The Rise of Sports Betting in Indiana and the Challenges it Faces
Upon the groundbreaking decision from the United States Supreme Court in Murphy v. Nat’l Collegiate Athletic Ass’n,[i] Indiana quickly mobilized to bring sports betting to the Hoosier state. This article provides an update to fellow Riley Bennett Egloff LLP associate Jaclyn Flint’s article titled: “You Can Bet on It: Sports Gambling Legislation in Indiana and Beyond” published on January 2, 2019 by examining the recent success and challenges that our State has experienced during its brief period of legalized sports gambling.
The Road to Success
After the Indiana General Assembly passed House Bill 1015 to legalize and regulate sports gambling, Indiana Governor Eric Holcomb signed the proposed bill into law on May 8, 2019.[ii] Shortly after, on September 1, 2019, Indiana went “live” with sportsbooks open to patrons at casinos, riverboats, and “racinos” all around the State. As the State promulgates its official rules on sports gambling, Indiana Code article 4-38, et. al. and an emergency set of rules are regulating sports gambling operations in the meantime. As of today, the Indiana Gaming Commission has issued certificates of authority to 18 different locations and/or companies to operate in the State.
In September 2019, all legal sports gambling was strictly limited to in-person betting at licensed casinos, riverboats, and “racinos” located within Indiana. These sportsbook operators accepted wagers on professional, collegiate, and international sporting events, including football, basketball, baseball, auto racing, horse racing, hockey, soccer, boxing, golf, and Olympic competitions. Patrons aged 21 or older – many of whom traveled from neighboring states without legalized sports gambling – were required to enter one of these establishments physically to wager on the various sports platforms.[iii] According to the Indiana Gaming Commission, there was a total of $35 million wagered in the State and $8.5 million in adjusted gross revenue for the operators of the sports books.[iv]
While these initial figures are impressive, it was in October 2019 when the real show began. On October 3, 2019, with authority from the Indiana Gaming Commission, several operators launched their online sports betting websites and mobile apps. By October 31, 2019, over $91 million was wagered around the State with $11.5 million in adjusted gross revenue for all the sportsbook operators.[v] The State of Indiana also generated a significant return from the venture as it amassed nearly $1.1 million in tax revenue during October, in addition to the $813,000 collected in September.[vi]
The rise of online and mobile sports betting capabilities has significantly contributed to the spike in monthly betting popularity and revenue. But how does online and mobile betting work? While patrons are not required to be residents or citizens of Indiana, the online or mobile device used to place the bet must be located within the borders of the State.[vii] Of course, then the question becomes: how does the website determine whether a patron is in Indiana? The answer, while technologically complicated, is quite simple. These online and mobile apps utilize software that incorporates state-of-the-art “geofencing” technology, which can track the location of a patron’s device through a GPS-satellite signal. The “geofencing” system is programmed to monitor the patron’s location continually while the website or mobile app is in use and to block attempts to access the online sportsbook if the device is outside the confines of the Hoosier state.[viii] Once the website or device verifies that the patron is in Indiana, the he or she can successfully place the online wager.
While Indiana is off to an active start in the sports gambling arena, there are present and future challenges the State must navigate.
On October 18, 2019, Purdue University became the first public university to enact a policy prohibiting students, employees, staff, professors, or contractors of the university from betting on Purdue University athletics. While the bylaws of the NCAA (the governing body of collegiate athletics) prohibit student-athletes from participating in sports gambling of any kind, these regulations do not apply to every student or university employee. As a result, Purdue University’s Board of Trustees opted for internal policies in response to legalization because “[legalized sports gambling] did not feel consistent with a value set that we think we hold onto[.]”[ix] Regardless of the stringency of the ban, Purdue University President, (and former Indiana governor) Mitch Daniels, acknowledged it would be difficult to truly enforce. “We’re not going to set up a secret police to run around and try to find out,” Daniels said.[x]
Purdue University may invite future legal challenges if it attempts to enforce the policy and discipline its employees, which could range from suspension to termination. If faculty or staff are members of unions, this type of regulation may be within the realm of activities considered part of “working conditions.”[xi] Because the negotiation of terms surrounding working conditions is a mandatory subject of collective bargaining, the argument can be made that the policy must be mutually agreed upon between the university and the union before enactment, which does not appear to be the case here. Further, for non-unionized workers at Purdue University, this policy could be interpreted as a new contractual term that would require a new agreement with the employee, although Purdue may have arguments that the policy falls within the purview of a morals clause in certain employment contracts that would not require faculty and staff approval.[xii]
The primary challenge on the horizon for Indiana is the inclusion of other Midwestern states into the sports gambling arena. Currently, Indiana is in a unique geographic and economic position because the nearby, traditionally larger sports markets have not yet legalized sports gambling. Ohio, Michigan, and Kentucky are significantly behind in passing and enacting legislation; however, Illinois – where a noteworthy percentage of the patrons to Indiana’s northern-most casinos reside – is quickly closing the gap. Illinois governor, J.B. Pritzker, signed a sports-betting law into effect in June 2019, and while the Illinois Gaming Board has yet to authorize a sportsbook, casinos, racetracks, and stadiums can begin applying for licenses in December 2019.[xiii] According to the Illinois Gaming Board, applications for sportsbook operators will become available as soon as December 19, 2019.[xiv] However, Indiana caught a break when Illinois mandated that mobile-only licenses cannot be applied for until 18 months after sports betting goes fully live in Illinois.[xv] Based on this, it will likely be 2022 before Indiana experiences significant competition in online sports betting at its borders.
Indiana’s transition into the sports gambling world has been remarkably smooth and states all around the country are looking to Indiana as an example of how to monetize and regulate this industry. If current trends continue, the State of Indiana could continue to collect over $10 million annually in taxes. To date, there have been no significant issues in the legal sports betting space in Indiana.
Author Kevin T. Bennett
Kevin assists businesses and their owners in several matters such as entity selection and organization, mergers and acquisitions, employment, succession planning, and general litigation matters. Kevin also assists in counseling clients in the construction industry, including owners, general contractors and subcontractors, in disputes involving claims for payment, delay, and design and construction defects, as well as mechanic’s liens. Kevin advises clients with a focus on client-driven solutions through an attention to detail and determination.
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Posted on December, 12 2019 by Kevin T. Bennett