When the U.S. Supreme Court struck down a federal ban on legal sports betting in most states in May, the door was opened to some bandwagon-jumping by states eager to grab the predicted windfall. But, in the wake, there are a whole lot of questions as to how it’s all going to shake out.
The overturn of a 1992 federal prohibition on state-authorized sports betting was seen as a win for states that argued it was a means of boosting tourism and tax revenue.
In the aftermath of the ruling, five states have joined Nevada, New Jersey and Delaware in making full-scale sports betting legal. Another 13 have introduced bills, and the remaining states are sitting on the sidelines for now.
Perhaps that’s the better option. In 2017, Nevada sports books held nearly $250 million in wagers, a new record that drove total wagers to just under $5 billion. But there’s not necessarily a substantial trickle-down impact on operator profit or tax revenues.
In Nevada, for example, between substantial operational expenses, state taxes (about 12 percent of revenue) and federal taxes, operators post positive results, but with thin margins. It would be hard to turn a profit in states with tax rates over 10 percent, especially when the competition is illegal sports betting, which takes in between $150 billion to $400 billion annuallywithout the burden of operational costs or taxes.
For the hospitality industry, legal sports betting opens the door to a host of potential changes and concerns. Whether you become directly involved in offering gaming (after all, what’s a casino other than a hotel that features gambling?) or are a beneficiary, thanks to the growth in visitors that may result, your risks are likely to be heightened. So make sure your insurance covers them adequately.
For example, legalized sports betting, similar to horse and dog racing, tends to throw off a lot of cash and attract a more freewheeling clientele. Security becomes a potential issue – both personal and cyber. That makes it critical to ensure your liability package protects you sufficiently for crimes against guests as well as cyber breaches.
Another problem can be heightened risks of problem gambling as it becomes more accessible, making the addition of Employee Assistance Plans to hotel employers’ health benefits worth evaluating.
It’s going to take a potentially broader insurance portfolio to protect you, including exclusions and endorsements for directors & officers, employment practice liability and kidnap and ransom policies.
The impact of the lifted ban on sports betting on hospitality has yet to be fully felt. As more states follow the lead of the early adopters, opportunities and risks will become more fully realized.
HUB International’s team of advisors is available to work with you in understanding how trends and developments like the lifting of the ban on sports betting affects your risk posture today and in the future.