- Coming up on IGI, we look at the sports betting boom and the arrival of legal sports betting in Kansas.

Stay with us.

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(bright music) - Hello, and welcome to IGI, I'm your host, Bob Beatty.

The state of Kansas has legalized sports gambling, and in the first nine months sports betting has brought in more than 6 1/2 million dollars in tax revenue.

On today's show, we'll be diving deep into the economic implications of online sports betting for the state, exploring the potential revenue streams, and consider how legalized sports gambling could impact the state's coffers and its citizens' wallets.

We'll also examine the social aspects from concerns about addiction and responsible gambling to the broader societal implications.

How will this change the way Kansans experience sports and what safeguards are being introduced to prevent problem gambling?

Joining us today, we have Clay Wirestone, opinion editor at the Kansas Reflector, and with us via Zoom is Dr. James Whelan, professor and executive director of the Tennessee Institute for Gambling Education and Research at the University of Memphis.

Thank you both for joining us here on IGI.

This is a fascinating topic, and it's also a topic that is hitting people in the faces every day because seemingly every television program, and of course every sports program is now sponsored by a gambling, essentially company or organization.

So, you know, people have been affected by this in a way that just a few years ago, they were not.

And that's where I wanted to start with both of you is, and I don't wanna give away my age, but when I was younger, you only gambled in Atlantic City and Las Vegas, and the idea of gambling on sports was, you know, it was scandalous.

And, you know, I know it's been a while since then, but how did the idea of gambling on sports become so mainstream?

And I would argue maybe a little bit, seemingly so quickly.

Jim, do you want to chime in on that to begin?

- Yeah, sure, and I actually think you began with a really key point, and that is over the last few decades we've gone from gambling being a trip to being a drive, and now it's essentially a reach for the phone.

Now, what's happening in the United States over the last few years is we went from two states where sports wagering could occur to now 35 plus.

We have seen this rapid growth, but I think it's important to understand that sports wagering, including live betting, et cetera, et cetera, has existed in other parts of the world for quite some time.

So the companies that have the technology that are driving this force are companies that have lots of experience, particularly from Australia, the UK, some parts of Europe.

It's moved very quickly in the United States, and it's gonna require a lot of adjustments for people to fully appreciate and understand what its impacts would be.

We have reason to think that the impact immediately is going to be concerning to many people, and it has been over the last couple of years.

The question of where it goes from here is a little hard to answer quite yet.

Generally, when a form of gambling is introduced in a jurisdiction, what we see is not just an increase in activity, but also an increase in problems that tend to then dissipate or attenuate over a couple years period of time.

We don't know if that's gonna happen yet.

- Yeah, and that's, arguably that has been lost.

That used to be the subject that, again, back 10, 15, 20 years ago, that's what people talked about a lot and we'll get into it more, which is problems associated with gambling, but that's why it's a bit shocking to what we're seeing in the media, what we're seeing on television is all the positive.

It's so fun.

You know, it's wonderful.

We'll get into the problems, but before we move on, the quick sociological aspect, Clay, of having a people, a country, a political culture that's like "No gambling" to, you know, "Okay, let's go!"

What do you think of that?

- I think it's very difficult to understate the amount of money, the amount of eagerness, the amount of resources that were poured into this effort across the United States.

And you have to understand, the Supreme Court in the United States really only cleared the way for this in 2018 when they struck down a federal law that had prohibited states from establishing sports gambling, you know, except in the restricted jurisdictions before.

And so if you look at what the professor was saying with 35-some states having this now, we have gone from zero to 100 in the space of only five years.

And I would say too, you know, I wrote about this in just a single column over the summer, and I had a reaction to it that I'd never seen before as opinion editor, which is the response I got was not necessarily from people who were gambling or for people who had read the column, but it was actually from gambling lobbyists.

Like they actually reached out to, you know, want to educate me about the topic and to say why what had happened in Kansas was a good idea, obviously.

I mean, and this was over a year after it had passed in Kansas.

So there's interest and money in the industry to make it look great, to make it look fun, and to keep the train rolling.

- Yeah, that- - I think it is important to understand though, that well over 90% of the people who gamble, gamble without creating harms to themselves or their families.

And that this transition has really been one that's build building slowly.

It's really about, since 2018, it's about accessibility.

Sports wagering has always existed, and it's existed, we've treated sports wagers who only bet illegally for decades now.

The transition is, is that it's become so accessible.

