Arkansas regulators advanced statewide mobile sports betting rules Thursday despite opposition from the nation’s leading sportsbook operators. The rules, which would make Arkansas the first southern state with both retail casinos and statewide mobile sportsbooks, also require online operators to give 51 percent of gaming revenues to their brick-and-mortar partners, the first such requirement among the more than 30 U.S. jurisdictions with legal sports betting.
The Arkansas Racing Commission’s unanimous vote came after more than an hour each of testimony from both supporters and opponents.
Operators testified before Thursday’s meeting that they typically give partner casinos around five to 15 percent of their profits as part of deals negotiated between the two parties. Representatives on behalf of FanDuel, DraftKings and BetMGM, the nation’s three largest sportsbook operators by market share, testified in person or in writing that this mandate would dissuade market participation and, in turn, continue funneling funds to unregulated bookmakers and offshore betting sites.
“It is financially unfeasible to operate sports wagering pools at that (51 percent) level,” Andrew Winchell, FanDuel’s Director of Government Affairs, testified at Thursday’s commission meeting.
Casinos support decision
Representatives from Oaklawn Racing Casino Resort, Southland Casino and Saracen Casino Resort, not surprisingly, each supported the rules, saying it would benefit not just the casinos but their thousands of combined employees. Online sportsbooks would have to partner with one of these facilities and only those partners would be able to accept mobile sports bets.
Supports of the rule change also argued the 51 percent split was required by the 2018 amendment that permitted casino gaming. Under the voter-backed amendment, state casinos are required to have a majority ownership stake in gaming. Giving an out-of-state operator a majority of revenue would violate this provision, rules advocates said.
A fourth Pope County casino approved by voters in the 2018 ballot measure, which is under an ongoing legal and political battle that has prevented its construction, would also be eligible for online sports betting. The current structure would allow two online licenses or “skins” apiece for all four facilities, meaning, depending on the Pope County casino’s fate, there would be between six and eight potential statewide mobile books.
National sportsbook operators had supported four (or more) skins apiece for the casinos among potential avenues for additional licenses, which they said would create a stronger, more competitive marketplace.
Arkansas sports betting next steps
The rules now go to the Arkansas Legislative Council, a bipartisan, bicameral group of lawmakers tasked with approving rules passed by state regulatory bodies. The council’s next meeting is scheduled for Jan. 28.
Thursday’s unanimous vote – as well as the adamant support from the state’s casino industry- would seem to give the current online sports betting rules a political mandate heading into the council’s meeting. Republican Gov. Asa Hutchinson has also supported statewide mobile wagering, which could give further weight to the rules’ approval, especially among party members in the GOP-controlled legislature.
If approved, statewide mobile wagering would likely be months away. The casinos would need to find operators, train employees and pass regulatory certifications, among other logistics.
Finding operators, at least from national brands, could be difficult after all the aforementioned operators fought against the requirement.
Smaller operators could be even less willing to take on such a steep revenue share requirement. Though supporters of the rules noted these sportsbooks jumped at the opportunity to enter New York despite its 51% tax on gross gaming revenue, Arkansas’ significantly smaller population and profile may not prove financially lucrative enough to justify a casino partnership. On top of the 51% revenue share, operators have to pay a 0.25% federal excise tax on handle, as well as state taxes and administrative expenses on what is already typically a less-than 10 percent margin industry.
This could lead Arkansas casinos to try launching their own branded sportsbooks in conjunction with tech providers such as Kambi and IGT, which have struck similar partnerships in other states (though, notably, without the revenue share mandate). The major brands argued ahead of and during Thursday’s meeting that their high profile and marketing in other states have made them household names nationwide, a brand recognition that would be impossible to capture otherwise.
Arkansas casino stakeholders, meanwhile, were bullish about their capabilities. Saracen’s Chief Market Officer Carlton Saffa said during Thursday’s meeting that his facility already works with a wide range of employees and companies to run a casino and could do the same for sports betting.
“We’re not just three guys in a room,” Saffa said.
Regional impact
If approved, Arkansas would be the first state in the South to offer both in-person sportsbooks at casinos as well as mobile books anywhere within state lines. Louisiana has opened multiple casino sportsbooks and will offer mobile betting, but will geofence online betting in certain parishes that rejected a 2020 ballot measure. Mississippi has casino sportsbooks but only offers mobile wagering within casino properties.
Virginia and Tennessee offer statewide mobile betting but neither currently has commercial casinos. North Carolina has retail sportsbooks at two tribal casinos but no other legal sports betting options.
