Here & Now

Mark Sommerhauser on Online Sports Betting Law in Wisconsin

Frederica Freyberg:
At the state Capitol, a bipartisan legislative bill to allow online sports betting in Wisconsin that was on the fast track for a vote was pulled from this week’s calendar. Its future is uncertain, but the legislation would have allowed the online betting if it originated from servers in tribal casinos in the state because under the Wisconsin Constitution, most gambling is only legal on tribal property. The idea was for the state to regulate and cash in on the revenue generated from the explosion of online sports betting, as other states have done. Researcher at the Wisconsin Policy Forum, Mark Sommerhauser, did a deep dive into online sports betting, and he joins us now. And thanks very much for being here.

Mark Sommerhauser:
It’s good to be with you.

Frederica Freyberg:
So how surprised were you that this otherwise fast-tracked bill just got pulled?

Mark Sommerhauser:
Yeah. So it was an interesting development. It was also interesting to see how the legislation had been fast-tracked fairly quickly in the weeks leading up to this last week. And so, you know, perhaps, you know, the speed with which the bill had come forward, there may have been a desire among some lawmakers and some stakeholders to kind of take a step back and, you know, consider some of these issues more fully.

Frederica Freyberg:
So what kind of revenue could the state realize if it legalized and regulated online sports betting?

Mark Sommerhauser:
So that’s a great question. I have actually not seen any projections as of yet, probably in part because the legislation would just be the first in sort of a two-step process here in Wisconsin. So even if this — even if this legislation were to pass, be signed into law by the governor, there would still be an additional step where the state would need to renegotiate its compacts with the tribal nations here in Wisconsin. So that would kind of actually be the final threshold to cross before you could have legal online sports betting. What we know from our research is that we have looked at some other states that have legalized online sports betting. As you alluded, there’s been dozens and dozens of states that have done that just in the last few years. And they have, in some cases, seen quite large, you know, infusions of revenue. Of course, a lot of it depends on how the extent to which it’s taxed. And we see from state to state, there are huge variations in that, you know, from 5% to 50% taxes. So the rate differs hugely. In states that have a high tax rate and in larger states, it can be on the order of hundreds of millions of dollars in tax revenue a year. Again, that’s on the very high end, and that’s with a very high tax rate. So that’s not necessarily something that could be extrapolated to Wisconsin, but it does give you a sense of what some states can.

Frederica Freyberg:
As we described, right now, people in Wisconsin can only place bets online legally while physically on site at a tribal casino. How unusual is this across the country, that kind of restriction?

Mark Sommerhauser:
It’s fairly unusual. I think there’s only one or two other states presently that have a set up quite like that, in part because so many states have — that have some form of legal gambling have taken the step already of legalizing the online sports betting. And so Wisconsin is fairly unusual in that we permit it legally, but only in this in-person setting right now at the tribal casinos.

Frederica Freyberg:
So stepping back to your larger research, describe kind of the explosion of online betting that we’ve seen.

Mark Sommerhauser:
Yeah. So the really big trigger point for that was the U.S. Supreme Court ruling in 2018. And what that did is it essentially paved the way for states to — it struck down a law that previously had barred most states outside of Nevada from legalizing sports gambling. And what we saw was a very, you know, swift reaction to that Supreme Court ruling. And we are now, at last count, I believe, at 39 states that have some form of legalized sports betting. Nearly all of them permit online sports betting. And so that has brought about a really rapid shift in this whole landscape just since 2018.

Frederica Freyberg:
And what are the numbers look like, you know, from maybe five years ago or ten years ago or something to today in terms of the amount of money being spent on these bets?

Mark Sommerhauser:
Right. So yeah, we’ve seen hundreds of millions of dollars in revenue increases in terms of the total amount being gambled. And, you know, again, you know, prior to the Supreme Court ruling, Nevada was really the only state at a statewide level that was permitting this. Now we’re up to almost 40 states that are permitting it. And there are more, as in here in Wisconsin, that are considering it. So it’s pretty staggering the scale of how quickly that’s happening.

Frederica Freyberg:
So people, I understand, are betting not just kind of on the outcome of the games, but on like individual plays within the games. And so it’s super popular and there’s always something to kind of bet on. But what are the downsides to this according to your research?

Mark Sommerhauser:
Yeah. So it’s interesting because outside of, again, Nevada, it’s only recently that, you know, we’ve had legal sports betting. And so it’s only in these 49 other states, only fairly recent development, that researchers have been able to study at a large scale. So we’re actually seeing a lot of really interesting research coming in just over the past couple of years where they started studying this maybe three or four or five years ago and are just starting to get to the point where they can draw some conclusions. And those conclusions are mixed, but I would say definitely contain, you know, some areas of concern. We have seen higher rates of bankruptcy, of delinquency in car loans and other forms of loans and debt, and in states that have legalized sports betting relative to states that have not. And interestingly, at least one paper that we read that I think came out last year was even able to take that a step further and find a higher rates of some of these financial sort of stressors within households, within states that have legalized specifically online sports betting. So that’s just one study again. But there’s more of this research coming in kind of by the month here. And it does raise some areas of concern in terms of the impact to households and household finances, that sort of large-scale legal sports betting can potentially be associated with.

Frederica Freyberg:
And not even speaking of kind of the gambling addiction that it could potentially trigger in some. Do you expect this move to legalize it in Wisconsin will die or be revived somehow, possibly through the courts?

Mark Sommerhauser:
I would expect that the discussion is far from finished. I would expect that there’s going to be a lot more discussion, both among the stakeholders, the tribes, and some of the other stakeholders, because everybody kind of sees where the national landscape is going. But, you know, I would not dare to make a prediction as to how it’s going to turn out. But what we see is that our neighboring states have legalized this in some form, so many other states across the country. And so I think it’s just going to continue to be a really hot topic going forward.

Frederica Freyberg:
All right, Mark Sommerhauser, thanks very much.

Mark Sommerhauser:
Thank you.