The most successful states that have legalized sports betting have a competitive, low-tax environment with focused regulation that puts integrity first – rather than using regulations to handicap certain companies or provide giveaways to sports leagues.
In this episode of the Leave Us Alone podcast, Grover talks with Brandt Iden, Vice President of Government Affairs for Fanatics Betting & Gaming. Previously, Iden served as a former Michigan State legislator where he was the primary author of Michigan’s sports betting bill. He possesses unique insights into this growing industry from both a market and elected official perspectives.
Check out ATR’s recommendations for crafting the optimal free-market sports betting policy at the state level.
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Episode Transcript:
Grover Norquist:
Hey, Grover, here, with Americans for tax Reform. Thank you for joining us at Leave Us Alone podcast. We’re gonna be talking about sports betting betting on professional sports, on college sports and so on. Legal, some states not legal, and others. What’s working, what’s not working, what’s happening. Just a reminder, we tend to look at issues at the Leave Us Alone podcast as to whether or not they are part of leaving us alone. And we’ve certainly seen in the United States all sorts of swings back and forth like prohibition on liquor from banning lotteries to having states run lotteries to, you know, not allow to allowing casinos to not allowing casinos back and forth, back and forth. It really has. The government hasn’t made up its mind as to whether it wants to leave us alone or whether it wants to tax us or what they wanna do with this subject and which is why it’s still with us as something that we discuss.
Whereas we rarely discuss the legality of carrots, which is kind of a subtle issue if betting on sports is not. Just a reminder I encourage everyone to subscribe to the podcast. If you like what you’re hearing, please subscribe to our podcast on Apple Podcasts or Spotify, or leave a five-star review. That always helps us get more people to to find us and to, to join us. And if you’re watching on livestream, please be sure to hit the thumbs up on YouTube. That also helps and subscribe to the Americans for Tax Forum YouTube channel or like us on Facebook. So, any of those things we greatly appreciate more people will be able to join us when we are here. Now, I want to start by introducing Brent Iden who focuses on this.
He’s been a state legislator in Michigan. He’s been a vice president, is a vice president for government affairs or fan for fanatics sports and lifestyle brand fanatics. What a great name. Brent, could you give us a state of play? They’re somewhere between 50 and 57 states, depending on which president you listen to. Which ones is sports betting, legal, kind of legal? Yes, if you do it in a casino, but not if you do it sitting on your couch. What, what’s the state of play and how much is new and different because people have iPhones whereas before you went to a casino.
Brandt Iden:
Sure, absolutely. Well, first off, Grover, it’s always great. See you, obviously we go back to my legislative days in Michigan, so great to be on with you and thank you for having me. As you said, Brent ein with fanatics betting and gaming and the state of play for sports betting has really grown rapidly over the course of the past five years. And why do I say five years? Because this may w will be basically the anniversary of the when paspa, which was the federal ban on states allowing sports betting was overturned. That was May of 2018. So this year will be year five. So we’re coming up on a big anniversary, and since that time, 33 states plus the District of Columbia, and if you want to throw Puerto Rico in there, plus Puerto Rico, have passed some version of sports betting, and both, as you alluded to, mobile as well as retail, meaning that the the type of betting where you can place it on your mobile phone from the, the comfort of your own home, where I am today on your couch, or if you want to go into the casino.
Some states have passed both retail and mobile, and other states have passed just retail, where you can go in and place a wager in person at the casino. So we’ve come a long way in the past five years since passable was overturned.
Grover Norquist:
Wh why did they pass a ban on it? It, it was sports betting of any kind or that was banned or just electronic sports betting was banned.
Brandt Iden:
So, so in the, basically this dates back, the the act, the federal ban dates back to the sixties when, oh, there was a lot of mafia and, and others in corruption in the sports betting industry. So this goes back a long ways, and the, when it was originally enacted by the federal government, it was to deter, to deter crime and from money being transferred over state lines via the mafia, mainly in this particular case, it was the example that was used and the only carve out was the state of Nevada. And so up until Pasco was overturned in 2018, the state of Nevada was the only state that allowed for sports betting of any kind.