That's a key part of it.

But I think the other key part of it is that each of these operators have a very well-developed marketing arms, so that when you pick up that phone, when you open the app, you are immediately marketed for options to wager, which you may have not thought of.

I think they're the real key issues, but the truth is most people still gamble in a pretty controlled manner with their disposable income.

Those that get harm is a small percentage, although that harm can be tremendous.

- Yeah, we're gonna take a look or talk about specifically Kansas and, Jim, I know you've done a lot of research on a lot of issues surrounding gambling, so you probably can give us a more widespread view of other states, but we'll start with Kansas, of course.

And, Clay, I can talk about it or do you want to get into some of the specifics of the Kansas law you've written about it, and tell us a bit what Kansas ended up doing.

- Well, I mean, I can touch on some high points and then perhaps you can fill in what I've left out.

What's important to understand about what happened in Kansas was that a lot of things in our state happen at the very end of a legislative session, often at midnight, close to midnight or after, and this was the case with the sports gambling bill.

It was something that waited until the very end of the session.

It passed with a lot of other things going on.

And it was, essentially, a sweetheart deal for gambling companies.

The original tax rate that they had proposed was 20%, it was reduced to 10%.

And then it's, promotions.

The idea that, you know, you have your free $1,000 to bet with if you're a first time person signing up, or you know, $200 if you deposit $5 or whatever.

Those promotions were not only allowed in Kansas, but they were made deductible by the gaming corporations.

So they deducted, I think something along the lines of $80 million worth of those promotions in the first eight months that sports gambling was legal here.

So, you know, I just look at it and the way that it was done, and it was definitely, our state did not drive the kind of hard bargain with some of these outfits that it probably was able to.

- And the New York Times famously did a very large story on Kansas, and there was a lot of color in the story.

It involved legislators smoking cigars that were supplied by lobbyists and drinking Irish whiskey.

And I believe the New York Times was making some implications in their article that the legislators were wooed by lobbyists.

But the specifics are, as you mentioned, a tax rate of 10%, but deductions for these promotions, which when I first started seeing these promotions, I'm not a gambler, I was tempted, I was like, "Wait, $100 free?"

You mean if I bet 100 bucks and win, you know, I keep all the money and I don't even have to pay for the bet.

All that sort of thing.

Basically, yes.

I was like, "Wow."

So with those deductions and other things, the effective tax rate in Kansas for the last year is give or take about 3.8% if my math is right, because Kansas announced they made $7 million on $1.85 billion in online sports gambling.

So that's about a 4% rate.

And more details, if I'm right, a high percentage of that money has been earmarked toward luring a professional sports team to the state of Kansas.

And then I think then the rest of the, you know, 20% or something is for programs for problem gambling.

There's a lot to unpack there, and I may as well just do it here.

To give you an example of what Clay said, he wondered how good a deal Kansas got.

I looked up the effective tax rate of some other states.

Again, Kansas is about 4%, Illinois, 15%, our neighbor up north in a way, Iowa 7.3%.

New Hampshire, 46%.

New York, 42%.

Rhode Island, 51%.

And so it's interesting because if you have a much higher effective tax rate, you don't need to have as much gambling to make a lot more money.

And I looked up some of these states and they're raking in 200, $300 million on there because their effective tax rates are so high.

- Well, and, Bob, something I wanna add here that I think is really important to understand, Kansas is, I mean, and people might not realize this because we had bad budget news out of Kansas for so very long, you know, we essentially had a lost decade with our budget.

Kansas is sitting pretty right now.

This next legislative session, we're likely to have $3 billion in surplus in the bank.

It's over two billion now, I believe.

So this was not a situation where, you know, we had to get money in the treasury some way.

Like we are set up well, we're actually set up in a position where we could have bargained and gotten one of those much higher effective rates that you mentioned.

- Well yes, and, Jim, I talked too long, so.

We said a lot.

What would you like to comment on of what we talked about, in terms of Kansas, what Kansas got out of their law?

- Yeah, I read through the law and a couple of pieces, including Clay's column.

And you know, I think that, I think with any law, it's really important to understand what are the benefits and what are the costs.

And it would concern me if I was a citizen of Kansas where the deal was made without seeing the future of how those funds are going to be used and why are they being used in that way, et cetera.

It's not unlike many states have passed this bill quickly.

There are states who have deliberated on this for years.

Georgia's one that's gone back and forth on it for quite a while.

