Digging Deeper: Sports Gambling

– [Announcer] Support for
Digging Deeper comes from the Penn State
Alumni Association, connecting alumni to the
university and to each other, the Alumni Association
is powered by pride. Learn more at alumni.psu.edu And from viewers
like you, thank you. (upbeat music) – Hi, I’m Alisa Vasquez. If you’re a sports fan,
you’ve probably noticed a lot of commercials for betting
apps and services recently. What is responsible for this and how has sports gambling
changed over the past year? On this episode
of Digging Deeper, Penn State President Eric Barron talks to John
Affleck, Knight Chair in Sports Journalism and
Society at Penn State and Mike Ahlgren, Director of Gaming
Initiatives at Penn State, about the recent changes
in sports gambling. – Well, thank you
both for joining me. A fascinating topic,
interesting topic but what exactly
is sports betting? – Essentially it’s the wager, at least in this country,
on an athletic event. You know, in other countries,
it varies a little bit. You can, in the UK, you can bet on the
outcome of an election. But our sportsbooks and
our regulatory authorities have decided that it’s
restricted to an athletic event. It has to occur on a field and the outcome
has to be available to everyone simultaneously. So, and I think that protects
the integrity of the bet, so in other words, a problem with betting
on, say, the Oscars, is that somebody
knows the result before the public
knows the result. So that’s one of the
primary distinctions. – A common misconception
about sports betting is that you can bet on anything. But there are a lot
of sporting events, minor leagues come to mind, where there just
isn’t enough interest, what the industry
would call action, for there to maintain enough of an incentive for there to be betting. There’s also what
are called prop bets, which are bets on
things that will happen within the game. In, I was in London for the FA Cup Final in May and walked into a sportsbook and there were all sorts
of bets you could make on how many corner kicks
there were going to be, the way the goals were
going to be scored, all those sorts of things, in addition to
the result itself. – So and we have
prop bets as well? We can be sitting there
in the middle of it and say here’s my bet on whether
number 24 makes a touchdown or something like
that during a game? – Sure, most famously,
there’s, you know, at Super Bowl time, when
there’s a lot of interest and you will have
a lot of prop bets. You will have
things like how long is the national
anthem going to be? That was a controversy this year because the singer went
back and hit a note again. – Oh, wow.
– So. – That really is
wide open, isn’t it? That’s right in the,
still considered in the realm of sports gambling? – [John] Yeah. – The length of the
national anthem? – In the, yeah, it’s
a small example. – But so–
– Tougher argument. – So you have the
first part of this that is sounds like if there was interest, someone would find a way to
enable the betting to occur. And I also heard you say about making sure you
don’t know the outcome, so it sort of hints at some
regulatory environment. Who regulates this? – Typically, it’s not
regulated at the federal level. It’s regulated at
the state level so there are differences
from state to state how sports betting is
going to be treated because although, you know,
we can look back historically at the gaming industry
in the United States, and we can say that, you
know, Nevada legalized in 1931 and then, you know, as states, New Jersey in 1976 and all the riverboat states
in the ’90s came online, they used the regulatory
model in Nevada as sort of a guiding light. But to probably somewhat
justify their own existence, they’ve all made their
adjustments to it. So it’d be wrong to assume that, you know, from a
regulatory standpoint, it’s gonna be the
same in every state. It’s gonna vary, you
know, from state to state. – [Eric] It varies
from state to state? – Yeah. – So, is that
people in the state betting on something
out of the state and you’re following that
state’s rules and regulations? – Right, well, I mean,
at this stage, you know, based on the current laws, and that’s really, you
know, tied to the Wire Act which goes back to
Robert F. Kennedy is the one that put
that through in ’61, it prohibits betting
across state lines. So if you wanna bet even online in a
Pennsylvania sportsbook, the bet has to be initiated within the border of the
state of Pennsylvania. – And we can tell? – Well yeah, there’s, all the
sportsbooks use geolocating to determine where
the person is. And it appears to
be quite accurate. – When you get an app,
when you get a betting app, you will be asked
to allow them to– – To track you. – To track you. And you have to confirm
that you’re in Pennsylvania if you’re in Pennsylvania.
– So I could light up a map and see where everybody betting on everything across
the US was, potentially? – [Mike] I suppose.
– Potentially, theoretically. I don’t know that such a
database would exist but– – Well, I don’t know whether that would
be interesting or not but a lot of times when we’re
doing all sorts of studies, people sit there and
use phones to track. I mean, that’s how we know how fast we can
go down a highway. So it seems like you would– – At least legal sports betting. You could track that.
