Front Burner - Betting boom: Online gambling blows up

Episode Date: April 29, 2022

If you've tuned into the NBA playoffs, it seems like every second ad is for sports betting websites. That's because Canada recently made single-game betting legal, and in Ontario private companies like Bet365, BetMGM and FanDuel are allowed to operate in this multi-billion dollar industry. This booming business has seen companies partner with broadcasters, other media companies and celebrities to promote their platforms. But experts are worried that no one is looking after the betters. Today on Front Burner we talk to John Holden, an assistant professor at Oklahoma State University, and an expert on the sports betting industry.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. Hi, pizza review time. We are still in Toronto.

I got, I don't know, what do I have, 15 places I got to try? So this week, Dave Portnoy, the controversial founder of the equally controversial media site Barstool Sports has been in Toronto, watching the Blue Jays and posting a lot of Instagram videos about pizzas, which is a thing that he does. And in these videos, he'll note why he's in Toronto. I'm here with Score, obviously part of the Penn family, going to the Red Sox, Blue Jays all week long. I'm here, by the way, with the Score bet. So if you haven with this gambling app called The Scorebet. It's one of the apps that just became legal to use earlier this month in Ontario. the apps that just became legal to use earlier this month in Ontario. Part of a wave of companies cashing in on the legalization of what's known as single game sports betting. In Canada, the rule

used to be that gamblers had to bet on a series of games for a chance to win. They're called parlay bets, a sort of less extreme version of what Adam Sandler did in Uncut Jets. I want to make a six-way parlay. Celtics, Sixers game. What's the lineup? Still plus one. Plus one. Okay. So I want the Celtics to cover. I want the Celtics halftime. I want Garnett points and rebounds. Garnett block shots. Celtics opening tip. Make all the right picks, you win. Canada lifted the federal ban on single game betting last year. So you can do this in lots of provinces now, through provincial agencies mostly.

But this month, Ontario became the first to launch a market where private companies can take wagers. So this industry is growing really fast. And I don't know about you guys, but I've been absolutely inundated by ads pushing these kinds of services while I've been watching the Raptors lately. Because every bet with BetMGM has a potential for greatness. Imagine a sportsbook built for you, the fan. Passionate, patriotic, and proud. There's no better feeling than a win, except a bad MGM win. This model has exploded in the United States over the last couple of years. But with that boom comes a lot of concerns about the blurring of boundaries between gambling companies and sports leagues and media and the potential for an increase in addictions.

Today, I'm going to talk about all of that with John Holden. He's assistant professor in the Department of Management in the Spears School of Business at Oklahoma State University. He's done extensive research on sports betting and its legalization. And he also happens to be Canadian. Hey, John. How's it going? It is going great. Thank you so much for joining us. So we're going to be talking about some Canada-specific stuff later on in this conversation, but I wonder if we can start with where you're living right now, the United States, where this industry has exploded. As I understand it, sports gambling became legal in the U.S. outside Nevada in 2018.

And can you give me a sense of how much online sports betting has grown since that point? Sure. So in 2018, the Supreme Court struck down a federal law that had frozen sports betting in place as it stood in 1992. So Nevada was the only state where you could play single game wagers until 2018. Even before that Supreme Court ruling, a number of states had really sort of begun to question the wisdom of this federal ban. Like everyone, the states were looking to raise revenue in a way that didn't involve sort of raising property taxes or income taxes on their citizens. So sports betting looked like an attractive means of doing so. Sports betting looked like an attractive means of doing so. When the Supreme Court decision came down,

we had a handful of states that within two months had legalized sports betting and were getting ready to launch. Since that time, we're now more than 30 states are live across the country. It's only been a month and experts say that New York is already the largest online sports betting state in the country. According to a recent report, New Yorkers have placed $1.6 billion in online sports bets in January since it was legalized. And even big states like California and states that are opposed largely to any form of gambling like Texas are even considering this. And in terms of money, like how much is being spent here? What kind of numbers are we talking about? Sure. So we're seeing tens of billions of dollars wagered.

Now, that money translates into several billion dollars in revenue. One of the things that we're yet to see is a really sort of stable, mature revenue number. But we think that a mature market will probably see between $10 and $20 billion in revenue down the road. A year? A year, yes. Wow. Right. These numbers out of the U.S. are so wild.

