Business of Speedway
The Money Behind the Motorsports Industry
By: Tim Frost
Date: July 1, 2018
This month, we will look at legalization of sports gambling and its impact on motorsports.
Recently, the Supreme Court ended the federal law, the Professional and Amateur Sports Protection Act that prohibited states from legalized sports gambling. In 1992 laws were put in to forbid states to allowing betting on sports. The premise was its potential harmful effect of gaming on America’s youth. Nevada was exempted from these new laws, since it had allowed wagering on sports since 1949.
Unlawful sports wagering is substantial. It is estimated that Americans gamble $150 billion on sports events each year. The Super Bowl attracts around $4.2 billion and the NCAA Men’s Tournament almost $10.0 billion – almost 97 percent illegally. A large portion of illegal sports wagering is conducted by organized crime syndicates which may support money laundering, racketeering and extortion.
The question presented to the courts was not the legality of sports wagering. It was that the act was unconstitutional on the grounds that federal statutes were discriminating individual state rights. The State of New Jersey challenged the federal ban on sports wagering – highlighting the fact that Congress lacks the power to compel States to enact state laws and regulate interstate commerce.
The Supreme Court justices ruled the law unconstitutional in a 6-3 ruling. Critical to its future was effective regulation that would preserve the integrity of the games.
The reception was favorable on many fronts. The casino industry predicted the ruling would generate additional revenue. The media companies that have existing relationships with major sports leagues hoped that fans would have a vested interest in the outcomes driving higher ratings. Data companies that compile and distribute instant information would see demand rise for their information.
Sports leagues did not always publicly embrace legalized sports betting. They feared match-fixing and corruption. Sports betting legal in Britain and the integrity of professional soccer has not suffered. Legalized gaming allows leagues and monitor gambling patterns and flag betting irregularities that could suggest corruption.
Now that landscape for sports wagering has changed, stakeholders want a slice of the gaming revenue pie. Casinos and government want to assure that taxes are collected. Leagues want an “integrity” fee place on bets, Players unions want to ensure that privacy and publicity rights are protected and compensated.
Nascar has indicated they are monitoring the impact of the court ruling. There is a relationship between motorsports and gaming on several fronts.
Many casinos have sponsored tracks and teams through the years. Most notably, South Pointe Casino has supported the efforts of Brendan Gaughan in various series. For the last few years, Nascar has held it season ending banquets at the Wynn Casino in Las Vegas.
Tribal sovereign nations are not subject to state laws. They have not stated an official position. Several tracks are located on / or owned by Indian reservations that have casinos. Wild Horse Pass Motorsports Park is located in the Gila River Indian Community.
Hollywood Casino at Kansas Speedway overlooks turn two at the race track. Opened in 2012, the building is a 50/50 joint venture of Penn National Gaming and International Speedway Corporation. The casino annually contributes almost $20.0 million in net income to ISC’s bottom line. It has been a solid investment.
Dover Downs began as a motorsports and harness racing operation in 1969. The dual- purpose complex was designed to accommodate a 5/8- mile horse track and one-mile concrete auto race track. The Dover Casino was built in 1995 and added a hotel and conference center ten years later. The State of Delaware was the first state to allow full sports betting after the court decision. They expect to take bets on the fall Nascar race.
As additional states offer legalized sports betting, casinos could offer wagering on events such as Nascar races. Overall, Nascar is not expected to a large part of the overall take. Bets on race winners would have the biggest payoff, followed by prop bets and then driver matchups. At track betting via a sports book, slots or kiosks present logistical and licensing challenges. Mobile apps are attractive allowing in-seat wagering.
Nascar may be able to participate via information. The information it has accumulated over the years on track, team and driver performance may be licensed to data providers. In turn, it may be used by book makers to set the odds In addition, it has established relationship with fantasy racing leagues like DraftKings and FanDuel which are moving into the legalized sports betting marketplace.
There is excitement about the future of sports wagering. Any new source of revenue is welcome. Creating additional forms of fan engagement at the race track are important in the challenging economic environment. You can bet on that.