Commentary: State needs to pick winner with online gambling

To compete with offshore websites, the state needs to trust a well-regulated market to offer gaming.

By Charles Gillespie

For The Herald

In the past year, more than 30 states have been busy analyzing, debating and creating new laws and regulations to take a responsible approach to sports betting.

Washington state already has a number of gaming options, including a state lottery, over 30 tribal casinos, and even some limited sports betting on “squares.” Of course, this doesn’t even count the millions of Washingtonians who fill out a March Madness bracket or participate in office pools, activities that technically violate state law but take place in broad daylight. It’s surprising to see that Washington has been slow-walking its approach to regulating full-fledged sports betting until now, but thankfully the state Gambling Commission is starting to explore the idea. Better late than never.

There is already a massive online marketplace for sports betting, offering any bet on practically any sporting event, any time of day across the world. This online marketplace includes dozens of offshore websites that operate in a contravention of state and federal law. The offshore market has grown and evolved to cater to the tens of millions in the U.S. who bet on sports each year. Worries about the expansion of black-market sports betting are long overdue; it’s here, it’s happening now to the tune of $150 billion a year in the U.S., and it will continue until each state presents its citizens with a viable and legal alternative to place a bet.

Washington must learn from states that have already tackled this problem: To beat offshore operators, you have to compete head on. The offshore market is convenient, competitive and offers customers their choice among cutting-edge products. In 2019, most people who want to place a bet on sports are already doing it, illegal or not.

There is another phenomenon at play here; this offshore black market will benefit as the popularity of legal sports betting across the country continues to rise. As the state gaming commission’s executive director smartly pointed out, the media attention and excitement created by legal sports betting will play directly into the hands of offshore sports books, at least until states can catch up. But states have to take the right approach to creating a viable alternative to the sophisticated offshore network if they ever want to be able to compete.

Who better to take on the offshore than the fastest growing tech hub in the country? With such a massive wealth of tech savvy firms and individuals, it seems inevitable that Washington-based companies would not only surpass the illegal market in sophistication, but potentially revolutionize the entire sports-betting experience. The next generation of sports fans demand constant entertainment and immersion, and finding a way to cater to this demographic will be lucrative. If anyone is capable of this kind of innovation, a Washington-based startup would be a good bet.

Combating the black market isn’t as simple as just adding a rudimentary sports book to the state lottery’s offerings. This creates the worst scenario of all; existing black-market customers will have no interest in switching to an inferior product, while new customers get excited about the ability to legally bet on sports, only to find that their only legal option is a dull one-size-fits-all platform. But in the process, these new customers will also find dozens of more enticing illegal options, often indistinguishable from the legal ones, with a simple Google search.

Washington should avoid this trap at all costs. Rather than limiting access to legal sports betting options or create a state-run monopoly, Washington must focus on creating free market competition and innovation. By allowing multiple sports betting companies to compete, customers get more choice among legal products that can go head-to-head with — and ultimately crowd out — the illegal ones. Washington should offer a healthy number of sports book licenses at a reasonable fee, impose a reasonable tax that also encourages business growth, and let the market decide which companies are winners and losers.

Sports betting is here to stay, whether or not Washington chooses to act. If the state does nothing, then the status quo remains and millions of Americans will continue to send an estimated $3.5 billion to unaccountable offshore websites each year. If the state goes halfway and takes a monopoly approach, they may end up unwittingly driving even more customers into the black market.

The only sensible option is to allow well-regulated free market competition that can offer the same allure of the offshore market, while protecting customers and keeping tax dollars in the state. The blueprints already exist, it’s just about following these free market principles and letting the Washington tech industry do the rest.

Charles Gillespie is the chief executive of Group.

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