Grover Norquist:
Okay. Now, sports betting is, you bet on golf games, you bet on certain weekend
Brandt Iden:
<Laugh> football. Right now we’re in the middle of March madness. So basketball is huge right now as you might imagine,
Grover Norquist:
But, but the big sports that people bet on, football, basketball, something else, baseball.
Brandt Iden:
Absolutely. the, the big ones n hhl M L B N F L p g a, these are gonna be all the main sports, but you know, people bet on everything these days. There’s a lot of different options out there. And options are regulated state by state, so that’s not federally, those options that consumers can wager on are set via state, state law and not federal law. But but yes n f nfl and certainly this time of year basketball are two of the biggest.
Grover Norquist:
If I live in Massachusetts and I drive to New Jersey, which has legal sports betting, right?
Brandt Iden:
Correct.
Grover Norquist:
Okay. Am I Massachusetts for purposes of the law, or am I in New Jersey?
Brandt Iden:
You’re in New Jersey. You’re in New Jersey. And so basically the software we have today, geofence is the state. And when you are in that particular state, regardless of your home state, you can wager in that state.
Grover Norquist:
Okay. and how, how big a market are we talking about? How many people bet on sports how much money’s involved? And I know states that decide to legalize something, one of the reasons they do is they think they can get some cash to give to their friends. And so they wanna legalize it and tax it. What’s, what, what, how, why are we talking about this? Is it a teeny thing or a big thing?
Brandt Iden:
This is a massive market, and you know, in anticipation of that question, I wanted to pull some statistics because we’re talking about March Madness right now. And I will tell you that according to the American Gaming Association, 68 million American adults planned a wager 15.5 billion this month alone on, on dur for the, during the course of the tournament. So the four weeks of the tournament, 15.5 billion, and if you look at last month when we had the Super Bowl, 16 billion was bet by Americans on the Super Bowl just this past. So that’s just one event. So I mean, that, that even outweighs the entire month of March for March Madness. But if you look at that, these are, these are massive numbers and why that’s so important to the second part of your question, which I think is really key, is that we need to have states regulate this to protect the consumers who are placing those wagers because of those that are wagering in, in fact, and this is another statistic from the American Gaming Association, 40% of those folks that wager actually are wagering in an illegal market, meaning their state doesn’t yet have legalized sports wager.
So they’re betting sometimes offshore, they’re betting with their bookies down the street. So, and, and oftentimes they don’t even necessarily know that it may not be a legal form of entertainment in their particular state. So they’re taking their money offshore. So states aren’t getting it, but more importantly, people aren’t being protected because of the massive amount of dollars that is actually being wagered offshore. So why is this so important that states regulate it first and foremost to protect the consumers in their state? And but secondarily to your point about taxes, this is tax revenue that states are significantly in some cases missing out on because they haven’t yet to legalize it and they’re allowing their consumers to just place sub bets in the illegal market.
Grover Norquist:
One of the, what is a reason? How do you tax betting? Do you tax, I bet a thousand dollars is the tax on my thousand? Is the tax on what? And if I win a hundred, having bet a thousand is the tax on a hundred? Is it different by state? What, what, what is generally the, what is taxed on Sure. Betting on sports.
Brandt Iden:
So, so the way that works is that the operators and we’ll use fanatics betting and gaming as the example, my company. So an operator in the space is the entity that would pay the tax, and we pay taxes on what would be determined. Our winnings, I guess is the easiest way to look at it. So if you wager a thousand dollars and, and you win your thousand dollars back, plus an additional thousand dollars that that is, that comes directly to you, and of course you would have to file that to on your own income for your own tax purposes and that sort of thing. In terms of who pays the state, that would be us the, the operator, the commercial operator in the state, that would be basically paying the state taxes. And those do range in every state.
You’ve got a very low threshold. Nevada has the lowest sports wagering tax rate in the country at 6.75%. And then you’ve got a very high ex tax rate in the state of New York at 51%. So as you can imagine, this does vary tremendously in what operators like our company and others have to pay depending on which states they operate in. Very proud of the Michigan legislation. I’ll throw a plug in there. As the sponsor of the Michigan legislation, we have the third lowest tax rate in the country at 8.4%. So I very proud of that.