– At least legal sports betting,
you would be able to see where all the lights were
all just sort of popping up, that would be fascinating. Well, how does this work, then? So, about, I think 1992, there was a Supreme Court case that enabled all
of this to happen and now we’ve gone a
considerable period of time and it didn’t seem like
much was happening, maybe that riverboat
on the Mississippi or something like that. What happened to
make all of a sudden this dozen or so states
decide to legalize gambling? – Sure, there was a
federal law in 1992 called, the acronym is PASPA, and it essentially
legalized gaming, sports gambling in Nevada
and three other states that have sports
lotteries and the like. But it was illegal
elsewhere and then– – [Eric] By federal law? – By federal law. And then the state
of New Jersey– – Said, “Sorry.” – Said, right, using the
10th Amendment argument, this isn’t in the Constitution, you have to allow this to
be a states’ rights issue. Argued this, actually pretty
unsuccessfully until 2018 when they got the case
before the Supreme Court in a 6-3 decision
the Court ruled that states could make
up their own minds on whether they wanted
to have sports betting. And since that time, we’ve
had 13 states come online with full operations. Five other states have
passed legislation that will allow sports betting and the District of Columbia. But they aren’t operational yet. So right now, we’ve
got about 13 states actively doing this. – And so you have to follow
the rule in the state. You have to be in the state,
which is really interesting. Are all these laws
starting to look the same? – I think there’s a lot of
similarities as far as I know because again, you know, I
think the regulatory framework tends to, you know,
come from Nevada. I think what’s varying
right now is whether, and it’s an
important difference, whether there’s an
online component along with the sportsbook. Whether the betters are
compelled to place their bet in a brick-and-mortar facility. – So in Pennsylvania,
what is the rule? – It is, online is legal. So and we’re seeing
a profound impact from those two factors
occurring at the same time. I was just telling John that I was reviewing some
of the revenue numbers from Pennsylvania
Gaming Control Board and if you take a
look at, for example, Valley Forge Casino, they have
a partnership with FanDuel, the operators of Daily
Fantasy Football, and their gaming revenues, overall gaming
revenues from 2018, September 2018 to
September 2019, increased by 50% and
really all of that increase is due to their
sportsbook and about 90%, over 90% of that sportsbook
revenue is coming online, it’s not being
placed in the casino. – [Eric] In the casinos. – It’s being placed
on people’s phones. – Does it mean there
might actually be a decline in
attendance at a casino because there are other
betting opportunities? Will people feel like they
have some intelligence in choosing how to bet? – Well, I mean, we
know from studying repeater marketer locals casinos all around the United States that the number one factor that people choose to visit one casino over
another is convenience. And really, you know,
how easy it is to get to or lack of transactions– – So online,
incredibly convenient? – Very convenient and I think
that’s what we’re seeing. – Now you cited a
big number of 50%, most of it related
to sports gambling. Do you have a sense of
how many dollars that is? – Well, the handle meaning
the entire amount wagered in the state of Pennsylvania since it was legalized here,
which is almost a year ago, has been over $600 million. – $600 million in
less than a year. That’s a significant
amount of money. So and then presumably
the state of Pennsylvania gained some benefit from this? – 36%. 36% of the adjusted
gross revenues. So you can figure that about,
whatever the handle is, which is the volume metric,
right, how much is bet, about a little bit
shy of 6% of that flows through to
adjusted gross revenues and then the state takes 36%
of that, which is very high. If you compare that to– – Other states. – West Virginia is 10%. New Jersey is, I think, 9%
in their brick-and-mortar and 14% online. So Pennsylvania has a
relatively high tax. – Does this matter if you
have a captured audience? Anybody in the state,
if you wanna bet, you’re betting in this state. Does the better care
what the state’s taking? – Not really, no.
