Why did Nevada Governor Brian Sandoval, on the eve of the close to the legislative session, sign bills that will expand the reach of sportsbooks? Why is New Jersey Governor Chris Christie suing the federal government to allow Garden State casinos and racetracks to offer sports wagering? The answers can’t be found in the bottom-line numbers Nevada sportsbooks have posted, but rather in the trajectory of sports wagering.
Last year, Nevada’s books won a combined $227 million—certainly not peanuts, but only about 2 percent of the $11 billion the state’s casinos took in. And yet sports betting has been in the news much more than multidenominational slot machines ($2.9 billion last year) or blackjack ($1 billion and change). If public interest was based merely on dollar amounts, there would be a national clamor about roulette ($345 million) long before anyone got worked up about which team is favored to win the NBA Finals. But that’s not the case; New Jersey is spending taxpayer dollars trying to overturn the federal ban, despite offering all the games that brought Nevada 98 percent of its casino income last year.
The reason New Jersey wants in? Sports betting is growing faster than any other Nevada gaming sector. Scratch that: Sports betting is growing while every other piece of the gaming pie seems to be shrinking. Since 2007, state gaming revenues as a whole have fallen by about 14 percent—it’s the nongaming boom that has industry watchers proclaiming the end of the recession, not the results from the casino. In that same period, the amount won by sportsbooks has risen by almost 35 percent.
This growth isn’t just a recent phenomenon. Since 1984, sports betting here has increased about four times as much as gambling as a whole. True, it’s still a small fraction of the total win, but the trend arrow is pointing upward, which explains the attention—out of proportion to its present revenue state—that sports gambling enjoys.
The bills that Sandoval signed into law do two things. The first authorizes “entity wagering,” which sounds like something out of the Q Continuum but actually just allows groups of people to pool their resources and place bets at Nevada race and sportsbooks. The second allows Nevada companies to run legal sports-betting facilities in other jurisdictions (as long as the back-office operations remain in-state).
Both bills are predicated on the hunch—which the numbers seem to amply support—that public interest in sports betting is on the rise. There is a sense that this may be gambling’s last frontier. And while Nevada is the only state where single-game sports wagering is lawful, daily fantasy sports leagues—really just a thinly disguised variant of traditional sports betting—have exploded in the past two years. Would legal, widely adopted sports betting have the same meteoric rise? That seems more than likely, which explains Christie’s continuing efforts at undoing the federal ban. Everyone likes money, governments most of all, and there may be quite a bit of it if other states are allowed to accept wagers on the Giants-Cowboys game.
For Nevada operators, the increased focus on sports betting has both present and future implications. For now, legal sports betting remains one of the few monopolies that the state still enjoys. This hasn’t led to a tremendous windfall for operators, but it may be the deciding factor that settles some sports fans on a trip to Las Vegas instead of a drive to the nearest casino. The more diverse offerings—and the larger pools of potential bettors—the better.
And yet, the economics of governance being what they are, the monopoly won’t last forever. So, just as they did when casino gambling expanded beyond our borders, Nevada companies are positioning themselves to take the lead, so that they can open up shop in new jurisdictions, armed with proven track records of business competence and regulatory compliance.
So while the numbers suggest that sports betting is a trivial part of Nevada gaming, the reality is it’s a small but growing segment of an industry that is, at best, flat. When you add the potential revenue streams that could come from national expansion, the growing focus on sports is a brilliant game plan.