Colorado lawmakers are gambling that voters want sports betting

Two Colorado lawmakers want to take a gamble in 2019.

A bipartisan duo think they can convince two-thirds of their colleagues and a majority of voters to legalize sports betting throughout the state.

Republican gubernatorial candidate Walker Stapleton is so sure it's happening that he's already telling voters on the campaign trail how he would spend the tax money from sports betting. However, it's far from certain that proponents can clear all the hurdles and make all the necessary deals in just a year's time.

While Colorado has been at the forefront of converting another black market — marijuana — into tax dollars, the state has taken a more cautious approach when it comes to letting citizens lay down money on games of chance. Voters have crushed eight previous attempts to expand gambling.

Still, Reps. Cole Wist, R-Centennial, and Alec Garnett, D-Denver, think the payoff could be worth the political risk of attempting to legalize an American pastime that has lived in the shadows.

"It seems to me it's a no-brainer," Wist said. "We should have the conversation to see if this is something we as a state want to do."

Garnett and Wist started talking about the idea of letting Coloradans bet on the Broncos, Rockies and other sports in May after New Jersey convinced the U.S. Supreme Court that a federal law limiting sports betting to a handful of states was unconstitutional.

Colorado didn't allow casino gambling until 1991, and voters have consistently said they want it confined to the towns of Black Hawk, Central City and Cripple Creek. An amendment proposed in 2014 to expand gambling to certain racetracks failed with a whopping 70 percent of voters against it.

Wist and Garnett, however, did succeed in convincing their colleagues to legalize fantasy sports leagues in 2016.

In theory, they could skip asking voters about sports betting, convince their colleagues its a good idea and open the market next summer. Colorado Attorney General Cynthia Coffman issued an opinion in August that the state's constitutional restrictions on gambling don't apply to sports betting. The opinion said lawmakers only need to change Title 18 in the Colorado Revised Statutes, which defines sports gambling as an illegal activity.

But that's only in theory.

"I think it's important to go back to the voters and make sure it's something that they want," Wist said. "I think there are reasons legally why we don't have to, but we have to be respectful of that history."

That means putting a legislative referral on the ballot in November 2019 that would likely legalize sports betting starting in January 2020.

Garnett agreed with that timeline, and so did Peggi O'Keefe, the executive director of the Colorado Gaming Association.

"There will be a lot of things that voters want to feel comfortable about," O'Keefe said.

Most sports betting — both legal and illegal — happens on mobile platforms. That means Coloradans would essentially be saying yes to allowing people to place bets from anywhere in the state — something they have rejected in the past.

"I think it's unrealistic we create a system that doesn't include a mobile platform," Garnett said.

If it starts snowing or a player gets injured during a game, gamblers want to be able to adjust their bets without driving back up to one of three mountain towns. "Moving the line" is a major feature of sports betting, Garnett said.

About 52 percent of the total sports betting revenue New Jersey collected in September came from bets people placed on their phones or computers. And DraftKings, a fantasy sports betting website that recently launched a sports book app for New Jersey, said it hit 2 million bets in less than two months.

Those who support legalizing sports betting agree that to lure players from the black market, legal sports betting needs to be as convenient as what's offered now. Where they disagree is how to prevent underage gambling on mobile apps, who should control those apps and where to spend any tax revenues Colorado collects.

O'Keefe, who represents the interests of Colorado's casinos, said managing digital sports betting should be within the purview of the casinos and the Division of Gaming. She also said casinos should control any mobile betting apps and be the ones deciding whether to partner with third-party companies such as DraftKings.

 

As a safeguard against underage gambling, O'Keefe recommended requiring players to visit a casino in person to have their identification reviewed before they could create an account. That's the way it's done in Nevada, O'Keefe said.

But Nevada has casinos all over the state, while Colorado confines them to three towns. Players in places such as Lamar would need to drive nearly eight hours round trip just to make their first bet.

DraftKings spokesman James Chisholm said New Jersey, which legalized sports betting in July, allows users to create accounts online.

"When registering for an account with DK Sportsbook, a person must provide full name, address, date of birth, email address, telephone number and Social Security number, which we then verify before activating the account and allowing them to play," Chisholm said.

Another big question is whether to let racetracks such as Arapahoe Park in Aurora run their own Las Vegas-style sports books.

"We definitely want to be one of the players," said Arapahoe Park executive director Bruce Seymore. "I don't want them (the casinos) to do something that eliminates me from doing that."

Colorado's casinos fiercely opposed expanding gambling to racetracks in 2014, and it wound up being one of the most expensive ballot initiative fights in the state's history. Voters overwhelmingly said they didn't want casino games outside of the state's current casino towns, but Seymore thinks voters might feel differently about sports betting that's similar to the way people bet on race horses and dogs.

"It was a brutal fight between businesses that played out with the electorate in 2014," Garnett said. "We have to create some compromise here, so that doesn't happen again."

If Garnett and Wist can strike a deal with the casinos and racetracks, their next hurdle will be getting the rest of Colorado's lawmakers on board with a tax structure that lays out how much money the state would collect from every bet and how those dollars would be spent.

Nevada levies a 6.75-percent tax on gross revenue from sports betting. Rates are around 10 percent in New Jersey and Delaware. Pennsylvania lawmakers, however, set their state's tax rate at 36 percent on gross wagering revenue and included a $10 million licensing fee — which soured several national and international companies on the state's market.

A representative from William Hill USA, the giant British bookmaker that operates legal sports books at the New Jersey Shore, told The Philadelphia Inquirer it's not interested in operating inside the state at that price.

"We're doing a lot of research right now to try to find that sweet spot on a tax rate that pulls people from the black market and puts them into a transparent process," O'Keefe said.

Regardless of where that number ends up, sports betting won't fill Colorado's state coffers with a game-changing amount of money.

Stapleton has said Colorado could earn about $150 million off sports betting annually and use it to pay off a loan of up to $2 billion for transportation projects. Garnett, Wist and O'Keefe all think Stapleton's numbers are too big because they rely on an inflated estimate of what Americans might be betting on the black market.

The high estimate for what could be earned nationally from legal sports betting is about $5 billion by 2023, according a June 2018 report from GamblingCompliance.com. That would make America one of the world's largest markets, but the epicenter of this new market is expected to be in the northeast in states like New York. The Empire State is projected to earn about 10 percent of those dollars, according to the report.

"We don't want to say, ‘Pass this and we're not going to have congestion on Interstate 25 or Interstate 70,' " Garnett said. "I don't want to say ‘misled.' I think that's the wrong word. But (voters) were definitely under the impression that more of the revenue generated from marijuana was going to go to schools."

Garnett also isn't sure transportation is the best place to spend sports betting dollars, adding that his colleagues at the Colorado statehouse are sure to have an opinion about how to use the money.

http://www.canoncitydailyrecord.com/news/colorado/ci_32234366/colorado-lawmakers-are-gambling-that-voters-want-sports