A Biden-Harris Administration, Democratic Senate Paints Rosier Picture For Sports Betting Nationwide  

Could a Joe Biden-Kamala Harris administration be a positive for legal sports betting in the U.S., and online gaming more broadly? While gambling regulation is far down the list of U.S. priorities, the Nov. 3 presidential, Senate, and House elections will at some point have consequences for the industry. Taken as a whole, potential policy shifts and initiatives under a Biden-Harris administration appear more likely to create favorable conditions for industry proponents than exist right now.

As of today, Biden is the clear favorite to win the White House over incumbent Donald Trump, as polls consistently show the former vice president widening leads in key demographics and in battleground states, with a 9.2% national average advantage per RealClearPolitics and an 87% chance of winning, according to FiveThirtyEight. Concurrently, the Democratic Party’s odds of taking control of the Senate are increasing, while polling figures also point strongly to Democrats retaining a sizable advantage in the House of Representatives.

For gaming industry stakeholders and consumers wanting legal platforms to bet on sports, or play online poker, or use online casinos, a Democratic “trifecta” has the potential to bring small-scope changes on the federal level, but also some significant policy and law enforcement shifts regarding the federal Wire Act of 1961 that could allow for a major expansion of interstate sports betting and poker compacts.

To preview what to watch on this front in the event of a Biden-Harris win and a Democratic-led Senate, we checked in with a trio of observers: Dr. Krista Jenkins, professor of political science at Fairleigh Dickinson University and director of the FDU Poll; attorney Thomas H. Lee, member-in-charge at the Nashville office of Frost Brown Todd LLC, who also sits on Tennessee’s Sports Wagering Advisory Council; and Marc Edelman, professor of law at Baruch College’s Zicklin School of Business and the founder of Edelman Law, where he consults extensively on both gaming law and antitrust law.

Gambling on the Department of Justice views

doj
(Shutterstock)

First, Edelman sets the table for what he views as the three key things to watch.

“I think that a Biden-Harris administration would look at gambling similarly to how the Obama-Biden administration did. This could reasonably lead to three changes of note,” Edelman said.

“First, I expect to see the Department of Justice once again adopt a narrow interpretation of the Wire Act that limits itself to sports gambling. Second, I would expect the DOJ to drop its appeal in the New Hampshire Lottery case involving the interstate sale of lottery tickets. Finally, I expect a very hands-off approach to challenging private online gaming businesses that arguably may violate state and thus federal laws, much as how the Obama-Biden administration gave very little attention to the proliferation of FanDuel and DraftKings.”

The New Hampshire Lottery case refers to the tenuous legal offensive by the DOJ against the New Hampshire Lottery, in which a First Circuit Court of Appeals judge sided with the state lottery’s position that the Wire Act the primary criminal law on the books addressing sports betting across state lines — indeed applies only to sports betting. And that is despite a late 2018 formal DOJ opinion announcing a reinterpretation of the Wire Act — to apply more broadly to interstate sports gambling, threatening interstate and even intrastate lottery products, as well as poker offerings.

A June 2020 update on the applicability and enforcement of the 2018 opinion indicated that the DOJ would take no enforcement action in 2020, seeming to punt the ball to after the November elections.

Lee concurred with Edelman that a Wire Act audible is a probability.

“The most likely change is a return at the Department of Justice to the pre-Jeff Sessions interpretation of the Wire Act,” Lee said. “That’ll give states more confidence that they can develop their own gaming markets free from confusing federal interference. I think you’ll also see the administration move slowly in any way that would disrupt tribal revenues.”

Many legal sports betting states have both commercial and tribal casinos. Indian gaming usually falls under a different set of regulations than commercial gaming, with most operating in accordance with tribal-state compacts, as well as within the guidelines of the federal Indian Gaming Regulatory Act.

Rewiring of the Wire Act

A story last week by Tony Batt of Gambling Compliance (paywall) explored operators’ appetite for Wire Act surgery. Batt quoted Ayesha Khanna Molino, a former Senate aide who is senior vice president of government affairs for MGM Resorts International, as saying, “Once you open [the Wire Act] up, there is a potential for a lot of downside risk.”

There’s similar sentiment among tribes across the country with regard to reopening their tribal-state compacts. Sometimes you fix one problem and create another. But technology and communications have certainly changed since 1961, and the Wire Act has yet to evolve.

“The president of the United States has no power in terms of passing laws but very real discretion in terms of how the Department of Justice enforces them,” Edelman said. “I would expect a Biden-Harris administration would end any legal challenge under the Wire Act to non-sports gambling. It is also possible that a Biden-Harris administration would be less likely than Trump-Pence to challenge even interstate sports gambling operations as long as the underlying conduct only occurs in states where such gambling behavior is explicitly legalized and regulated by state law.”

One other ingredient tipping the scale toward a Wire Act update/reinterpretation? A Democratic administration would sideline the influence of casino magnate and Republican mega donor Sheldon Adelson. Adelson has for a long time opposed any online expansion of gaming and was a driver behind the proposal and consideration of the Restoration of America’s Wire Act (H.R. 707), introduced during the 114th Congress (2015-16). (Congress did not pass the measure.)