I even saw one prediction from Goldman Sachs that said that the market could reach $39 billion in annual revenue by 2033. The pandemic, did it make online gambling more popular, you think? Yes. So the pandemic really brought out some interesting things in the world of sports betting. Obviously, back in March 2020, the world shut down and so did most sports. Coming out of that, we saw a few innovations. One of those happened to be the rise of Russian table tennis.

Dude, dude, they literally can't get over the net. No, no, for real, who am I betting on here, man? No, you're kidding. You're literally kidding. I have $100,000 on this guy in the f***ing rat band, and he can't make it over the net. Which took the place of NFL nfl betting or major league baseball betting or nfl or nba betting and became one of the most wagered on sports in the world

if you watch the the feed of this it looked like it was in someone's basement. But it attracted millions of dollars of wagers. And until the invasion of Ukraine, it was still a top 10 bet on sport in a number of states. Yes. Where there wasn't Russian table tennis, people were betting on virtual sports, simulations games so there was a real tremendous appetite for gambling products even without any sports taking place yeah i i i also saw people were betting on on like slap fighting the defending champ will get the first slap which I don't even I don't even like begin to understand um and also you can bet on like super granular factors right like I wonder if you could give me some examples of of some of the more obscure stuff that that you can bet on offshore in these unregulated markets You can bet on virtually any aspect of a game For a soccer game

You can bet on the number of throw-ins The number of corner kicks You know, you can bet on the number of strikes In a baseball game Virtually any aspect of a game can be bet on The prop, over or under 107.5 seconds For Gladys Knight's national anthem. It's gonna be under!

In the regulated markets, we see less of these sort of exotic proposition bets with the exception of major events like the Super Bowl where we authorize betting on things like the coin toss or the length of the national anthem. Yeah, or like the color of Gatorade that will be dumped on the coach's head. Exactly, yes. Yeah.

Can you talk to me a little bit about the shift in the kind of attitudes that major U.S. sports leagues and sports media have towards gambling now compared to just a few years ago? Yes, this has been sort of one of the most dramatic 180s in, you know, certainly an industry this size that's ever happened. Since 1919, when the Chicago White Sox fixed the World Series against the Cincinnati Reds, the professional sports leagues have viewed gambling as the ultimate pariah. It was going to corrupt the leagues, and it would ruin sports no one would want to watch.

And then in 2014, NBA Commissioner Adam Silver had a change of heart. There's a small pocket of legalized gambling. We know there's an enormous amount of illegal sports betting in the United States. I mean, estimates go up to $400 billion a year for all sports. So my feeling was, let's make it transparent. Let's regulate it. We had an issue in the NBA. He wrote an op-ed in the New York Times, and he basically called for the federal regulation

of sports gambling. And a lot of people saw this as a real important moment because the NBA was beginning to recognize what everyone who studies gambling knew, that simply making this illegal did not stop it from happening. And that sort of begins the momentum for change. Over time, each of the major sports leagues, with the exception of the National Collegiate Athletic Association, has come around to legalize sports betting. The optimist of me believes that the sports leagues recognize that legal sports betting is much preferable to the unregulated markets, but the cynic in me tells me that they saw how to make money from it.

Yeah, and are they making money from it? Like, how? So certainly we know that sports bettors consume about twice as much sports content as non-sports bettors. So we know that when it comes time to renegotiate those lucrative broadcasting deals, they're going to go up 50%, maybe even double in value. Some of the leagues have had success in mandating from state legislators that sportsbooks use official data or data that originates from them.

So through partnerships with data providers, the sports leagues are getting paid when the sports books use their data. And this has been controversial because, you know, much of the information that sports books rely on, we can easily observe on a television screen. What do you mean by user data? Like what data? So effectively, this is the official data. screen. What do you mean by user data? What data? Effectively, this is the official data. When the official score marks a rundown in a Jays game, that then gets transmitted to sportsbooks. Even if you can see it on TV?

Exactly. It's the official writing down of a statistic that then goes directly from the stadium to the sports books. Okay. What about the media companies? Where do they fit in here? Yes. Well, certainly anyone who has been around a television has now been bombarded with television advertisements for sports books. So many, so many. Everywhere. It's impossible to avoid it. But we've seen a real about face from the major networks.