– It doesn’t come out of the better. It has an impact on– – [Eric] Profits. – Well, on profits,
and then also what the casinos are
willing to invest in terms of capital
expenditures. So you can take, I won’t
throw the name out, but we can take one
local gaming company that spent much more in the
build out of their sportsbook in West Virginia than they
did here in Pennsylvania because of the difference
of what they have to share. – Do we know what
they’re betting on? – Well, that’s an– – I’m really curious whether
Penn State’s a big player in the book for Pennsylvania. – Oh, I couldn’t give you a
Penn State specific number but partly because of
what I said earlier about the interests being
limited to certain areas, the industry funnels you toward
the major team male sports. So the NFL, the NBA, the World Series, you know, MLB, college football,
men’s college football, men’s college basketball. You wind up pushing
interests, which, in my world as a
sports journalist, pushes interest in
stories about that area toward those sports
where you can bet. – So we have an assumption that if you’re
interested, you will bet and then they’re making
a second assumption, probably based on good data, that those men’s sports are
going to be of the most interest so then they funnel people
in to that category. – I mean, if you’re
betting, you can only, there are only so many options so you’ll, the presumption
is you’ll watch this. So it’s a bit of a cycle. – Cycle, yeah, it’s interesting. But maybe a big game, would they funnel you into a national championship
in soccer or something? – They, I mean,
not specifically, I’m sure they’ll offer
promotions around– – [Eric] And then they’ll watch. – Around a game but people will, people know it’s happening and the audience is
already huge, I mean. You know, 19 out of
the top 20 events ever watched on broadcast
television are Super Bowls, so, in the United States. – Probably, yeah. – So people are
already watching. – Yeah, so, and if in
this betting process, you can do it in real time? I can be halfway through
the game and make– – Absolutely, yeah, I
think that brings up somewhat of an integrity issue when you’re trying to protect
the integrity of the game. There are people that fear
that these in-game bets are perhaps more
susceptible to, you know, somebody fixing, you
know, for example, the first fumble
in the second half occurring by a particular team. You know, one of
those proposition bets
that occurs in-game is perhaps easier
to affect than, you know, the outcome
of a major game which would take a lot of
people to come together, to conspire to do that. – So here must be
the greatest risk is that you’ve got a
lot of people involved and data becomes
extremely important. If you have the
notion, for instance, whether that injured
player will be back or not, which is held
closely but for which there could be an advantage. Given the fact that people
look at referees now and decide whether or not
teams get more penalties and others, less penalties,
based on who the ref team– You start to look at
anything that advantages you on the data side of things, and you’ve just mentioned that
even the instant activity, you know, we’re already
winning by a big margin even if I drop the ball, you
know, we’ll win, we got a W. But the spread
will be different. – [Mike] Right. – That this is where
we got a lot of risk. – Yeah, well, I mean, I
think the risk is two-fold. It’s one, is the impact
on our student body with respect to
gaming addiction. That’s, I think, a major risk. And the other is the
integrity of the sport. And it’s much
harder to, you know, if you’re the NFL, you have
32 teams, one game a week. You have athletes
that are being paid a considerable amount of money. They’re probably less
apt to conspire for a bet than perhaps a college athlete that comes from a completely
different economic reality. – Or a trainer or a water
boy or the, you know. – Or the player’s uncle or– – The player’s uncle or
just happening to know that. – [Mike] Right, it’s– – Sam is injured
worse than that, but they’ve kept it under
wraps to keep the game planned. So the assumption is
greater vulnerability in a college sport
than a pro sport? – I don’t, I can’t say that
for sure, I don’t know that. But I think that advocates
for the industry would say we’re also in a situation where the lines are being
monitored much more closely and the betting patterns are being monitored
much more closely because of legality and so we’re in a position where if something starts to
fluctuate or look odd, regulators will know
much more quickly. – So this is really interesting. You’re suggesting that
by virtue of having laws, we now have regulation and a lot of data
mining and analysis, we may catch a
problem like that. – Right, that’s the– – We have more
capability to do it than if was unregulated and
people were just doing it. Is it safe and secure? When someone’s online
and making a bet? And how do you, do you
get a check in the mail? How does that work? – Well, they’ve spent a
lot of time, you know, back when I worked for the
American Gaming Association back in 2004 through 2006, one of the big questions was people anticipated online
gambling at that stage and a lot of research
was being done whether you could
protect online gaming from people that were
underage, for example. Whether it was safe
to place those bets. And so it’s been tested
for quite some time in anticipation of
where we are now. And the answer seems to be that
we can do a pretty good job of guaranteeing that
people that are of age are the people that
are going on to there and that their funds are safe. Much more so than, for
example, an online sportsbook that’s operating
out of, you know, Costa Rica or somewhere else where we really have no
regulatory oversight. I think that’s one of
the real, you know, compelling arguments in favor
of legalized commercial gaming is that it’s not opaque, it’s not run by organized crime. We know when bets are placed. There are services that,
as John was talking about, that let us know when
strange bets, you know, are placed sort of in high
numbers in the midst of a game. We can find it out in real time and then we can take a
proactive approach to it. So it should really enhance
the integrity of the game. It’s just, I think
it’s a daunting task for those responsible
for doing that but… – So John, you know, we’re
running around, I think, universities are running around making sure that we
have the rules in place and, you know, you’re on
the board of trustees, don’t, you shouldn’t