Earlier federal initiatives

Separate from the executive branch, there’s the possibility that Democratic-led chambers kick the sports gambling ball around. During an era of hyper-partisan divides between “red” and “blue” states, gambling and gambling legislation remain a rare patch of common ground.

In late December 2018, Sen. Charles Schumer (D-NY) and outgoing Sen. Orrin Hatch (R-UT) introduced the Sports Wagering Market Integrity Act of 2018, which would have set certain “minimum” standards for state-level regulation of sports wagering.

In a statement, Hatch said that the bill would tackle “numerous, complex issues” and included provisions to protect “the gaming industry, professional and amateur sports leagues, consumer advocates, data providers, law enforcement, and many others.” But the bill never went anywhere in a lame-duck session.

In September 2019, Hatch’s successor, Mitt Romney, was rumored to be proposing a similar bill setting federal guidelines. One of the more objectionable aspects of the Schumer-Hatch bill was that it would install the U.S. attorney general as the gatekeeper for approval of state regulatory frameworks. Thus, a lot of power consolidated into an unelected federal official.

In July 2020, the Senate Judiciary Committee, led by Chairman Lindsey Graham (R-SC), held a 90-minute surface-level hearing on sports betting that was largely inconsequential.

For the most part, the legality of sports betting “remains very much a state-level issue, as many states have moved to legalize independent of the federal government,” said Jenkins. “We’re certainly not seeing much congressional movement on the issue. While there is still a sizable number of people not supportive of sanctioned ‘vices,’ all indicators are that legal sports betting has public support.”

Public support and priorities

Jenkins and the Fairleigh Dickinson University Poll found in May 2018 — after the Supreme Court struck down the federal ban on full-fledged sports betting outside Nevada — that 62% of New Jersey residents supported an expansion of legal sports betting. A national poll by FDU conducted before the ruling found that 50% of Americans “favor legalization everywhere, as compared with a little more than a third (37%) who are opposed.”

In 2018, even before New Jersey generated $70 million in state tax revenue without imposing a new tax on residents, Jenkins’ poll reported the Garden State public cited “more tax revenue for states” as the main reason for legalizing (47%), while “people are already doing it” as the runner up at 39%. With budgets in every state getting hammered by the economic fallout from the persistent COVID-19 pandemic and associated restrictions, it seems like it would be an exceedingly unpopular position for a member of Congress to somehow impair a potential new revenue source for 20-plus states now.

“I do not expect much change in Congress’ approach,” Lee said about the new Congress coming in January 2021. “Continued Republican majorities in the Senate means legislative gridlock continues. A Democratic Senate places pressure on Congress to fulfill the principal agenda of the majority. And there’s a long line of priorities in the queue ahead of gaming.”

Said Jenkins: “In the short term, no, I don’t expect much change, regardless of which administration is in charge. It’s just not front and center, relative to all the issues facing the country right now, namely the public health and economic crisis. It’s too early to tell, but we’re fighting so many other fires right now.”

Edelman echoed the same, adding that interstate gambling compacts are more likely to expand under Biden. Such gambling compacts include the poker liquidity pooling agreement between New Jersey, Nevada, and Delaware. Pennsylvania has also indicated it would join, but has yet to jump. Part of the hesitation is the specter of federal intervention.

“States that want to allow for the creation of online sports gambling compacts may be comparatively better positioned under a Biden-Harris administration, given that challenging such conduct where the underlying activity is legal in all states of operation seems unlikely to be how Biden-Harris would wish to expend their limited Department of Justice resources.”

One more such state is Michigan, where in early October the state Senate overwhelmingly passed a bill that would permit online poker to be played across state lines, pending agreements with other online poker states.

Other items to watch

Only two and a half years post-PASPA, there’s already been an incredible amount of new partnerships, league evolution on gambling sponsorship policy, mergers and acquisitions, and investments in the sports betting space. This is likely to continue and, under a new administration, some new business relationships may see more scrutiny.

“The William Hill/Caesars Entertainment merger could open the door to increased consolidation in the market,” Lee said. “If Biden wins, keep an eye on early administration appointments to antitrust slots at the DOJ and the [Federal Trade Commission], as Democratic administrations are traditionally more aggressive in policing monopolistic behavior.”

Going back to bipartisanship, in July, Reps. Dina Titus (D-NV) and Guy Reschenthaler (R-PA), co-chairs of the Congressional Gaming Caucus, introduced legislation to repeal the 0.25% excise tax currently placed on all legal sports bets, known as the “handle tax.”

The bill has not yet moved, but in the event of a Democratic-controlled Senate, although there are obviously many larger issues for Congress to address, it seems more likely that the bill could find some footing.

Speaking of that handle tax, a late August memo by the Internal Revenue Service potentially could subject DraftKings, FanDuel, and other DFS operators to that same handle tax or perhaps a tax as high as 2% off the top. Stakeholders referred to the potential 2% tax as “a significant line item” and “a big problem.” But then, that memo, too, could fall down the priority list under a Democratic administration.

Suffice to say, Nov. 3 could be the next key date on the gaming timeline.

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