A legislative panel on Wednesday delayed action on the Arkansas Racing Commission's proposed rule that would allow the state's casinos to begin accepting mobile sports bets from throughout Arkansas.
The Legislative Council's Administrative Rule Review Subcommittee will resume its consideration of the proposed rule this morning after officials representing the state's casinos and a lobbyist representing online sports betting operators disagreed about whether the proposed rule would violate the federal commerce clause.
The state's licensed casinos are currently allowed to offer sports betting on-premises under the commission's existing rules, but the proposed rule would allow people anywhere in the state to make online sports bets through the state's casinos.
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. In November, a divided Racing Commission voted to award 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 November 2018, authorizes the four casinos.
Mobile sports betting is currently allowed in Louisiana and Tennessee among Arkansas' surrounding states, state Department of Finance and Administration spokesman Scott Hardin said.
The proposed Racing Commission rule 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 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 licensee's premises," under the proposed rule.
"Further, operation of an online sports pool shall be prohibited in circumstances in which a majority of the net casino gaming receipts, as defined in Amendment 100, from the online sports pool is paid to a third-party vendor in assisting in the operation of the sports pool."
That portion of the proposed rule would grant the state's casinos more than a half of the proceeds when partnering with online bookmakers. The majority split would set Arkansas apart from the rest of the nation, where the average share is 5%-15% with local casinos.
The proposed rule is opposed by officials representing online sports betting operators Draft Kings Inc., FanDuel Inc., BetMGM, Fanatics and Bally's.
Lobbyist John Burris, who represents Draft Kings Inc., FanDuel Inc. BetMGM, Fanatics and Bally's, told lawmakers the Arkansas Racing Commission's proposed rule is inconsistent with the federal commerce clause because the state can't discriminate against an out-of-state company for the benefit of an in-state company.
The state's casinos helped craft the proposed rule by the Arkansas Racing Commission and the proposed rule won't provide a competitive market for consumers, he said.
Burris said the intent of the proposed rule is to keep third-party vendors out of mobile sports betting in Arkansas and keep mobile sports betting revenue in the state.
He said the online sports betting operators that he represents want to be able to negotiate their own contract with the state's casinos without the state dictating the profit margin through the proposed rule.
Carlton Saffa, chief market officer for the Saracen Casino Resort, said the proposed rule to allow casinos to accept mobile sports bets was passed unanimously by the Arkansas Racing Commission on Dec. 30 and it's consistent with state and federal law.
The national online sports betting operators "have no other choice but to invent an argument about legality to stop" the proposed rule, "so that's exactly what they are doing," he said.
"I cannot blame the other side for this commerce clause, throw-the-kitchen-sink-at-it argument," Saffa said. "I would try the same thing if I was in their shoes. But none of that makes for a convincing case or a reason for you to view this rule as out of line with the law."
Attorneys representing Oaklawn Racing Casino Resort and Southland Casino Racing testified that the proposed Arkansas Racing Commission rule that would allow casinos to accept mobile sporting bets doesn't violate the federal commerce clause.
Rep. Denise Garner, D-Fayetteville, questioned whether Attorney General Leslie Rutledge's office believes the proposed rule would violate the interstate commerce clause.
At that point, subcommittee co-chairman Rep. Lee Johnson, R-Greenwood, said the subcommittee would resume its review of the proposed rule this morning at 8 a.m. because the Joint Budget Committee was scheduled to begin meeting soon Wednesday morning in the Multi-Agency Complex room in which the subcommittee was meeting.
In an advisory opinion dated Dec. 30, requested by Sen. Jonathan Dismang, R-Searcy, Rutledge said it wouldn't be a violation of Amendment 100 to the Arkansas Constitution for a casino licensee to contract with a third-party vendor to assist in the operation of a certain function of casino gambling, such as an online sports pool, under which the third-party vendor retains a majority of the revenue generated from assisting in the operation of casino gambling.
Saffa told lawmakers the legislative panel's action on the proposed rule was delayed by nearly a month as a result of a request by national online sports betting operators to the Arkansas Racing Commission for "a technical correction" to the proposed rule.
The Arkansas Racing Commission on Jan. 25 approved a minor change in the proposed rule and then-commission attorney Bryan Freeland later that day decided to pull the proposed rules from the agenda of the Legislative Council's Administrative Rules Subcommittee agenda. At that time, Hardin said Freeland's decision to pull the proposed rules will allow for additional time to adequately address questions recently raised by state legislators and other interested parties.
Saffa said the delay in the legislative panel's consideration of the proposed rule caused Arkansans to miss an opportunity to place mobile sports gambling bets through the Arkansas casinos on the Super Bowl, the biggest sporting event of the year.
"This rule addresses something our patrons ask us for every day and I am sure you have constituents asking you about every day," he said.
"With March Madness just around the corner, should we not proceed today, I imagine we will all get calls from people around the state asking what is taking us so long."
Hardin said Wednesday that a total of $33 million was legally wagered on sports across the state's three casinos in 2020, and that total increased to $67.7 million in 2021. Oaklawn accepted the state's first legal sports wager in July 2019.
State tax revenue from sports wagers totaled $583,000 in 2020 and $1.2 million in 2021, he said.