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Las Vegas & Pro Sports: a potential way forward for governments to stop subzidizing pro sports venues

September 3, 2017

Constantly renewing itself, Las Vegas is moving into another a new era.  Las Vegas sportsbooks have been legally accepting wagers since sports betting was made legal in Nevada in 1951.  Once shunned by professional sports leagues for its association with gambling, or perhaps more correct, their refusal to share gambling profits, with a regional population now exceeding 2 million, Las Vegas will soon welcome two professional sports teams as these leagues appear to have moved past their distaste for the profits that Las Vegas sportsbooks have been making on the backs of their event results. 

In the Fall of 2017, the National Hockey League will welcome the Las Vegas Golden Knights to the T-Mobile Arena, located right on the Vegas Strip among dozens of Casinos and sportsbooks.  Despite the ability to request that the local bookmakers take the Golden Knights events off the board, Las Vegas bookies will likely continue to offer NHL betting odds for all games.   

Perhaps as soon as the 2019 season, Las Vegas will also welcome the relocation of the Oakland Raiders franchise to play at a brand new Las Vegas football stadium that will be adjacent to the Strip and the Mandalay Bay Casino resort.  Again, Las Vegas sportsbooks will likely continue to offer NFL betting odds for all games. 

With this, Las Vegas is providing an example of a potential way forward with regard to addressing the the longstanding pattern of professional sports teams that constantly put undo pressure on local governments for subsidization of their new for-profit venues.

Two things of consequence are in evidence here.  First, this is a clear shift in the attitudes about the relationship between North American professional sports leagues and the gambling that takes place on their events.  Betting is an important way to give the otherwise non-interested sports watcher a way to have a vested interest in a game.  A game between two non-descript teams can be interesting to a neutral onlooker when there is money on-the-line. 

While sports betting is illegal in most of the US, the rise in popularity of fantasy sports and daily fantasy sports games, (which has now been made illegal as a form of gambling in a few states) has provided important and lucrative ways to keep people interested in their sports entertainment product.   So much so that some American sports leagues have invested in these daily fantasy game operators or have struck strategic partnerships. 

Individual game sports betting is simply the next step to take to ensure the largest possible audience is watching their events – so why stifle the interest?  American pro sports teams have seemingly seen the light.   For example, the NHL has partnered with Sportradar to monitor betting patterns worldwide in an effort to stay ahead of any unwanted betting-related controversies like match-fixing.    

Second, the $375 million T-Mobile Arena was built completely with private money.   MGM Resorts International (MGMRI), owner of several casinos on the Vegas Strip owns 50% while the other 50% is owed by Anschutz Entertainment Group (AEG) which builds, owns and operates several arenas and stadiums for profit around the US.  With a strong local population and the attraction that gambling poses for Las Vegas’ millions of annual visitors, it is little wonder that these two companies thought that the T-Mobile Arena would be a sound private investment.  MGMRI and AEG did not go begging, hat-in-hand to the local governments, looking for free money toward the construction costs of their for-profit project. 

Contrast the T-Mobile Arena development with the Las Vegas football stadium and the dozens of arenas and stadia that have been built over the past 25 years around North America with billions of dollars in public funds for professional sports team owners.  Owners of pro teams constantly threaten to move their franchise to another city if the local government fails to stump up with free cash toward a newer, more profitable facility.  Zimbalist and Noll explore this in their book, Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums.  In it, they show that while owners proclaim that public investment in arenas and stadia for their teams will create jobs, create trickle-down economic benefits for local businesses and allow for regeneration of decaying urban areas, these ideas are largely unfounded by the resulting effects.  The public investments in these buildings largely outweigh any return in public economic benefit.

This returns us the example of the T-Mobile arena, again, part-owned by a casino operator.  Clearly there are profits to be made in entertainment, gambling and sports betting.  Perhaps rather than wasting public money on the subsidization of buildings for billionaires and their sports teams, state and federal governments should open up gambling legislation so that the private sector, including sports teams have an additional revenue source to operate their businesses without public money so that the public can benefit through additional tax revenue on gambling and avoid doling out funds on these for-profit capital projects. 

Some might argue that loosening gambling laws might further promote an unwanted vice in a widespread manner and that having legalized gambling limited to only a few states and Native Peoples’ reserves helps to contain the vice.  This however is a huge fallacy.  The fact of the matter is that despite online gambling being made extremely difficult by the Unlawful Internet Gambling Enforcement Act of 2006 and Federal Wire act of 1961, many offshore betting and casino sites still continue accept US players and make huge profits.  So much so in fact that the annual spend from American online gamblers hovers around $6 billion.  Imagine if that gambling money were returned annually to US businesses and US tax payers. 

The example of sports teams, sports betting companies and governments working together is far from unprecedented.  In several European jurisdictions, online sports betting is taxed, so the public benefits, while the betting companies are allowed to sponsor professional teams for the purposes of increasing their brand awareness.  Nearly every major soccer team in England, Germany, France, Spain and Italy has an ‘official sports betting partner.’  Everybody wins, while betting is highly regulated so that customers or bettors have their rights protected, in addition to ensuring that betting services are not marketed to minors.  Problem gambling and prevention is also a high priority for regulators and betting companies and has been addressed through problem gambling detection technology which can help prevent bettors from chasing losses, in addition to the availability self-exclusion programs. 

In the end, perhaps only new legislation can prevent the perverse phenomena of public subsidization of for-profit professional sports venues.  If such legislation was coupled with an easing of gambling laws, legalizing sports betting in a widespread manner in the US as it is in Europe, the setback to professional sports leagues and owners would be far easier to accept.­