And for a long time, the leagues wanted nothing to do with legal or illegal gambling. So they banned their broadcast partners from even mentioning things like the point spread or the money line on the game. But now all these networks have official gambling partners that produce these materials for them. and dedicating increasing amounts of content to betting shows, shows that are sponsored by these betting companies and designed to give you the tips to succeed. I know LeBron's not 100%, but this line does feel a little low. I like the Lakers as well. I also like the second quarter under. What happens with these quarter lines, and you can bet them in advance,

is they chop them up. Perhaps the biggest example of this is Bally's, who famously owns casinos in Nevada, runs a sports book, recently acquired the Fox Sports Regional Networks. And they are now branded as Bally Sports Regional Sports Networks. So it's really the gambling industry is taking over the media industry. Talking about the broadcast, I've seen the TNT guys, Shaq and Chuck, make their NBA picks during halftime. It's totally becoming normalized. Yeah, yeah. All the major leagues have sports betting partners that they're fully connected with.

Yeah. All this connectivity, what kind of thing, it might be hard to do that. Totally. I think there's potentially real conflicts of interest developing there. It raises questions about what sort of journalism independence will remain when the gambling content is so integrated and so integral to really the success of a number-changing connection.

Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization. Empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not

know their own household income? That's not a typo, 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. vision together. To listen to this podcast, just search for Money for Cups. So I want to ask you now about some of the broader consequences too. You know, our producer Sam spoke to a University of Calgary psychology professor. His name is David Hodgins, and he researches gambling addictions. And firstly, he said that this boom in online sports gambling is really concerning a lot of experts. And it really pulls in a whole new market, a whole new group of people. And it continues the progress of or the extent that gambling has become normalized and really part of everyday life.

and really part of everyday life. And he said that online sports betting can be particularly addictive because firstly, it's similar to a slot machine, which he says is the most problematic kind of gambling. So it's the rapidity of the gambling, of the reinforcement that is the most problematic part. So if you think about sports betting, it's relatively rapid. And now with the development of in-game betting, it really starts to proximate what is offered by a slot machine. So it's very quick and you might be overall losing, but you might have a little win associated with a particular play.

And so it begins to look more like the slot machine. And he said the other big concern is that betting on your phone just makes it so accessible, right? Like versus something like going to a casino, which you would eventually have to leave. casino, which you would eventually have to leave. The other part of what we know about gambling addiction is that accessibility is a big issue. So casino games are problematic, but people need to go to a casino. They often will go with their friends. And so there's some limits on the experience, whereas if you're using your phone and you're on your own, you don't have that social influence. And you also don't have the limits in terms of consuming other addictive substances. So it's a setup so that it's going to possibly be more problematic. Have you heard many people expressing those kinds of concerns?

Yes. And I'm certainly not a psychologist, but, you know, there is growing talk and a lot of it is coming out of the UK, which a lot of people view is about 10 years ahead of the US market. And so maybe 15 years ahead of the Canadian market. And there are real concerns about the massive increases they are seeing in gambling addiction, particularly amongst young men in their sort of 18 to 35 age range. And a lot of this, people are suspecting, is attributable to the ease with which they can bet on their phones. So this is absolutely a concern with mobile sports betting, online sports betting. You know, it's something that you can do from the privacy of your own home. No one is watching you.

There's no one identifying you as, hey, weren't you just here a minute ago when you walk up to a physical sports book in a casino? So there are absolutely those concerns. now with that said the technology on our phones is there to put in checks to ensure that you know people are getting warnings when they're displaying these problem tendencies but as of right now a lot of this isn't mandated to do and you know, if you're a sports book, I'm not sure that, you know, you're super motivated to be on the front end of preventative gambling measures. Are there any guardrails that advocates are calling for specifically,

like whether in the UK or the US? Like, I guess, any laws? So there's been a few discussions come out of the UK that have not been implemented yet. Some of them are quite drastic, including limiting the amount of money that people can deposit in a month, limiting the number of wagers that you can place in a week.

Now, we have a lot of opportunities to self-exclude, self-set your limits on sports betting apps in North America, but a lot of users simply aren't aware of them or aren't aware of how to use them. So there's a real sort of education gap on providing that information. And the other thing is, a lot of people struggle to recognize a gambling problem in themselves. I was somebody who thought I was quite mentally strong when I was younger. And it had me in a vice-like grip. I could not stop gambling. And it drove me right to the very brink, to be honest.