Grover Norquist:
When, when you talk to a new state and we’re looking to get it legalized in a, a new state what is your advice on what the best tax rate is in terms of getting people to come from the black market to the legal market so that people have whatever protections the government gives you for somehow I’ve always assumed the mafia did a better job of getting you the money you really won than the government does without taxing it. But that said, assuming that the government does something useful in managing this industry unlike every other industry in Western civilization bringing it into the legal market, there’s some value to people not being forced to be criminals when they do what they wanna do. That’s, that’s of value. You want to have them join the legal market. And what, what is the, and, and if you have the rate too high, then no company would take the best.
Brandt Iden:
That’s right. That’s right.
Grover Norquist:
What are the, how do you look and say, this is too high and this is the most reasonable that’s going on?
Brandt Iden:
Well, you know, I personally, I believe the lower, the better you know, the lower you can make that, because you have to remember the offshore operator, illegal operators that are operating in Costa Rica and China and others, they’re being zero taxes right now. So they have no, I mean, it’s, it’s all income for them versus the, the regulated US operators that have got employees a tax structure and, and all these other things that go into that. And, and being a, a participant in a regulated market so lower the better. But I would definitely say that the industry average, you are seen somewhere around that nine to 10% is what you’re seeing in states when you average it all out. And I would say that that’s, that, that’s very fair. I mean, I like a number closer to Nevada, it’s 6.75, but if you can get in that single digit tax rate of, you know, si 6.75 to nine, nine and a half, if you have to go to 10, then, then that’s, you know, fair at the end of the day.
Because what happens is, to your point, which is it’s spot on, you need to draw folks in that are wagering in that offshore market and getting the benefits of doing that in the offshore market and bring them into the, into the legal regulated market. And one of the ways to do that is to provide them with the incentives of low tax rates so they can get similar odds that they wager on the game that they’re gonna get in these offshore markets. So that’s really the key is getting the number right so we can really address that illegal offshore market and those 40% of betters that are still wager offshore, despite the fact that, that, like I said, when I, when we started, 33 states plus the District of Columbia currently have regulated sports betting.
Grover Norquist:
Yeah. For those people just joining, we’re talking about sports betting, betting on professional games and, and schools, universities, football games various sports. 33 states have it legal in some capacity. Number of others don’t have it legal at all. And the effort to have sports betting move towards the legal zone and to raise some money for the state you know, what’s the best rate? I would’ve assumed that if you ask me what state I would look to to find the best percentage, I would’ve said Nevada, because they’ve been doing gambling or gaming for longer than most other places. Uninterrupted in terms of finding the sweet spot on maximizing revenue, maximizing the number of people who want to bet with you instead of somebody else, or to bet legally rather than extra legally that they would’ve been the guys to look at. Is that, and and you were saying that you also thought that they had the, the, the, the, the best tax rate,
Brandt Iden:
They, they do, they have the, the lowest tax rate in the country at 6.75, Iowa’s next it’s 7.5%, and then Michigan third at 8.4, all single digit tax rates. And you’re correct. Nevada’s been doing it the longest. And so they’ve got a huge history of gaming in Nevada, the, the longest in the in the era of PASPA being overturned. So since 2018 would be New Jersey, new Jersey’s got a, another great model that, that we often look at and talk about. You know, one of the things though that you just mentioned is that some states, every state has different regulations. Of course, that was the way that this was set up. That was how it was supposed to be. So the federal government didn’t just take this over. And so each state addresses this differently. One of the things that New Jersey does, which I think is very interesting, and we can talk about that now because we’re right in the middle of the tournament, is if you are in the state of New Jersey, they don’t allow you to wager on their in-state institutions.
So we look at Princeton right now who’s making a run in the, in, in, in the tournament right now. If you, if you’re a Princeton graduate, you live in the state of New Jersey, you can’t actually wager on Princeton. And this is a regulation that I think states have put in place, unfortunately. And I think the thought process was, you know, added layers of protection and other, but the reality of it is, is that this is just simply pushing that person who graduated from Princeton that wants to bet on their team and in the tournament to the offshore legal market. And so whenever you put up barriers for consumers to be able to participate, it actually makes it a lot harder to, to regulate this and, and create the safe play and, and the safe entertainment product that we’re trying to create here.