California still is.

But many states actually doing this at the end of the session.

And the laws are not very clean.

The other, and actually in some ways more important part is how the whatever regulatory board writes the rules and regs and learns from other jurisdictions about how to appropriately monitor this.

I think one of the things I've seen across the country is that the regulatory boards are usually not people who are familiar with gambling.

So therefore the rules are missing key elements to encourage appropriate safeguards as well as to, I think it requires a cooperative effort with operators, but it's also should be a strong line with operators about what can happen and what cannot happen.

I mean, there's beliefs, for example, that just make it 21.

No one under 21 will gamble, and that's just not true.

I mean, they don't do it with alcohol and cigarettes.

It's not gonna be true here either.

There are safeguards on the apps for it, but they're not going to be enough.

The free play I think is particularly dangerous for those who have problems with gambling.

We run clinics that we've treated about 1,500 gamblers over the years presenting with problems and free play is frequently a tough temptation for them to avoid.

- Yeah, I can certainly imagine.

Now, Clay, you have the interesting job of following the Kansas legislature quite a bit in what you do for a living.

If people agree, you know what, maybe Kansas got hosed here.

You look at these other states they're doing, you know, they're doing a lot better.

Is this something that could be fixed?

Or do you see any will for it to be fixed in the Kansas legislature?

Could they renegotiate?

- Right.

Well, so I mean I think there's two questions there, right?

So I think the first answer is from my reading, and I think the professor could probably speak more to this, but states do renegotiate.

You know, the tax deductibility of the promotions, for example, I believe Colorado ended that, I believe Tennessee switched from taxing the net revenue, which is what Kansas does, to taxing the handle or like the total amount bet, which is also what the federal government does.

So definitely states do go back, they do rethink, they do rework it.

I think the bigger question and the harder question frankly is whether or not there's political will to do that in Kansas right now.

And again, if you're sitting on $3 billion, I don't know that there's necessarily the motivation right now to say, "Oh, we've gotta go dig around in the couch cushions for more change."

I mean, it's $7 million, which is, you know, better than nothing, but it's certainly, you know, pennies compared to a lot of the rest of the budget.

- Yeah, the interesting thing about this, the Kansas law was the link to luring a professional franchise, which I'm assuming is supposed to be the Chief's at some point down the road.

- I think there was some connection to some lobbyists that were interested in doing that as well.

And so there was the question as to whether that was a giveaway of some sort.

I think it makes it feel very dodgy, you know, you're bringing in a big chunk of gambling into the state, making it legal.

Kansas has this tradition as being a very kind of conservative state when it comes to alcohol temperance, certainly.

And, you know, and so the idea that we would welcome sports gambling like that, that's a big shift.

And then to say, "Okay, well, and on top of this big shift, we're gonna try to lure a professional sports team that more people will bet on."

That's pretty shocking.

- Well, Jim, maybe a lot of viewers have the same question, which is it seems, I mean, not seems, professional sports leagues seem to be all for now gambling.

They're being advertised on the broadcast of the football and everything.

Is that simply because they just, they used to be very anti-gambling.

You know, Pete Rose is not in the Hall of Fame, you know, all that sort of thing.

Now professional franchises are like, "Hey, sounds good."

What is that link between the actual professional leagues and gambling?

- So, yeah.

I think this is a big cultural issue.

So where, the reason why that law existed at the federal level around sports wagering, the step on the grandparent at the jurisdictions where sports wagering was illegal and they said no one else can.

And that was to protect sports, to protect integrity, to protect amateurism for college sports and to maintain those boundaries that Pete Rose was held up to.

I actually was in a meeting just a few weeks ago and I was speaking with an official, fairly high status official within the NFL, and I said, "So like, how do you guys approach this?

You're now a gaming company."

And this individual's response was he'd recoiled and said, "No, we're not."

And I said, "You're not?"

I said, "Does your arenas have sportsbook in 'em?

Do you have identified relationships?

Do you have teams that have identified relationships with gaming companies?

Do those gaming companies advertise that?"

He said, "Well then why are you going through all of this to make sure that the arena's safe of people who might snoop and find things out, and now they're controlling when people get information about injury and whatnot?

The bottom line is professional sports currently are in the business of gaming, and their commentators will talk about odds.

Oh, and by the way, you know, ESPN is now own, owns a sports book.

So the ESPN is definitely in the business.

