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  • The San Juan Daily Star

Why states were unprepared for the sports-betting onslaught

A BetMGM Sportsbook site next to the entrance to Nationals Park, the baseball stadium in Washington, on Nov. 17, 2022.

By Rebecca R. Ruiz, Kenneth P. Vogel and Joe Drape

David Hummel placed his first sports bet in January 2021, wagering $250 on the underdog in a mixed-martial-arts fight. He won $662.50, he said, “and it was probably the worst thing that could have happened to me.”

Having been drawn in by an offer of a “risk-free” bet — gambling company FanDuel promised to refund his money if he lost — Hummel kept betting. In little more than a year, he had lost more than $30,000, draining his checking account to $327.

Since 2018, when the Supreme Court opened the door to widespread sports betting, the gambling industry has mastered ways to attract customers like Hummel. Oversight of this young, fast-growing market has been left to states.

The states are not disinterested parties. They collect taxes on gambling, and the more people bet, the more governments get. One result is that states have, in many ways, given gambling companies free rein.

They have required few protections for consumers, dedicated minimal funds to combating addiction and often turned to the gambling industry to help shape regulations and police its own compliance with them, a New York Times investigation found. Few states have imposed restrictions on the kinds of promotions that helped hook Hummel.

The enforcement of state rules has been haphazard, with punishments often light or nonexistent, according to a Times survey of dozens of state gambling regulators. Some states have been so eager to get gambling up and running that they have let companies begin operating before comprehensive reviews of their backgrounds and practices have been completed.

In Iowa and Tennessee, sports-betting companies allowed gamblers to put money in their accounts via credit cards, even though, seeking to discourage gambling debts, the states had outlawed such transactions.

In New York, gambling companies accepted thousands of bets on lower-division football and basketball games, even though they were supposed to be off-limits.

And in Indiana, dozens of people who had enrolled in a state program to block themselves from betting were nonetheless able to wager hundreds of thousands of dollars.

“I don’t know a regulator that really just wants to go out and catch somebody,” said Daniel Hartman, the top gambling regulator in Colorado. Instead, the goal has been to create “an environment where we all work together.”

State auditors this year criticized Hartman’s gambling commission for granting temporary licenses to sports-betting businesses without running the required criminal background checks. Hartman partly attributed that and other failures to staffing shortfalls during the pandemic.

The economic and social effects of legalized sports gambling are likely to take years to become fully apparent. But calls to the national hotline for people with gambling problems rose by 43% last year, according to the National Council on Problem Gambling, though it is unclear how much of that stems from sports betting.

Gambling executives and regulators have argued that even disjointed oversight is better than the nonexistent safeguards in illegal betting markets. And industry officials have cited their voluntary support for anti-addiction resources as proof that they can be trusted to operate without stricter government rules.

“I would caution against really stringent regulations,” Richard L. Taylor Jr., who focuses on responsible betting for gambling platform BetMGM, said at a conference this year. “We need to have some flexibility right now built into what we’re doing, so we can learn and identify what is harming, what is not harming.”

Yet some architects of legalized sports betting acknowledge that they weren’t sufficiently attuned to the risks to public health.

“The issue of addiction really got lost,” said Ralph R. Caputo, a former casino executive and New Jersey legislator who was instrumental in legalizing sports betting. “We didn’t think very seriously about it.”

Rescinding the tickets

The Times spoke with more than 20 people who said they developed gambling problems as they wagered on sports. Most had not done much sports betting until it became legal in their states.

Like Hummel, a chiropractor, many said they were drawn in by offers of supposedly free money or insured bets. (Most asked for their names to be withheld to avoid negative consequences from employers or relatives.)

They described feelings of exhilaration as they won early on baseball games, soccer matches, even Ping-Pong. The victories were followed by losses that left some thousands of dollars in debt. Yet they remained motivated by the conviction that a few good wagers might be their salvation.

“Gambling is the only mood-altering thing that has hope involved,” said Scott Anderson, a problem gambling specialist in the Department of Mental Health and Addiction Services in Ohio, where sports betting is set to debut in January. “I’m not going to sit in the crack house and hope I can catch up on my child support.”

