SBJ Betting: North Carolina makes sudden turn in favor of teams/venues

By the end of the day, North Carolina legislators will make official a foundational change to a sports betting law that they passed in March and the governor signed in June. Five-plus years into legal sports betting, the one thing we know is that we don’t know.

Late changes in North Carolina show fundamental shift for sports betting structure

As the North Carolina Senate was winding down its debate over a state budget that seemed certain to pass late Thursday afternoon, the lobbyist who worked for three years on the bill that legalized online sports betting in the state reflected on how suddenly its structure had unraveled.

Working on behalf of four leading sportsbooks, and initially in concert with sports interests in the state, Orrick law firm partner Scott Ward saw a bill first introduced in 2019 die in committee and then fall a few votes short on the floor before finally passing overwhelmingly in March, getting over the line thanks to a savvy compromise.

The state’s five major pro teams, two PGA Tour stops and Charlotte Motor Speedway, which together lobbied hard for a “tethered” system that would give them control of any online licenses the state issued, instead were included in wording that gave preferred status to applicants who did sponsor deals with them.

That left four licenses for the state to distribute to sportsbooks directly.

North Carolina’s lottery commission went to work making hires and establishing an infrastructure to consider applicants, with a goal of launching in the first half of next year.

And then, on Monday, a draft of the state budget revealed foundational changes to the structure of the sports betting framework signed into law by the governor three months ago. Gone was any reference to the 12 licenses, replaced by a definition that identified 11 teams, sports facilities and tours that each would control access to a license -- requiring sportsbooks to secure a “written designation agreement” with one of them in order to qualify.

Control of online licenses now rests with the owners of the Panthers (NFL), Hornets, Hurricanes, Charlotte FC, NC Courage (NWSL), Charlotte Motor Speedway, North Wilkesboro Speedway, Quail Hollow Country Club in Charlotte, Sedgefield Country Club in Greensboro, NASCAR and the PGA Tour. Those willing to pay the state $1 million for a five-year license must first negotiate with one of those 11 to secure access.

That makes North Carolina the first state to tether all its online licenses to sports interests.

Over the last year, the teams and facilities went from being out of the bill entirely, to thinking they’d get tethers to half the licenses, to no tethering but preferred status on two-thirds of the licenses, to the full tethering that emerged this week -- out of nowhere, six months after the bill passed.

“We got hometowned,” said Ward, a government affairs partner in Orrick’s DC office. “The legislature chose the local teams and chose not to use the same sort of transparent process that we used for three years to pass the bill. ... This is how the legislative process works. Sometimes it works in your favor. Sometimes it doesn’t. It didn’t work in my clients’ favor this time.”

New N.C. bill clarifies a number of things, but unknowns remain

This isn’t the first time influence has subverted democracy. Budget and appropriations bills can be catch-alls for the party in power to layer in pork or achieve gains they couldn’t get during a session.

In floor debates Thursday, Democratic legislators in the N.C. Senate and Assembly rose to point out matters of policy that their Republican counterparts, who hold a supermajority, were able to implement through the budget bill, rather than traditional channels. Most who took issue with that would have put the control of sports betting near the bottom of their worry list.

While there’s room to debate whether this is what’s best for the state’s coffers -- or the best way to develop a sustainable, competitive set of sportsbooks -- it at least clarified waters that were murky in the bill that legislators passed in March.

Among them:

• North Wilkesboro, a historic track that hadn’t hosted a Cup Series race since 1996 when NASCAR brought it back on the schedule for this year’s All-Star Race, will get access to a license, giving N.C.-based track owner Speedway Motorsports access to two of them (it also owns Charlotte Motor Speedway). Seemingly left out of the initial bill, which applied to any speedway that “annually hosts more than one” Cup race, North Wilkesboro was inserted clumsily into the budget bill, which now grants a license to any track that hosted "at least one" NASCAR All-Star Race occurring after Jan. 1, 2022.Hmmm. Who might that be?The change also could boost leverage for Speedway Motorsports, which has visions of a broader entertainment corridor on its property adjacent to the speedway, which would qualify as the site of a year-round retail sportsbook. Based on performance in other states, sportsbooks have cooled on the idea of stadium and arena retail. Penn Entertainment has tabled its plans to open one at the speedway in Phoenix. But an applicant might swallow hard and give it another shot if it’s the only path to market access.
• Tethering one license per team makes it clear that Tepper Sports & Entertainment, which owns both the Panthers and Charlotte FC, will control two licenses. Tepper execs thought the group’s ownership of two teams allowed it to convey preferred status on behalf of each of them -- and perhaps to control two retail licenses -- but that was complicated by the fact that they both play in the same stadium.As initially written, the bill tied preferred status to a “documented history of partnership with a sports facility,” rather than the teams. The budget requires sportsbooks to secure a “written designation agreement” with “a professional sports team," a motorsports facility, a PGA Tour or LPGA host or NASCAR.David Tepper won’t get two retail licenses. But he’ll get to negotiate market access deals with two sportsbooks.
• The elimination of a direct path to licensure reduces the leverage held by FanDuel and DraftKings, who undoubtedly could have secured licenses based on their standing as clear market leaders. They still likely would have wanted team sponsorships deals, but probably didn’t need them to get licenses. So they would been priced like sponsorships of similarly positioned teams in other states. And the only way the sportsbooks would have considered retail was if it made economic sense as part of the broader deal.