Grover Norquist:
I understand the argument for not allowing somebody to bet against the team he’s playing on or coaching. I’ve never understood a ban on letting somebody bet in favor of him winning. Cuz in theory, you’re supposed to try and win. And if you bet on yourself, you’re supposed to try and win even more. There, there’s no conflict of interest there. It’s complete confluence of interest. Matter of fact, they should all be required to bet on themselves. They’d be a little more hustled there in the game if everybody had a couple hundred bucks right there. That’s, that’s
Brandt Iden:
Interesting. I’ve not heard that one before, but that’s an interesting
Grover Norquist:
Be mandatory no <laugh>. But and if they don’t do it we’ll tax them the, but okay. But don’t bet against yourself, Chicago, white Sox or whatever cuz you might throw the game, but why would they, okay, Princeton alumni are not in a position to fix the game <laugh> because they’re not playing or coaching it. Why did that get dragged? Well, how did that get expanded and is it by specifically against the rules to bet against yourself if you’re on the Princeton team? In Well,
Brandt Iden:
The, the, the example I Yeah, great question. The example I used there was Princeton, only because New Jersey, like a few other states, has a specific betting ban on their, in-state colleges and universities. So basically what I’m saying is, is that if you live in the state of New Jersey or you travel to the state of New Jersey, you wanna place a wager. You can’t place it on any of the in-state New Jersey schools. And that’s, that’s because of state law that prevents that. And that’s, and again, it varies state by state, but there are other states that also have done that. And, and the, the reality although of it is, is that, you know, as great a market as New Jersey is by preventing a consumer from being able to wager on a certain athletic event it’s gonna just simply push that consumer to the illegal market. And so my example there is the Princeton alum that wants to bet on their home team now has to go find another outlet because they can’t do it in their home state. And, and that’s an example of where the government may have some too much overreach, in my particular case of trying to restrict this to, to only certain types of wagers. Right.
Grover Norquist:
Well, this problem solves itself because anybody who graduated from Princeton, if you’re smart enough to do that, you’re not still living in New Jersey at this point, <laugh>. So that problem is probably,
Brandt Iden:
I set you up there, I set you up for that
Grover Norquist:
One, actually. Smart enough to do the wine. You’re smart enough to, to get outta town. You were a legislator in Michigan when this came up. What, what makes for the city estate to decide we’re gonna do this, we’re not gonna do this. What are the, who cares? Are there surprise people who come in and say, do this, do that. What are the special interests that, that get involved? How, and when you said when people in in Michigan said, let’s do this, how long did it take before the bill got passed? Months, years,
Brandt Iden:
Years. Definitely. pass the legislation in 2019 took us four and a half years to get there. And that is because there are a lot of interests involved in gaming. It’s a highly regulated industry as it should be. And, and that just, there’s a lot of it. And of course you have tribal presence, you have commercial presence in Michigan, you had both. And so there’s there’s a fine line. You have to walk there. And then on top of all that, and to go out and procure the votes from both Democrats and Republicans making it a bipartisan effort. What I see as I work across the country as this is, this effort is always bipartisan in nature. One party or the other can’t just push this through. This has to be a concerted, bipartisan effort. And that’s really, that takes time. It takes time to to, to go through that education, to build those relationships and to be able to, to pass laws that, that regulate gaming. And so that’s why in some states, you see, it hasn’t been touched in 20 some years. In some particular cases, we hadn’t updated the gaming law in Michigan in 23 years until we did it in 2019. So it can be tough.
Grover Norquist:
I remember years ago, Jim Leach, Republican from Iowa ran a campaign to ban poker ga gam gaming with poker where you’d play poker online and I guess against other people or against the house. And that was banned. And so people had to go overseas. And Jim Leach lost the next election cuz this was so popular. And the republican leader of the Senate out of Tennessee also didn’t get to be president because this wasn’t the big wonderful issue that he was led to believe that would make all of the social conservatives wanna vote for him. It, it didn’t seem to be as popular as some people thought it was going to be to be a prohibitionist on gaming. As someone who’s a strong supporter of the Liva Alone coalition, I think if people wanna homeschool, they should be able to, if they wanna have Second Amendment rights, they should be able to, if they wanna go to private schools, they should, or if they wanna game gamble or not gamble, this is their own business.
