Top 10 North American Gambling Stories of 2022 – Year in Review Part 1

Hartley Henderson lists his top 10 gambling stories of 2022 for North America. In the first of two parts, Hartley examines the stories that affected gambling in the United States, from the return of land-based gambling to sportsbetting in one of the biggest markets in the U.S. to yet another horse racing story that is not so good.

Top North American gambling stories in 2022

2022 was a year in which most of the world, including the gambling industry, saw a huge return from the two year effect of a global pandemic. In the U.S., more states approved licensed and regulated sports betting, including the resolution of a hard fought political battle in Massachusetts to finally bring sports betting into the state. And Canadian sports bettors rejoiced at the introduction on online sports gambling in the province of Ontario. The tumultuous year that was 2022 also saw top horse trainer Bob Baffert suspended from competition, huge players getting into the online sports betting game, a new golf league and the return of patrons to land-based casinos. The following are OSGA's  annual year in review, with the top 10 gambling stories of 2022. 

10. BetFanatics impending launch

Despite not launching a sportsbook yet, BetFanatics is projected to be huge. Earlier in the year Fanatics, the giant sports merchandising company, which had revenue of $3.4 billion in 2021, is valued at close to $15 billion and employs 8,000 people, announced it was getting into sports betting. In June it hired former FanDuel CEO and founder Matt King to be the head of sports betting for the company and Chris Fargis, a former director of operations at DraftKings in a senior role. Billionaire Michael Rubin, who owns Fanatics and was also a partner in the Philadelphia 76ers and New Jersey Devils, raised $320 million for the launch which is set to take place early in 2023. In order to launch sports betting, Rubin was required to divest his stake in the two sports teams, which he did in June 2022.

BetFanatics top story 2022 gamblingTo a tee, almost every analyst expects the company to be a major player in sports betting, and at the SBC North America conference in July, a couple of speakers said they expect Bet Fanatics will overtake the biggest companies like FanDuel and DraftKings not long after they launch. The company already has deals with every major sports league and even with collegiate teams and players, which were given the right to earn money by selling their name in likeness (NIL) on sports merchandise.

Unlike existing companies, which have been forced to spend billions on advertising and promotions to get their name out there, the company already has a large database of sports fans, including names, addresses and email information on clients who are all potential sports bettors. By all accounts the Fanatics database consists of 94 million customers!

The company also recently announced that Andrea Ellis will be the new CFO for the company. Ellis has success turning smaller companies into large multinational brands.

Upon announcing plans to launch sports betting, Rubin said he plans to be in every major market by next football season with the exception of New York, which he said is impossible to be profitable in at the current 51% tax rate. This announcement was said to be embarrassing to New York and was one reason that NY state senators Addabbo and Pretlow said they have to do something about the tax rate. Rubin also has his name on a sports betting proposition in California.

Ahead of the launch, Betfanatics has signed major contractual deals with several sports teams, including the Columbus Blue Jackets and expectations are that the company will have the most lucrative promotional sign-up deals in the industry. There are also expectations they could use their current merchandising company to offer a rewards program that will allow the larger bettors to net collectors merchandise, including autographed material.

Analysts have said that the biggest sportsbooks like FanDuel, DraftKings, BetMGM and BetCeasars didn’t fear newcomers, but they do fear BetFanatics could steal their customers.

9. Bob Baffert’s suspension at Churchill Downs and the future of horse racing

To say 2021 was a disastrous year for Bob Baffert would be an understatement. Baffert seemed to be unstoppable after the Kentucky Derby, when Medina Spirit pulled off an upset win, but that was quickly quashed when Medina Spirit tested positive for the banned substance betamethasone. State rules say that the drug can only be administered 14 days prior to racing and any amount found on race day would lead to disqualification. Baffert first blamed the positive finding on a groom urinating on hay, which Medina Spirit ate, then said that the amount of betamethasone was so small that it was irrelevant and couldn’t have improved Medina Spirit’s performance. But, he finally admitting he used an ointment on the horse which contained betamethasone, although again he said it was an error and he shouldn’t be blamed. The Kentucky Horse Racing Commission was set to disqualify Medina Spirit after an investigation, but Baffert issued an appeal.

After a 2nd sample came back positive, Churchill Downs banned Bob Baffert from racing horses for two years and New York banned Baffert as well, making him ineligible from entering horses in the Belmont Stakes. Medina Spirit went on to finish 2nd in the Preakness Stakes, 2nd in the Shared Belief Stakes at Del Mar, 1st in the Awesome Again Stakes and 2nd in the Breeders Cup Classic.

