How Sports Gambling Could Revitalize Iowa's Casinos
WHY YOU SHOULD CARE
Because sports gambling promises revenue, but what about its social impact?
Pooja Bhatia is an OZY editor and writer. She has written for The Wall Street Journal, The New York Times and the Economist, and was once the mango-eating champion of Port-au-Prince.
The wind is whipping across the cornfields, and a few people, hoods up and hands jammed into the pockets of their puffy winter coats, are doing the darn-it-is-freeeeeeezing-out-here boogie toward the entrance of Rhythm City Casino Resort. Opened in 2016, the establishment is next-gen Iowa gaming: less smoke, fewer slot machines, and fancier amenities, like a sports lounge with a backlit bar and 360-degree monitors, and a massive, swank spa.
Given the bitter winds outside, it might seem odd that the spa’s signature feature is a “cold room” — a chamber that is the thermal inverse of a sauna — but it’s a point of pride. “You’d have to go all the way to Chicago to find another one,” says the young woman showing me around.
It could be a significant game-changer, because it could attract the next generation of gamblers.
Wes Ehrecke, Iowa Gaming Association
Twenty-six years after Iowa’s first riverboat casinos set off on the Mississippi, gambling in the state has reached a crossroads. Revenues at most of the state’s 19 commercial casinos declined last year, and officials are refusing to grant new licenses, arguing that the market is saturated. To grow, the casino industry must woo a demographic that has historically resisted the charms of the one-armed bandits: people younger than 50. Which explains not just the cold room but also why casino owners are pinning their hopes on a Supreme Court decision that could open the door for sports betting throughout the nation. “It could be a significant game-changer, because it could attract the next generation of gamblers,” says Wes Ehrecke, who has been president and CEO of the Iowa Gaming Association since 2000.
The court heard arguments in the case, Christie v. NCAA, last week. New Jersey is arguing that the Professional and Amateur Sports Protection Act of 1992, which prohibits most sports betting in every jurisdiction except Nevada, violates the 10th Amendment and its protection of states’ rights. A decision is expected in early summer.
But the gaming industry in Iowa — and across the country — is already preparing to cash in. Aiming to “fill the well before you’re thirsty,” as Ehrecke puts it, the IGA hopes to shepherd bills enabling and regulating sports betting through the Iowa Legislature in its upcoming January-April session. Indeed, sports betting legislation is one of the association’s top priorities, Ehrecke says. Others include holding the line on taxes and preserving the industry’s special exemption from a statewide smoking ban in public places.
Ehrecke cites estimates that the sports betting market is worth $150 billion a year, with only 5 percent of it on the books (i.e., regulated and taxed by the state). Iowa’s casinos could see as much as $1.2 billion in wagers on sports if PASPA is overturned, according to Global Market Advisors, a consultancy that specializes in gaming.
None of those dollars will come without controversy. Critics fear that the repeal of PASPA will irreparably damage the federal government’s ability to regulate gaming — and lead to millions more addicted gamblers, in part by opening the door to ultra-addictive types of gaming. “Christie v. NCAA is not a 10th Amendment issue; it’s a consumer protection issue,” says John W. Kindt, a professor of law and economics at the University of Illinois at Urbana-Champaign. Kindt, who has for decades followed the evolution of gambling in Iowa and other jurisdictions, likens the gaming industry to Big Tobacco. The costs of gaming — such as increased crime and displaced entertainment revenue — outweigh its benefits by at least a factor of three, he argues.
Ironically, the repeal of PASPA on a states-rights argument could lead states to conclude that they have little choice but to legalize sports betting, lest they forgo revenues to other states. “If states on our borders pass [legislation], we could be at a competitive disadvantage,” Ehrecke warns, with Iowans crossing state lines to wager. Some 15 states have already introduced or passed legislation that enables sports betting, he says.
With 19 commercial casinos, Iowa is in some ways poised to capture the potential benefits of sports gambling. Most observers believe that if PASPA is overturned, it will still confine sports wagering to brick-and-mortar facilities, at least at first. They point to the setups in Nevada, with rows upon rows of screens broadcasting games, leather recliners and a well-stocked bar.
Iowa was something of a maverick in 1989, when it became among the first states outside Nevada and New Jersey to legalize commercial casinos. Many were wary in this farming state where, a generation ago, modesty and frugality reigned, and bingo in the church basement could feel reckless enough. Gambling was severely limited at first: “Iowa legislators were concerned about not wanting to turn the state into another Las Vegas, so we were going to play off the old historic ties to riverboats,” remembers Randy Evans, a longtime journalist at The Des Moines Register who now directs the Iowa Freedom of Information Council.
But little by little, the regulations loosened. In 1994, the Legislature axed a $200-per-day limit on losses and a $5 maximum on hand wagers. A decade later, the Legislature defined “Excursion Gambling Boat” to include a moored barge; in 2007, it abandoned the riverboat restriction altogether. A sunset clause, requiring voters to periodically reauthorize gambling in their counties, was abandoned, perhaps somewhere along I-80. “Now it’s sort of like Vegas and Atlantic City without all the bright lights,” says Evans.
In the interim, some 20 states legalized commercial casinos. Native American casinos are in 28 states. And from 2003 to 2016, consumer spending at American casinos grew from $29 billion to $39 billion, according to the American Gaming Association.
When Iowa’s Republican-controlled Legislature meets in January, there’s a good chance the gaming lobby will position betting as a stopgap to bridge a budget shortfall that could continue to erode spending on education, clean water and other public goods. The gaming industry says betting provides $1 billion of direct and indirect benefits to Iowa per year. Says Kindt: “You can’t get rid of them once you let them in the door.”