The Arkansas Racing Commission on Thursday authorized its staff to publish, for the purpose of seeking public comment, proposed rule changes that would open the door to mobile sports betting through the state's casinos.
The casinos are allowed to offer sports betting on-premises under the commission's current rules. The proposed changes would allow people anywhere in the state to make sports bets, said Byron Freeland, an attorney for the commission.
Three casinos operate in Arkansas: Saracen Casino Resort in Pine Bluff, Southland Casino Racing in West Memphis and Oaklawn Racing Casino Resort in Hot Springs. Earlier this month, the Racing Commission, in a divided vote, awarded a license that would allow a new gambling facility, Legends Resort and Casino in Pope County.
Amendment 100 to the Arkansas Constitution, approved by voters in 2018, authorizes the four casinos.
Since the first sports bet was placed in Arkansas in July 2019, sports bettors have wagered $95.7 million at the three existing casinos, resulting in $83.2 million in payouts and roughly $1.74 million in state revenue, state Department of Finance and Administration spokesman Scott Hardin said after Thursday's meeting.
Finance department officials recently started reviewing how much more state tax revenue that authorizing mobile sports betting is projected to raise, Hardin said.
The proposed rule changes would allow each casino licensee to provide no more than two individually branded online sports platforms and accompanying mobile applications with the approval of the Racing Commission.
The proposed changes also include a slightly different proposal presented Thursday to the commission by Saracen officials. This change would allow each licensee to provide one individually branded online sport platform and accompanying mobile application with the approval of the commission, and a second platform and accompanying application may be approved, upon the request of a licensee, with good cause and a majority vote of the commission.
Any individually branded online sports pool platform/mobile application provided by an online sports pool operator intermediary must, on its website, conspicuously bear the name of the casino license with which it is affiliated, under the proposed rule changes.
The proposal would define an online sports pool as an operation in which wagers on sports events are made over the Internet on websites or mobile applications through computers, mobile devices or other approved interactive devices accepted through a gaming system approved by the Racing Commission.
In order to operate an online sports pool, a casino licensee must first operate and continue to operate a sports pool from the casino's premises, under the proposal.
"Further, operation of an online sports pool shall be prohibited in circumstances in which a majority of the net gaming revenue, as defined in Amendment 100, from the online sports pool is paid to a third-party vendor assisting in the operation of the sports pool," the proposal reads.
Lobbyist John Burris, who represents online sports betting operators DraftKings Inc., FanDuel Inc., BetMGM, Fanatics and Bally's, told the commission there had been a lot of effort to nuance the proposed rules "in a way that we feel like is going to limit sports betting."
"One of the big issues is that the rule dictates a majority of the revenue stay at a casino," said Burris, who is a former Republican state representative from Harrison. "That's something that is very important for the casinos, and that's why it is in the [proposed] rule.
"Our issue with that, simply put, is that we don't believe that it is the state's role to dictate business-to-business arrangements on a revenue share agreement, " he said. "We think that's something that should be negotiated between the parties, with your approval on the back end."
If the commission approves the proposed rule to require a majority of the net gaming revenue from the online sports pool to be paid to a casino, that would make it nearly impossible for sports betting operators to enter the market, warned Sean Ostrow, a Lawrence, Kan.-based lobbyist who also represents FanDuel, DraftKings, BetMGM, Fanatics and Bally's.
He said 95% of sports betting revenue goes to winning patrons and the other 5% pays taxes, platform costs and other expenses.
Ostrow said agreements with online sports betting operators generally require casinos to receive between 5% and 15% of the total sports betting revenue.
Freeland said there is a legal argument that Amendment 100 allows only casino franchise holders with a license to conduct casino gambling, including sports betting, in Arkansas.
There is a valid legal argument that allowing a third party to receive more than 50% of sports betting revenue would allow an unlicensed entity to operate as a casino gambling entity, he said.
Freeland said he can guarantee that there would be a lawsuit challenge over that.
But Burris said an online sports betting operator's revenue sharing agreement with a casino wouldn't give operational control of the casino to the operator. If there is a valid legal question, the commission could seek an advisory opinion from the attorney general's office, he said.
Notice of the proposed rule changes will be published soon in the Arkansas Democrat-Gazette and a 30-day public comment period will take place.
The commission will consider the proposed changes Dec. 30, Freeland told the commission. Changes approved by the commission will be reviewed by a legislative committee.
In 2018, the U.S. Supreme Court struck down a federal law that prohibited commercial sports betting in most states. Since then, 32 states and Washington, D.C., have legalized sports betting, according to the American Gaming Association.
Ostrow said 22 states, including Tennessee and Louisiana, allow mobile sports gambling, and he expects their ranks to increase next year and that could include Mississippi, Missouri and Oklahoma.
Gambling foe Jerry Cox, of the Arkansas Family Council, warned last week making sports betting more accessible via a mobile phone app would add to the problem of gambling addiction.
Oaklawn has an app that allows bettors to place wagers solely on live racing, Oaklawn Anywhere.
Afterward, Oaklawn's general manager, Wayne Smith, said in a written statement, "We are excited at the possibility of offering mobile sports wagering to all Arkansans should The Arkansas Racing Commission give us approval to do so at the end of the year."
Carlton Saffa, Saracen's chief market officer, said it has become all-too-common lately for others to criticize the Racing Commission.
"But I want to applaud their governance generally and especially regarding their continued interest in moving the three Arkansas casinos' current sports offerings to the mobile platform," he said in a written statement. "Saracen employs 900, and our team is excited about the potential to offer mobile wagering and compete head to head with incredible properties like Southland and Oaklawn, just as we do for slots, table games and more.
"The proposed rule change would rightly provide the constitutionally licensed casinos, those authorized to conduct sports wagering, the opportunity to provide our patrons what they are asking us for every day," Saffa said.
A spokesperson for Southland could not be reached for comment by email on Thursday about the rules proposal.
In other action Thursday, the Racing Commission approved Oaklawn's plan to allow one or two tellers to accept sports bets from people who are at least 21 years of age in a specified area.
Instead of having people go back and forth between the doors to the race track and casino to make sports wagers, this would allow people to avoid that traffic jam, Smith said.