Bob Baffert suspension gambling  story 2022In December, Medina Spirit collapsed and died at Santa Anita Park in a workout. Not surprisingly the horse’s death only made horse lovers suspect Bob Baffert of not caring for his horses and despise him more, even though there were no indications that Baffert did anything wrong leading to the horse’s death. Baffert was met with jeers in most places he appeared outside of California and there were calls to look into his past winners, including his 2018 Triple Crown winner Justify, who many said should not have been able to run because the horse tested positive for scopolamine and condemned the Kentucky Horse Racing Commission for not disqualifying him then.

In February 2022, the Kentucky Horse Racing Commission disqualified Medina Spirit and took away his 2021 Kentucky Derby win and suspended Baffert for 90 days from all races in Kentucky. Baffert, unable to race any horses in the Kentucky Derby, sent four of his horses to other trainers, but only one horse, Messier, ran in the Derby finishing 15th of 20 horses. Baffert was allowed to run horses in the Breeders' Cup races at Keeneland to the disgust of many, although his horses underperformed in those races. As of Christmas, Baffert sent out 75 winners out of 256 runners in 2022, mostly in California, and earnings of just under 10 million dollars, which is quite an accomplishment, but is still seen as dirty money by many.

So, within a year, the most accomplished and renowned trainer in horse racing went from a hero to a zero in the eyes of many horsemen, racing boards and with animal lovers.

8. The agreement for sports betting to proceed in Massachusetts

In 2021, Massachusetts representatives passed a bill to license and regulate sports betting in the state, while the Senate had its own bill. There was a lot of infighting over the details of the bills with the Senate bill being far more restrictive and having a much higher tax rate.  But, after demands by Governor Charlie Baker for the two sides to work it out and give him something to sign before the August deadline, the Senate and Congress came to an agreement and on August 10th of 2022 in the dying minutes, Governor Charlie Baker signed it into law. The details of the law are as follows:

 - A 15% ban on retail sports betting and 20% on mobile sports betting
 - A ban on in-state college games except in tournaments
 - A maximum of 15 licenses, 8 of which are tied to current land-based partners including casinos and racetracks
 - No restrictions on advertising
 - Credit cards prohibited for funding accounts

sports betting Massachusetts 2022 infoNine companies have indicated an interest to start operating an online sports betting app including BetMGM, BetCaesars and WynnBet, which were already approved by the Massachusetts Gaming Commission, as well as Barstool, DraftKings, FanDuel, PointsBet, Betway, Betr and Bally Sports. It is expected all will receive licenses and the current land-based operations will try and launch on their own or team up with an existing sports betting company. Other interested parties will likely take a wait and see approach. It should be noted that PointsBet is currently in talks to purchase Betr in Australia and Barstool will have to justify being allowed to receive a license after it received a large fine for violating rules in Ohio. It appears they will get only a temporary license while the issue is being reviewed. The current suggested launch date for retail sports betting is January 31, 2023, while the Internet sports betting launch will be a few months later.

The low tax rate almost certainly frustrated New York legislators who wanted a partner to justify their high tax rate, and neighboring casinos like Foxwoods and Mohegan Sun are also apparently disappointed as they believe the new sports betting apps will eat into their profits, particularly if the state ever legalizes online casino wagering as well. Reports suggest that up to 20% of visitors to Mohegan Sun in Connecticut come from Boston and surrounding areas. Mohegan Sun tried to operate a casino at Suffolk Downs racetrack in Boston, but had to abandon the plans when a state referendum failed to allow online casino gambling in the state. It doesn't appear Mohegan has any interest in running only sports betting.

7. The frustration over geolocation with online apps

One of the requirements of every state and province is that each bet must fully take place within that jurisdiction. Most gambling companies rely on GeoComply software to ensure the bets are legal, but some use different software. For example, the OLG site in Ontario apparently uses their own internal geolocation software. New Jersey, Colorado and Pennsylvania have all handed out fines to companies after people from out-of-state were able to use a VPN to place wagers outside of the state borders.

sports betting us states geolocationThough this has been a problem for a while, the vast increase in sports betting in neighboring states has led to a situation where legitimate gamblers are being turned away. With New York now legalizing online gambling, it appears more New Jersey and Pennsylvania residents are getting blocked and both New York and Ontario residents are finding the geolocation problem very frustrating. Gambling companies and GeoComply have both decided that it’s better to "over-geolocate" than to risk people who cannot wager being able to do so. Consequently, many people living in border cities often find themselves unable to legally place bets, as the software indicates they are living in a different location than they are. FanDuel in particular has received numerous complaints from individuals in various states and in Ontario that they simply can’t place bets on their app. Some Twitter posts have suggested that trying to place a wager at FanDuel in New York is like playing whack-a-mole. Sometimes it works, sometimes it doesn’t, but it’s all just a guess which it will be. And more frustrating, even when the player is logged in and playing the software re-evaluates the location and may kick them out.