And when they have commentators throughout the game who will talk about what a good bet this is, or you see the, you know, DraftKings or whoever, BetMGM will say, "Hey, here's your parlay for the game."

You know, there is no longer a boundary between what is professional sports and what is a gaming company.

- It seems like a very symbiotic relationship is developing between the gaming industry and professional sports.

- I'd say it's already there.

- Yeah.

- It's already there.

- And to be honest, stadium building, which is now expected to be partially funded in many places by the taxpayers.

So it's some pipe dream, but it seems like you could just say, "Okay, we're gonna have a sports gaming in the state and a 50% tax and all the money will go toward what you would've been taxed if you've been asked to build a new stadium."

But I gotta move on.

Jim, tell the viewers, tell us a bit about gambling addiction.

We know you said, "Hey, you know, vast majority of people, it's fun and they do it and it's not a problem."

But there are some individuals that do have a problem.

And what form does that problem take?

- Well, it is basically an addiction without a substance.

I mean, historically we think about addictions as being driven by a chemical that you ingest, alcohol, cocaine, opioids, gambling follows the same sort of pattern.

There are data we have from brain science all the way through behavioral mechanisms have lots of parallels.

There are differences, but they're very parallel.

And what we know is that about 2% of the population will meet diagnostic criterion.

So that diagnostic criterion is called a gambling disorder.

There are nine possible symptoms, but that really boils down to do you engage in gambling?

Is it causing you harms to you or those around you?

And despite those harms, do you continue to gamble?

And I think that's the simplest way to talk about what an addiction is.

2% of the people who are experiencing amazing amount of harms to their life all the way to being homeless sometimes, due to that engagement in gambling and that failure to pay attention to the harms.

But we also have another, approximately 3 or 4% of the population who may periodically have problems or may have difficulties in a way that's subclinical, they're getting some harms, then they back away a little bit and they get some harms and back away.

So those people are also in need of support, man, and empathy and finding a way out.

Now when I talk about addiction, it's really important not to say that gambling itself causes all of this addiction.

You know, people become addicted because of not just the behavior they engage in, but because of their lives that are around that behavior, where that behavior becomes so much more rewarding than the other things in their life.

So it's not a simple brain chemical problem, but it's actually individuals who are struggling.

They may be struggling historically with depression.

They may be struggling with just being able to cope with trauma, loss, grief, failure to sort of manage the stress and anxieties in their life.

- Yeah.

Clay, you've been, you know, writing about this and talking to some people, it didn't seem like the legislators were overly that interested in what Jim is talking about, again, to most of the money that is getting is going toward a stadium.

What did you find out?

- Yeah, I mean I think, you know, part of what the professor's talking about is, is I think a really important point whenever you talk about, you know, gambling or alcohol or any sort of, you know, sin, sinny subjects, right?

Which is that we know that people have gambled for forever and we know that people have put wagers probably on sports events for forever.

So I think the argument always made against, you know, made against ending prohibitions of various kinds, ending alcohol prohibition, you know, making sports gambling legal is that this is something that people would do anyway.

This is something that someone would go out and, you know, they would pursue illegally or go, you know, kind of underground to do and we're just bringing it out into the open where we can actually see it and regulate it and, you know, all of those other things.

And I think in as much as there was any conversation in the Kansas legislature about it, it was very much like that.

It was like, we know that you all are doing it.

We know that you're all going online and going somewhere, you know, perhaps shady to place these bets, let's just finally make it legal.

And that was really the predominant, I think, the predominant argument, the predominant voice at the time.

- Okay.

Jim, I hate to do this, you got 20 seconds.

What do you think is a important point to leave viewers with?

- Well, I think that as Kansas takes a close look at this, I think they need to create that safety net for people who may be harmed.

- Okay, thank you.

Clay, 20 seconds or less.

- I think the idea of deducting these promotional wagers is ridiculous.

If there was any one thing that I could change about the law, changing that right away would be my pick.

- All right.

Well that's all the time we have for this episode of IGI.

If you have any comments or suggestions for future topics, send us an email at issues@ktwu.org.

If you'd like to view this program again, or any previous episodes of IGI, visit us online at watch.ktwu.org.

For IGI, I am Bob Beatty.

Thanks for watching.

And thank you to the guests who joined us for this program.

Thanks.

(bright music) - [Announcer] This program is brought to you with support from the Lewis H. Humphreys Charitable Trust and from the Friends of KTWU.