Should Hawaii Play Online Sports Betting?


When the Kansas City Chiefs’ offense suffered a catastrophic collapse in the final minutes of the AFC Championship game against the Cincinnati Bengals, it cost the team’s supporters more than just another Super Bowl shot.

It also cost thousands in the US, who bet money on the Chiefs, who went into last week’s game as a seven-point favorite. On the other hand, the Chiefs’ loss meant a huge payday for the minority who bet money on the underdog Bengals.

This is a risk millions of Americans take every week in the 33 states that have some form of regulated sports betting. Now Hawaii lawmakers are considering whether to join those ranks and regulate betting on the islands.

Key proposals include bills to regulate sports betting on mobile devices and others to allow fantasy sports websites to operate in the state. Lawmakers have also tabled proposals for a casino in the state, but some see wagering as more palatable than other forms of gambling.

“In some cases, the public sees sports betting as something a lot less taboo than casino games and other gambling products,” said Kahlil Philander, an economics professor at Washington State University who studies gambling.

A major reason Hawaii legislators have considered gambling laws in the past is to increase state revenue. Another reason is to curb illegal betting. However, experts warn that sports betting alone, or even in combination with casinos, may not bring the expected tax windfall.

According to Keith Miller, a law professor at Drake University, billions of dollars can be wagered, but sports bettors typically keep only 5% of all bets as profit. State governments have to pick money from this small pot.

“A state that wants to patch all the potholes or pay teachers a six-figure salary is going to be really disappointed,” said John Holden, a professor at Oklahoma State University who specializes in gambling laws.

Fantasy sports is still a pipe dream

Legislatures have introduced two sets of bills aimed at legalizing sports betting in Hawaii. Some deal with traditional sports betting, where bettors wager on the expected winners and losers of a sporting competition.

The other set of proposals would legalize daily fantasy sports competitions, allowing players to wager money on specific outcomes or player stats, such as: Proponents argue that these competitions are based on skill and should not be considered gambling at all.

But since 2016, the Attorney General’s office has ruled that daily fantasy sports competitions are illegal under state law, which prohibits Hawaii residents from wagering money on them competitions of chance.

Because fantasy competitions still involve elements that might be beyond the control of weather — an athlete may be injured, inclement weather, or the game may be disrupted from functioning — the AG’s office argued that fantasy sports are still considered games of chance should be considered.

The State AG Bureau has ruled since 2016 that fantasy sports competitions should be illegal under Hawaiian law. Some lawmakers disagree. Screenshot/2022

MP Angus McKelvey believes that fantasy sportsbooks don’t risk their money gambling, but rather look at a variety of elements, such as how a team’s performance could be affected by injuries to key players and how teams have fitted together in the past.

“It’s not like roulette,” McKelvey said. “It’s a very skill-based thing that takes a number of factors into account.”

McKelvey introduced House bill 2004, which would legalize fantasy sports betting by exempting it from the state gambling definition. The measure would be limited to operators of online fantasy sports websites such as DraftKings or FanDuel.

Rep Angus McKelvey Chairman of Consumer Protection and Trade.  Capitol.  February 22, 2017
MP Angus McKelvey is pushing for a measure that would regulate daily sports fantasy competitions. Cory Lum/Civil Beat/2017

HB 2004 would ban wagering on all high school or college sporting events. The measure would also require fantasy sports websites to register with the state and implement strict surveillance programs to ensure underage wagers are not made.

McKelvey said the sites would work directly with the state Department of Revenue to collect state revenue from fees and taxes on profits, much like short-term professional rental companies in Hawaii act as tax collectors between the consumer and the state.

Miller said Hawaii needs to find experts from other states with experience regulating gambling establishments before it begins legalizing sports betting.

On Friday, the House Economic Development Committee postponed HB 2004, meaning it’s likely dead for this year. The committee’s chair, Rep. Sean Quinlan, said he wants to address the issue before the next legislative session.

“We should definitely do this at some point,” Quinlan said. “It’s a huge market and we would be missing out on tax revenue.”

Sports betting is not a cash cow

Sports betting laws were expanded in the country after The US Supreme Court ruled in 2018 that states should have the right to legalize sports betting in their own jurisdictions. Since then, states have seen mixed results in sports betting revenue.

in the first three weeks online sports betting is legal in New York this year, mobile betting sites in the Empire State reported more than $91 million in gross gaming revenue taxed at a 51% rate.

But not all states are so profitable.

Virginia also recently introduced online-only sports betting, similar to several proposals being considered in Hawaii legislation. While books in Virginia reported $3.2 billion of 2021 revenue, after payouts to weather and other deductions, the companies were left with $130 million in adjusted revenue. Of that, Virginia received only $20 million.

Miller warned that states should not overly rely on sports betting to generate revenue. And they should tread carefully when considering actions that would expand the betting market, such as: B. Lowering the gambling age.

“Trying to fill a budget hole with some form of gambling proceeds could itself be a form of addiction,” he said.

Experts see mobile betting as a double-edged sword that could help control illegal betting, but could also increase the incidence of problem gambling. Cory Lum/Civil Beat/2020

House bill 1973, introduced by Rep. Chris Todd, would allow companies that operate mobile betting sites like Caesars Sportsbook or BetMGMG to operate in Hawaii. The measure would allow an unlimited number of licensees to operate in Hawaii. Applicants would have to pay a fee of $50,000 to acquire a license and an additional $50,000 after each renewal. Licenses would be good for three years.

Companies would have to agree to pay 10% of gross profits minus profits to the state.

Todd said the 10% tax rate is just a placeholder and he would like to consider other areas if the bill gets a hearing.

Rep. John Mizuno proposes another sports betting measure House bill 1815would tax companies at a rate of 55% on gross profit.

Neither measure would consider allowing traditional sportsbooks with a physical location for people to go and place bets.

According to Holden, increasing access to online betting could help states break into the illegal booking market.

“If you have mobile sportsbook, we could all do that from the couch,” Holden said, adding that some mainland sportsbooks could be an hour’s drive away.

Holden said states have many choices when considering how to set up their tax and regulatory systems. Those wishing to root out illegal activities may wish to open up the regulated market by allowing unlimited number of licensees and setting low entry barriers such as: B. Low application fees. Jurisdictions looking to maximize revenue could offer operators a limited number of high-tax licenses.

But there are also concerns that easy access could fuel gambling addiction.

ONE Study 2016 by researchers in Australia and Germany found that gamblers who used mobile devices to place bets experienced gambling problems more often than those who used computers or attended in person.

All three lawmakers who introduced sports betting policies, Mizuno, Todd and McKelvey, said they would want to divert portions of state tax revenues from sports betting into addiction treatment programs.

“I think mitigating negative impacts has to go hand in hand with generating revenue,” Todd said.


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