Odds Sports Betting Bill Will Kill Black Market, Boost Gambling Addiction

At 1:30 p.m. today, April 22, the Finance Committee of the Colorado House of Representatives will hold the first hearing on a bill that would place a measure on the November 2019 ballot to allow legal sports betting in the state.

The proposal has powerful bipartisan support, including sponsorship by House Majority Leader Alec Garnett and Minority Leader Patrick Neville. According to Representative Garnett, regulating the sports betting industry will crush the black market even as it helps Colorado keep pace with the nationwide trend toward legalization kick-started by a U.S. Supreme Court ruling last year.

But while the Problem Gambling Coalition of Colorado is officially neutral on the legislation, its president, Larry Wall, would like to see more money devoted to the fight against gambling addiction — a problem he fears may grow exponentially should voters in the state make this particular move.

"Being able to place a legal bet with your cell phone from your couch without having to go to a casino would be as addictive as logging on to Facebook or Twitter," Wall predicts.

The bill, "Authorize and Tax Sports Betting Refer Under Taxpayers' Bill of Rights," is a lengthy document, spanning 42 pages and including reams of minutiae. But its summary is succinct: "Concerning sports betting, and, in connection therewith, submitting to the registered electors of the State of Colorado a ballot measure authorizing the collection of a tax on the net proceeds of sports betting through licensed casinos and directing the revenues generated through collection of the sports betting tax to specified public purposes, including the state water plan through creation of the water plan implementation cash fund."

The proposition was made possible by the Supreme Court's May 2018 decision striking down the Professional and Amateur Sports Protection Act. Also known as the Bradley Act, PASPA, which was signed in 1992, during the waning days of the President George H.W. Bush administration, largely disallowed state-sanctioned sports betting. But when the Supreme Court upheld a New Jersey law permitting casinos and racetracks located within that state's boundaries to let customers bet on sports, it removed the shackles from every other state regarding this subject — and plenty of them have since taken advantage.

By Garnett's count, "nine states have essentially adopted laws legalizing sports betting and over thirty other states have introduced bills to do the same."

click to enlarge Representative Alec Garnett is the state House majority leader and sponsor of the legislation. - TWITTER
Representative Alec Garnett is the state House majority leader and sponsor of the legislation.
Garnett stresses that the Colorado legislation is about more than simply joining a gold rush. Indeed, he tries to downplay the potential windfall. "I don't think it's going to generate as much tax revenue as people assume," he says. "I think it starts around $4 million and matures to about $20 million worth of state revenue."

His main rationale, then, focuses on "two goals. First, eliminate the black market, because we know it's happening. We know people are betting on sports. We know there are apps that people are using that are routed through places like Shanghai and the Cayman Islands. And second, we want to look at the models from other states to create a marketplace that's competitive, but not so large that the Department of Revenue can't regulate it effectively."

After noting that voters have previously voted in favor of gambling legalization (a reference to the Colorado Lottery, launched in 1983, and the Colorado Limited Gaming Initiative, approved in 1990, which okayed casinos in Black Hawk, Central City and Cripple Creek), Garnett says the ballot measure would "create licenses for casinos to operate a sports book, so there would be a physical sports-operating license. But there would also be a license for online sports operators. And we need to have a functioning mobile legalized marketplace, because that's where the black market is. That's why you're seeing states moving in this direction. Because it's already happening, we might as well bring it into the sunlight in a regulated way, so the state can better track it and tax it."

The vast majority of dollars generated by sports betting "would be earmarked for the state water plan," Garnett continues. "The Colorado Water Conservation Board identifies grants statewide in rural and urban areas that would go toward water storage and supply projects, so the revenue would also go toward land-use projects and all the things associated with the state water plan. This isn't going to meet all the demands of the plan, but having a dedicated revenue source to go toward water is something we don't have yet on the state level, and I think it's something people can really get behind and agree that we need to start paying more attention to."

Although Garnett has been talking about pushing a sports-betting bill since at least March 2018, and backed legislation to regulate fantasy sports gambling in 2016, the latest proposal, officially known as HB 19-1327, didn't arrive until April 18, only fifteen days before the current session ends. Some political observers have suggested that it was submitted late to limit discussion, but Garnett rejects that theory. "There really isn't a ton of opposition to this," he says, "so this was by no means something that was planned. As majority leader, I'm in charge of a lot of calendar issues, so I have a lot of responsibility outside the bills I carry. And there was also a lot of stakeholding that needed to be done, so that we could do this in a bipartisan way. I chose to spend a little more time doing that before rolling it out."

The National Council on Problem Gambling, with which the Problem Gambling Coalition of Colorado is affiliated, has an overall policy of not advocating for or against such legislation. But coalition president Wall notes that the group calls for "the responsible gaming aspect for consumer protection and appropriate funding for prevention, education and workforce development, which is part of the bill. And the funding is not really what we would have desired."

click to enlarge Larry Wall is the president of Colorado's Problem Gambling Coalition affiliate. - CONTINUUMRECOVERYCOLORADO.COM
Larry Wall is the president of Colorado's Problem Gambling Coalition affiliate.
Specifically, the legislation mandates the transfer of $130,000 per annum to the Office of Behavioral Health, an agency within the Colorado Department of Human Services. Of that total, $30,000 would be designated for "the operation of a crisis hotline for gamblers by Rocky Mountain Crisis Partners or its successor organization; and $100,000 for prevention, education, treatment and workforce development by, and including the payment of salaries of, counselors certified in the treatment of gambling disorders."

Wall says he's appreciative that the bill acknowledges the addiction problem in a tangible way. "Right now, Colorado has zero funding for treatment of gambling disorders," he points out, "so any funding is better than zero. But in the current landscape, about 1 percent of the population has a gambling disorder that's moderate or severe. So our goal was 1 percent of the revenue or the net proceeds. That's what we see as appropriate funding to treat individuals or help families that have been impacted or harmed by sports betting or gambling."

Garnett doesn't reject this suggestion out of hand. "Percentages are always tough," he allows, "and I think the revenue stream is going to be a lot smaller than people think. But this is always going to be a priority, and we're always happy to have these conversations."

He adds: "We know that sports betting can be addictive, which is why we have the behavioral health line items in the budget that go toward the hotline and providing resources to those who want to overcome their addiction. That's one of the benefits of actually legalizing sports betting. We can get dedicated revenue streams to go toward these areas — and in the black market, there aren't those dedicated revenue streams. I've heard from a few people whose families have been turned upside down by gambling, but that happened in an unregulated black marketplace. So with the voters' approval, we'll have a better idea of how much of this is happening statewide and if we need additional resources to go toward those in need."

Statements like these give Wall hope that the state will push forward responsibly. "That's what's happened with the Colorado Lottery," he reveals. "In fact, they're going to be one of the presenting sponsors at our 33rd national conference, which is happening for the first time in Denver." (Click for more details about the event, which is scheduled to take place July 19 and 20 at the downtown Sheraton.)

Still, concerns in Colorado about gambling addiction are big, and Wall emphasizes that the resources to fight it are anything but. "There are only seven certified gambling counselors in the entire state — not just addiction counselors, but counselors specifically trained to deal with gambling disorders, where you deal a lot more with finances than you do with general addiction," he says. "There are definitely costs associated with alcohol and drug use, but gamblers' lines of credit can get so high thanks to different credit options from banks that it can be very complicated to sort out the process. For example, we try to get gamblers not to declare bankruptcy, so they have a financial stake in not returning to gambling so quickly. If they work out payment plans with creditors, that payment is a monthly reminder that, 'Wow, I really did work myself into a hole.'"

And Wall thinks such scenarios could become even more common very soon.