity is. What's the source of revenue that they're gonna, that they're gonna bet a thousand dollars a week or more on, or even a hundred dollars a week? What are they capable of doing that? And is there a change in their betting patterns over time that starts to indicate maybe they're losing control? Maybe there's a problem. And believe it or not, the operators don't want to have people betting more than they can handle. Because when operators see that, that not only is a risk to the individual and to their customer who they certainly care about, but it's a risk to them, because they're not going to be able to hold onto the money from someone who has been betting way out of their other capacity. So, they don't want those customers to

get in, get beyond their capacity and with the ability to track all the wagering, all of the accounts that's happening, the operators are in a much, much better position, frankly, to, to assist in preventing problem gambling. >>> Michael: So, here's a question with, with regard to the operator. When you have all this information, are you, Dennis, as an operator, and Martin as an operator, are you sending the information and gearing specific advertisements? I no-- I noticed on Instagram, Facebook, all of these pages. The only thing that I haven't seen is sports gaming on LinkedIn is one of the social media. Are you utilizing this to build up your sports betting business? Dennis Drazin. >>> D. Drazin: Michael, you have to understand, not withstanding

what we've talked about so far, sports betting in the United States has been a $400 billion industry that was illegal, conducted by off shore gaming, conducted by families with mob ties, bookies. So, the problem has been here forever. In a legalized system, we can track it and try to prevent problem gambling a lot better. So, when someone signs up and recognizes through our ways of detecting that they're running into trouble, they sign up, you can't solicit them. You can't advertise to them. And I get a lot of calls in my law office. I

don't handle them, but we get a lot of calls from people who say, hey, I signed up and I told them, I'm problem gambler, I didn't want to be solicited, and I got ads anyway, and I got hooked again. And those people have recourse. So, it's a very important problem that we have to address to make sure people don't become addicted and they control their habit. >>> Michael: So, what, what can we expect in 2022? Where do we see the gaming business and the casino business in the next five years? >>> D. Drazin: I certainly think the business is going to continue to grow. It's going to continue to thrive. I think whether I like it or not, you're still going to have a lot of competition with ads and TV, digital, any form of advertising, to try and acquire customers, because that's the name of the game for the long run. But I think sports betting,

online gaming, e-sports, which is emerging, and I'm glad Bill mentioned that the New Jersey division of gaming enforcement, you know, permitted soft play today. And that will go real. But you have to understand this e-sports is something that's been growing for a long time. There are 110 division one schools that offer full boat scholarships to students who want to come to their school and get involved in all this. So, I

think that's an emerging area too. They have competition for drone racing also. It's just going to continue to grow, and your imagination, as you say, in your crystal ball, you know, the future is wide open. >>> Michael: When somebody signs up, you know, BetMGM or Caesars, do they -- do they get multiple accounts or do they stay with one company? Well, what's the status on that? >>> William: It's all, it's all about the marketing U.S. customers are not loyal. They're doing these what are called

promotional bets and bonus bets. So, sign up with Caesars, we'll give them a $500 match. They'll have a good time. And then they'll go off to the next company. So, they have multiple accounts. That's the, that's the phenom. What I think is

important about the future, Michael, very briefly. Martin is a very humble man, and Dennis has been a trailblazer as well with Martin. They have been involved in a sports betting, responsible gaming, compliance, and integrity institute at my alma mater, Seton Hall Law School. We're having our third bootcamp May 16th to the 18th, where we're educating compliance people and lawyers and marketing people, because the majority of the people hired in online gaming in America today have not been Americans. And Martin and Dennis are in an advisory board

that I'm so humbled to be a part of. That's going to try to change that. But also Martin's company, formerly GVC, now Entain, is the first company in America to not look at the problem gambler. And Ehling, Ehling knows this very well. Traditionally casinos brick and mortar in America, looked at the gambling addicted customer as their VIP customer. Online gaming does not do that, because they know it's not sustainable. You wouldn't market to folks in a brick and mortar casino.

‘Cause they come in, you show your ID and you gamble. They don't know or track it. But with online we track it. And the final point I want to make about the future are three things. Exchange wagering, peer to peer betting is going to be a monster and it's coming. Number two, there's also a, a new phenomenon, which hasn't been embraced in any state yet. But

Dennis and I have been looking at it, which is fun based wagering, where like a hedge fund can bet. The problem with that is know your customer KYC, it creates those issues. And finally, something that Dennis, Martin's been involved in and I, to bring fixed-odds horse racing to America. New Jersey is the first state in the nation to do it. We'll be launching in a few weeks, and that provides massive content to the operators with horse racing.

>>> Michael: So, as Dennis alluded, I do have my crystal apple over here, and it's very bright for the gaming business. Especially when you have these leading experts around the country together on my show today. And I'd like to thank Dennis, Dennis, Martin and Bill, and I'll see you next week. And

I promise to have you back later on in the season to tell us what's going on. >>> Thank you very much. >>> Thanks for having us. ♪ [Theme Music] ♪

2022-03-13 15:54

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