According to the GeoComply website they use a variety of methods for geolocation including Wi-Fi, GPS, IP address identification, Bluetooth and mobile device location data. If any one of those methods fails, the geolocation will fail also. GeoComply can also identify remote access tools like VPNs.

An issue with geolocation companies as well is that some states license them as service providers, while others don’t. New Jersey, for example, requires that all geolocation providers obtain a license from the Division of Gambling Enforcement, but Ontario and New York do not license geolocation companies. As states continue to legalize sports betting and iGaming, the companies such as GeoComply realize they may be required to prove their product has no warts, so in their eyes it’s better to say "we blocked 99.99% of all attempts to violate geolocation rules," even if that means also blocking 10% of legal attempts to access gambling websites.

According to reports, Ontario has been inundated with so many complaints of legal access being blocked in 2022 that the province is considering issuing a new rule that will indemnify any geolocation and iGaming company that allows illegal bets to get through, as long as the company can prove they took ample steps to block access. In better words, a company like GeoComply or FanDuel would not need to fear being fined as long as they can prove they took sufficient measures to ensure an illegal bettor was blocked. Nevertheless, many bettors continue to ask why there is such a discrepancy. Some companies like BetMGM, BetCaesars and WynnBet have no issue with geolocation, while other sites like FanDuel and Bet365 have ongoing issues. This is something that will have to be straightened out as more states and possibly Canadian provinces legalize online gambling and sports betting.

6. The return to normal for North American casinos

After a tumultuous 2020 year which saw casino gaming revenue decline by over 30% compared to 2019 thanks to lockdowns and social distancing requirements deemed necessary due to the COVID-19 pandemic, revenues rebounded remarkably in 2021 when commercial gambling revenue rose to almost $53 billion for the year. Of that amount, $45.62 billion was from physical casinos and sportsbooks. land based casinos revenue 2022The increase really took off after the 2nd quarter of 2021 when all social distancing measures were removed and many casinos made mask wearing optional. Several analysts also attributed the increase in attendance and revenue to the vaccines, as many gamblers felt safer going to casinos, in-part because the CDC said that being vaccinated would greatly reduce the chances of getting hospitalized or dying, if they did indeed catch Covid. It is notable that many states which lifted restrictions early in 2021 put them back in place later in 2021, after the delta and omicron variants caused cases to skyrocket and hospitals to become overwhelmed. Las Vegas, for example, only lifted its mask mandates in February 2022, and Ontario not only required masks to be worn until March 2022, but it also had vaccine mandates in place until that time, as well as social distancing measures such as spacing between slot machines and plexiglass barriers. The reopening of borders in September 2021 also helped casino traffic increase.

By the 2nd quarter of 2022 every state and province effectively lifted all Covid measurements, including vaccine mandates and the volume reflected that. According to American Gaming Association figures, by the end of the 3rd quarter in 2022, yearly gambling revenue was $44.38 billion compared to $38.67 billion in 2021. If the figures continue as is, then the U.S. should see gaming revenue of over $58 billion for 2022 (the number could be lower due to inflationary concerns). Analysts attribute this to the desire by gamblers worldwide to  get on with their lives without fear; the new interest in gambling, which is attributable to the acceptance of gambling thanks to the rise in sports betting; and to the increase in travel. As for individual states, the Nevada Gaming Control Board Reports suggest that Nevada’s first half figures were 31% higher in 2022 than in 2021 and slightly higher than pre-pandemic levels. Atlantic City, NJ revenue is up slightly from 2021 but still trails pre-pandemic levels. There is belief that by 2023 the figures in all states will exceed pre-pandemic revenue.

For Hartley Henderson's top 5 gambling stories in North America, continue here.

Read insights from Hartley Hendersonall year long here at OSGA and check out Hartley's RUMOR MILL!

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