When I was 18, I left school and I left. You mentioned that there probably isn't a lot of incentive for these companies to make it harder to gamble. But are they saying anything about this? Certainly, I think the companies are aware of the concerns of problem gambling. And I think, you know, certainly in a regulated market, no company wants a mental health crisis related to gambling. That would also be bad for business. So I do think that the companies are willing to work with regulators, but at the moment, we don't have regulators really imposing very proactive measures. They're kind of very passive. Okay.

I want to talk about Canada now because, of course, we are relatively new to this comparatively. It's been legal to place bets on single games online since last year. And in a lot of provinces, you can do that through like a provincial gambling agency. But Ontario has become the first to launch a market that allows single game sports betting online, like a private marketplace. But also, in addition to that, in the world of legalized sports gambling, they have done something a bit different here. Hey, that's a bit unusual. And can you tell me about what they're doing and what is different about it? Yeah, so Ontario is engaged in a grand experiment. For a long time, Canadians, Americans would bet offshore.

In the U.S., there was a federal law that makes it illegal to service Americans as an unregulated sportsbook. Canada, the law is much more gray. So we had all these gray market operators serving the Canadian market in addition to that parlay-style pro-line product in Ontario. What Ontario has said is, okay, we understand that for years, a number of companies have served Ontario. Well, we are going to extend our hand to them and offer them an opportunity to come into the regulated market. We aren't going to hold over them their past behavior, whether we agree with it or not. But if you register

and you follow our new rules and you play by the book, you will have an opportunity to exist in this market. And a lot of people think that this might be a really good approach to bringing back some of that money that previously went untaxed. We're letting these companies come in without a punishment, and now they're going to play by the rules. They're going to report income so we know who is betting there, and that revenue that they make will be taxed by the provincial government where it wasn't before. There's long been this idea that this is what should happen in the U.S. Unfortunately, the federal government has different views of sports betting and still views it as undesirable and hasn't made many moves in the direction that the states have to change federal law.

So such an experiment isn't possible at the moment in the U.S. But it's really going to be an interesting experiment. And from what we've seen, the early numbers coming out of Ontario show that some of those gray market operators are beating the U.S. juggernauts that, you know, dominate the U.S. market. And so it'll be really interesting to see if they can keep that up. Yeah, yeah. You know, it does seem like ultimately some of this kind of comes down to harm reduction questions, right? Like, obviously the case for legalizing is that it's out in the open and the government can put guardrails around it. They can also get

revenue from it. But on the flip side, legalizing also has meant like a fire hose of ads and sponsored betting related content and all of these other ways that this is becoming ubiquitous, which would obviously seem to make it easier to gamble more, get hooked on it more, get introduced to it more? And, you know, I just think ultimately, what do you think the answer is? Yeah, I think it's a really sort of nuanced question. And my broad opinion is that for all the lack of incentive that regulated companies may have to limit bettors, there's absolutely nothing in the illegal market that incentivizes those companies to care about their consumers.

People who want to bet will bet. The illegal market is, you know, the casual, cautious estimates put it at $150 billion being wagered every year. So if we can even bring a portion of that, we stand a much better chance of early interventions and providing help to people who need it than if we simply throw up our hands and try to use the limited resources of the criminal justice system to shut down those sites. Because you shut down one site and five will pop up in its place. It's not a perfect situation. This is undoubtedly a risky product.

And, you know, like alcohol, it needs to have cautious guardrails put in place to ensure that people don't get hurt. And I think we're sort of figuring out what that looks like right now. And I don't expect that we'll be right off the bat. Yeah, and ultimately I guess it will come down to actually putting guardrails and the right guardrails in place, right? Exactly, Exactly. John, thank you so much for this. Oh, thank you so much. All right. That is all for this week.

FrontBurner is brought to you by CBC News and CBC Podcasts. Our producers are Simi Bassi, Imogen Burchard, Andrea Balmere, Julia Sisler, Ali Jain, Sam Connor, and Derek VanderWaay. Our sound design this week was by Mackenzie Cameron, Nooruddin Karane, and Sam McNulty. Joseph Chavison wrote our music. The executive producer of FrontBurner is Nick McCabe-Locos. I'm Jamie Poisson, and I'll talk to you again next week. For more CBC Podcasts, go to cbc.ca slash podcasts.