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Q&A: Rodney Butler, chairman, Mashantucket Pequot Tribal Nation

Insight | Analysis

Ahead of his appearance at ICE Sports Betting USA, tribal chairman and interim CEO of Foxwoods Resort Casino Rodney Butler provides his perspective on at the US sports betting and igaming landscape post PASPA

iGaming Business North America: To what extent was Foxwoods prepared for the news of PASPA’s repeal?
Rodney Butler:
We had been closely following the development of New Jersey’s sports betting case for years, in addition to serving as members of the AGA’s Sports Betting Task Force. After the oral arguments in the US Supreme Court for the PASPA case occurred in December 2017, we had a strong feeling that PASPA was trending towards a full repeal. In preparation, we ramped up our internal education on sports betting, and in Q1 2018 we began the process to select a sports betting partner that will lead us and the entire sports-fanatical north east region of the US into this new and exciting business.

What impact would the leagues’ insistence on integrity fees have on your business model with regards to sports betting?
The proposed royalty fee by the leagues has no place in legislation. Sports betting has been operated effectively in Nevada without royalty fees, and to date no state has passed legislation with royalty fees for the leagues.

Simply put, these fees will affect an operator’s ability to price sports markets competitively and affect their ability to compete with the massive, unregulated black market – which contains groups that don’t pay integrity fees, taxes, or have any real consumer protections in place.

A royalty fee will drive the already slim sports betting margins even lower and will offer little incentive for licensed operators to invest in product and marketing, which in turn will adversely affect a trusted, regulated operator’s ability to recapture the prolific black market.

In turn, this negatively influences the revenue opportunity for both the operator and the jurisdiction that derives revenue from the operator’s activity. It flies in the face of social responsibility.

I don’t think there is an operator that would be averse to working with the sports leagues on something that makes sense commercially, but from a business and public policy perspective, the royalty fees don’t make sense to include in law.

In reality, a market structure without integrity fees will likely be better for the leagues, which stand to profit handsomely through their existing revenue streams from a stronger, growing fan base.

Should the tribes’ exclusivity agreement in Connecticut prohibit Connecticut Lottery from providing sports betting?
In the case of sports betting in the USA, we believe brand trust is extremely important. We are not creating a new sports betting market, but rather we are working to recapture a large, pre-existing black market from mature, offshore unregulated operators and underground bookies.

Foxwoods Resort Casino has been a trusted gaming operator for 26 years. We think it is important for strong gaming brands to serve both existing and new demand for sports wagering in a transparent, high-reputation environment.

Will you be able to offer sports betting under the existing compact with the state or are there revisions that need to be made? If so, what would they be?
We would work through our existing exclusivity agreement with the state, and depending on negotiations, we would collectively determine whether or not we needed any revisions.

What is the appetite for sports betting in Indian Country?
In general, we have been excited about the prospects for sports betting so long as tribes are treated equally and maintain some level of regulatory authority over betting. The National Indian Gaming Association has put forward a resolution supporting such and we want to be an active part of any sports betting dialogue be it at the state or national level.

What is the tribe’s current stance on how sports betting should be regulated, and how does it differ from other tribes with a significant presence in other states?
We support a common sense market structure that fits the business we aim to operate. Over the last two decades, the tribes in Connecticut have employed many thousands of people and funnelled over $8bn to Connecticut’s general fund, so it would be fair to say that we strongly support the constituents of Connecticut and the public policy initiatives that affect everybody living in our great state.

Nevada is a fine example of how a state can structure sports betting regulations, while Pennsylvania has created what appears to be an arbitrary market structure that will do little to support the recapturing of the black market, and hinder the regulated market’s growth and sustainability.

We believe that a lower effective tax rate and pragmatic regulation for sports wagering will create a strong market structure that will drive higher volume for the operators and the state.

It will also allow us a better chance of eliminating the black market. I think it’s fair to say that anybody that has become educated about the economics of sports betting likely holds a similar view.

What role do you believe mobile and online gaming to have and what work are you doing to prepare for its introduction should it happen?
I saw a great headline recently that read, “If sports betting makes sense, online gaming makes dollars.” We agree. New Jersey is a great example of how online gaming can both drive new revenues and also produce incremental benefit to retail casinos.

We support the legalization and regulation of online and retail sports betting, along with online casino gaming, to augment our guest experience, create new jobs and adapt with the ever-changing times.

To this end, we have selected a partner to help us enter the online gaming market and are actively lobbying the state of Connecticut to legalize the activity.