With marketing gimmicks and other lures, the gambling industry has tried to keep customers coming back. For example, it has dangled supposedly risk-free bets in which customers get refunds if they lose. The catch: The refunded money must go toward new bets.

Every time Hummel decided to stop gambling, “I kept getting deposit-match offers or free bets,” he said, referring to promotions offering to double what he put into his accounts at the betting sites.

Hummel even received offers of complimentary sports tickets. In May 2022, resolving to get clean, he used tools on BetMGM’s website to limit his betting. BetMGM then rescinded tickets it had given him to a Washington Nationals baseball game.

“Hi David, unfortunately since you are on cool off right now we will need the Nationals tickets sent back to us,” a BetMGM employee wrote in a text message reviewed by the Times.

Hummel gave up the tickets — and, with the help of addiction specialists, his months of gambling. (Taylor of BetMGM said the company “does not feel it is appropriate to provide an incentive or gift to someone it knows may be experiencing an issue with gambling.”)

Yet using sophisticated targeting techniques and artificial intelligence, the gambling industry has continued to pursue countless other customers with offers tailored to their interests and patterns of use.

One strategy is to offer bets that novice gamblers are almost certain to win.

In Michigan last year, FanDuel gave customers the chance to bet that the Detroit Pistons would not lose a game against the Los Angeles Lakers by more than 159 points. The biggest blowout in NBA history featured a 73-point margin. In other words, this was a sure thing.

The Pistons beat the Lakers by 15 points. FanDuel, an official sponsor of the Pistons, said it shelled out $2 million to the winning gamblers.

It was money well spent: FanDuel signed up nearly 47,000 new bettors who took advantage of the offer. That amounted to a cost of about $45 for each new user — a bargain in the hypercompetitive gambling market.

‘Not the Gestapo’

In a gray room in an Iowa casino, the state’s five gambling commissioners cruised through their monthly meeting in under an hour. For four minutes, two sharply dressed executives from Caesars Entertainment stood to receive their punishment.

The casino company had accepted more than $200,000 of online deposits from customers drawing on credit cards. That violated a state law that was intended to make it harder for people to go into debt from gambling.

The commission in August imposed a $60,000 penalty on Caesars, whose revenue last year was nearly $10 billion. FanDuel had paid similar penance in July, and several others would do so in the coming months. The gambling companies used the same outside payment-processing firm, which they said was to blame.

The idea was not to shame companies as much as to offer them gentle reminders to be more careful, said Brian Ohorilko, Iowa’s top gambling commissioner.

“A big part of what we do is voluntary compliance,” Ohorilko said. “The focus is making sure that the facilities are doing their jobs and not so much us actually running down every situation.”

At least one commissioner questioned whether the punishment was sufficient. “It just seems these types of infractions are becoming more and more common,” Amy Burkhart told her colleagues at the meeting.

The commission is now in the process of considering whether its penalties need to be tougher to serve as stronger deterrents.

Like Iowa, Tennessee also forbids the use of credit cards to fund sports-betting accounts, and similar violations occurred there, according to Mary Beth Thomas, the state’s top sports-betting regulator.

Tennessee did not pursue any disciplinary actions. Thomas said the gambling companies had developed plans to ensure such violations would not recur. “This is a new industry,” she said.

That forgiving attitude was common, the Times found. Some regulators noted the difficulty gambling companies faced as they navigated a state-by-state thicket of rules. “When you’re doing business in 30 states, for example, it takes a while to figure out who does what,” said Ronnie S. Johns, chair of the Louisiana gambling control board.

Some states have had little choice but to show deference. Lawmakers allocated minimal funding to oversee sports betting and assigned that oversight to state bureaucracies — such as lotteries, horse racing authorities or casino commissions — that previously had narrower responsibilities.

“These agencies do not possess the appropriate human resources and knowledge” to police cutting-edge international companies, said Richard Schuetz, a former casino executive and regulator. “I am not optimistic that the regulatory agencies can catch up.”

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