So I I’m in favor of the government sort of as much as possible getting out of the way, but I guess if something’s already illegal, the government has to get in the way <laugh> to get out of the way. That’s right. And it’s by legalizing something and having some regulations that’s moving in the right direction cuz original regulation was, or tax was a hundred percent can’t do it. And then everything less onerous than that is progress. As, as one moves forward. What is the, I if you were advising 17 states have not yet fully legalized, if not legalized, correct, yeah. Okay. But of the 33, how many of those you look at and go 20 of ’em are fine and 13 are stupid, or how many of them have done it? Okay. And how many you just look at it and say, this is not gonna work?
Brandt Iden:
I would say more than half have done it fairly well. Okay. I mean, I think that the example that I always point to is, is the state of New York, which taxes this at, at 51% Pennsylvania at at 36%. I mean, these are enormously high tax rates that make it difficult for companies to come in and do business and protect those consumers. And, and, and again, it’s sometimes because of that pushes folks offshore. So, you know most of them do do it right, but it’s about getting those tax rates low, keeping them low, and keeping consumer options available so people can participate in, in all the entertainment options that are available to them.
Grover Norquist:
Okay. well if you were to look ahead, do you see almost all states will get this largely right in the next two years, the next 10 years, the next 20 years. How long does this take to sort out as I watched them legalize marijuana state by state California taxes and regulates it to the point where it’s not clear people are coming in from the black market to the legal market. Other states you know, they, they’ve, they’ve, the the taxes are low enough and the rules are light enough that people do come in from the illegal market to the legal market. Your sense on how long until we get to sort of a most, almost every state basically doing fair reasonably well?
Brandt Iden:
I think it’s it’s a tough one with that <laugh>, but my crystal boss is maybe about five years or so. I mean, there are some big issues that are out there in some of these states that haven’t passed in states like California, Texas, Florida, where there’s currently litigation ongoing because of, of a, a compact that was signed by Governor DeSantis last year. So, and that may play out in the court and it’s ju it is playing out in the court and will just take some time. So, you know, but I think in the next five years you’re gonna see critical mass, then there’s always gonna be those other states that are just tough. I mean, Hawaii, it’s gonna be tough. There’s no, there’s no real form any sort of regulated form of gaming in Hawaii, Utah, sort of same thing. There’s going to be some outliers, but I think at the end of the day we’re gonna see that critical mass probably in the next four to five years or so. It,
Grover Norquist:
It’s interesting that Hawaii is, doesn’t legal have legal gaming on just about anything or casinos utah’s in a similar situation the states less so final thoughts as we about to wrap up. Could you give us what do other countries do? Are there countries that are like Utah and and, and Hawaii and, and Saudi Arabia says no ever or Europe In Europe, people are where, what’s the tour of the horizon in two minutes?
Brandt Iden:
Yeah, well, for sure. So what’s interesting is our, our neighbors to the North Canada, they’ve recently jumped into this fray. They’ve started to reg legalize it based on the provinces. And so the federal government has said, we’re gonna leave this decision up to the provinces. And some of them have started to take that initiative similar to the states. They do it a little bit differently obviously, but that’s playing out there. We’re seeing you know, Europe has the i I would say the longest history of sports betting 15 years plus, 20 years plus. Now this has been going on all throughout Europe. And so they’ve got you know, they’ve sort of got it handled. They’ve, they’ve, they’ve done it well over the years, but you’re starting to see a branch out as well. I’m starting to see some, some movement in Brazil recently.
And of course Asia’s always had a history of gaming. And so, you know, it, it, it does vary obviously in places that are more religious. It’s a little bit tougher. You don’t necessarily see that, but it is something that plays out throughout the world and that’s why you saw that this year, the World Cup was massive. Obviously, soccer being the number one bet on sport i i in the world it’s massive. And you know, we’ll have the World Cup in the US next year, so I’m looking forward to that. Hopefully we’ll get some of that attention right here in the us. But Grover, it’s been great and honor with you and I really appreciate it. Thank you.
Grover Norquist:
Thank you for sharing that information. Grover Norquist here with the Leave Us Alone podcast series, and look forward to seeing people again in a week or so. Thank you, Grover out.