be placing bets ’cause you have some
level of influence. You’re a president,
you’re you know, we’re educating team members and things like that. And we’re kind of
hustling, I think, to do this to make sure
we don’t have people with a little, with
some information
that’s very valuable, to have them understand
what the significance of it. But it’s also an opportunity. Pennsylvania law, you can
do 50-50 in Beaver Stadium. Will we get negative press
about that, if we do it? – I think if, I think if
somebody is in a position where, I shouldn’t even say
if, I should probably say when, given the state of the world. – Yeah, the draw for the, for
the dollars is significant. – I think if someone does
that and is caught doing that, it will be a major story,
it will be a major scandal. I think there is on a slightly tangential point, one of the things
you are seeing is, just talking to my students, there’s an exponential rise
in discussion about lines when you’re talking
about sports, so it’s everywhere. And so there are a lot
of people out there with some little
bit of information. And, you know,
they may act on it. – Yeah, they may act on it. Well, I’m so sorry for,
we’re running out of time, this conversation went so fast. Just quickly, what do you think
it’ll look like in 10 years? – I think most states, I think we’ll have
the majority of states will have online sports gaming. You’ll start to have much
more national advertising. There will be a few
holdouts like Utah that don’t have it. I think it’ll, I think we will
hit, we have to hit a mark somewhere in there
where there’s a peak. – Yeah, we’re still
on the way up. Any quick thought? – Yeah, I think that it’s
gonna continue to spread and I think particularly what’s
gonna be really compelling to the states that haven’t
adopted the online component is they’re gonna take a
look at what’s going on in Pennsylvania right now
with that and they’re going to include the online
component to the sportsbook. – Well, thank you both so much. A fascinating
topic, fascinating. – So thank you so
much, President Barron, for speaking with us today. – My pleasure. – Sports betting. – [Eric] A fascinating topic. – Yes, and in the interview, you talked about how it’s
really going to affect Penn State students maybe because the prospective
betters, the demographics, it says that betters might
be age 34 or younger. So how do you think
this is going to affect Penn State students and
college students overall? – You know, it’s sort
of, it’s interesting because this is a
very digital age and it’s digital tool
and it’s easy to do and students and very
enthusiastic about sport and very enthusiastic
about Penn State sports. So you worry about
whether or not a student might get in trouble, that the tuition dollar
just got placed on a bet and they don’t get to finish. Hopefully it’s not
a common occurrence but what I learned from
the two individuals that I interviewed is the addiction rate in
the normal population is about 1-2%, so there’s
sort of this sense that here’s this big
revenue generator and the problem part of it
is 1-2% of the population. But they said in the
college-age population, the addiction rate
is closer to 6%. So this suggests a certain
amount of vulnerability with youth or with the interest
and the tie to a school or something like that. And so this is something
to worry about, I think. – Especially with technology. He talked about with
it being online, there’s a higher
level of conveniencey, there’s new apps that
are being created. So do you think that technology
is going to exacerbate the gaming addiction? – It is, you know, another example
that I heard was, you’re sitting there,
looking at the line, Michigan and Maryland. And you’re going, oh, you know, I’ve watched each one
of these games intently, I know it’ll, they’ll beat
that or whatever else. And then it’s so easy
to sort of click and, plus to do it in the
middle of a game, as game proceeds, or maybe
you get in the hole in a bet and then you see,
well, you know what, I think that this touchdown’s
gonna occur and save the day and this’ll get me
out of the hole. It’s gonna be
interesting to watch and for Pennsylvania,
it’s not even a year old. – Yes. – $600 million and it’s
not even a year old. – And if it’s legalized
by all states, the revenue is estimated
to be $15.8 billion in the next five years. How do you think this
economic growth is gonna affect our economy? – I don’t know what
it’ll do to the economy, you know, it’s interesting,
it’ll be interesting, but it’s a big number. But what will it
mean for the states? What will they do
with the money? Will it be just
balancing the books or will they invest it in
human services or something or K through 12 education? It really starts to
have a positive impact. – And the feasibility of this. In the interview, both of,
the three of you talked about how it could be
easier to legalize it because a lot of the regulations are similar across state lines. So how feasible do you
think it’s gonna be for all states to
create betting laws? – You know, I think that as we’ve seenwith
many other things, lottery or whatever else, I think the enticement of the
revenue without raising taxes will be too great. – What do you think
colleges should do to monitor these changes and
problems that could occur? – Well, you know, we
just described the worry that a student would
get into trouble. And I think the
other part of it is this law came very
fast in Pennsylvania. And having the time to really educate all the
people that touch sports, there’s a certain amount
of temptation there. And yet, as we heard, the
scandal would be incredible if you discover that
extra information allowed someone to profit or even make people
make a mistake or do something wrong on a game, where you look and say, “Well we, we actually, did
we actually lose that game because of bets that
were on that game? That someone just did
something and it was a mistake and it caused a problem?” I think the scandal
could be considerable. And so we really do have
to work on the education, we really do have
to work on the care and hopefully we
won’t have students that will get in trouble. – Yes, definitely making sure
the students’ safety is first. – Yep, that’s first. – Thank you, President Barron. – My pleasure. – [Announcer] Support for
Digging Deeper comes from the Penn State
Alumni Association, connecting alumni to the
university and to each other, the Alumni Association
is powered by pride. And from viewers
like you, thank you.

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