  Now? This could play out more like Arizona, where the Suns (FanDuel), Cardinals (BetMGM), D-backs (Caesars) and PGA Tour stop in Scottsdale (DraftKings) each got retail sportsbooks.

Among the things we don’t know:

• The impact on the teams and facilities with less attractive assets than the Hornets, Panthers, Hurricanes and maybe Quail Hollow and Sedgefield. There almost certainly are at least 11 sportsbooks that will want to do business in North Carolina, the nation’s ninth most populous state. But the market, as it now stands, has seven sportsbooks accounting for 97% of handle. Fanatics and soon-to-arrive ESPN Bet are included in that seven. Bet365 is not.How much are the remaining three access points worth to however many sportsbooks might vie for them? And, considering the high burn rate of a sportsbook entering a new market, does a team really want to risk ending up like the Cavaliers, who did their market access deal with Fubo Sportsbook, only to see it default shortly before the state opened to betting? It's a cautionary tale. And not likely to be the last of them.
• How much later North Carolina will launch as a result of the dramatic change in structure? We’re already in the seventh inning stretch of September and the state hasn’t begun accepting license applications. It hired Sterl Carpenter, the former Massachusetts Gaming Commission sports wagering operations manager, to lead its sports betting rollout last month. It also hired Gaming Labs International, the consultant that worked with the Massachusetts commission on its launch.A change this foundational not only figures to undo some of the work the lottery staff has done in the last six months, it also has all the sportsbooks recalibrating models to figure out how much they’re willing to spend to get access in the state and who they want to spend it with.In a statement this week, the lottery commission pointed out that, for all the changes legislators made, they did not push back a June 14 launch deadline laid out by the original statute.

  A point of reference: former Massachusetts Gov. Charlie Baker signed that state’s sports betting bill into law last August and the state launched retail in time for the Super Bowl and online in time for March Madness. But -- and this is a big but -- the Massachusetts commission already had an infrastructure in place to regulate commercial casinos. And, it didn’t have the additional lift of adding parimutuel horse wagering, as North Carolina will.

Team execs talk newly legalized states, renewal cycles with sportsbook sponsors

Moderating a panel that looked at sports betting integrations by teams earlier this week at our AXS DRIVE conference in St. Louis, our Austin Karp introduced Tepper Sports VP Bryan Lodigiani with a reference to legislation in North Carolina being “at the 1-yard line.”

Turns out, the teams got a fifth down.

When I shared that observation with Austin this morning, I forgot the impact that that infamous play in the Colorado-Missouri game of 1990 had on his alma mater, Georgia Tech, which ended up sharing the national championship, instead of winning it outright. In case you’ve forgotten the details, here’s a terrific reflection on that game by our Tom Friend.

Full disclosure: As one of 60 writers voting in the AP poll that year, I cast my ballot for Colorado.

Here’s a bit of what Lodigiani and Monumental Sports SVP Adam Heintz had to say during the panel:

• Lodigiani, on the value of the category for a team in a newly legalized state: “Typically, the way this works with new categories, you sit back and you look at league averages and where are other teams coming in. Sports betting is completely different. It's truly a category that's difficult to compare across teams. And you say that about every category here; that there's nuances among teams. But with sports betting, it's legislation, it's the number of licenses, it's the tax.“Each market is so different that if you’re comparing across other categories, it's kind of comparing apples and oranges to ... apples and steaks, almost.”
• Heintz, on what teams will find as they hit renewal cycles with sportsbook sponsors whose objectives have changed and sportsbook budgets have tightened: “It's really interesting to think about how some of these deals are going to look the second time around. We signed up a very long-term deal with Caesars when we did, given that it had the lease components and things like that. So I think seeing how some of these second and third deals look like given that ...  the economics have changed wildly since these deals started to get signed a couple of years ago. I think that's going to be a big impact.”

Football on the brain has August betting handles on the rise

August sports betting handles were up 12% versus July, which is not a surprise, but it matters. It signals the annual turn at the end of the summer that says football is here and it's all about to take off again. August is also tracking 8% over the same month in 2022.

• A sports betting show produced in partnership with Caesars Sportsbook called “By the Book" is among the new programming on the relaunched Monumental Sports Network RSN, notes my colleague John Ourand.

• LIV Golf and Simplebet are rolling out the microbetting platform's golf markets at this week's event near Chicago, notes SBJ's Josh Carpenter. The markets initially will roll out through Hard Rock Bet starting with Friday's opening round at Rich Harvest Farms.