Mobile Sports Bets May Be Just a Tap Away

(A correction has been made to this article. See below.)

The state has three glittering gambling halls and a fourth on the drawing board, but Arkansas sports bettors could soon have a mini-casino in their pockets: their cellphones.

On Dec. 30, the Arkansas Racing Commission unanimously approved allowing Arkansas casinos to offer sports wagering on college and professional sports from a mobile device, laptop or desktop computer anywhere in the state. The current rules require gamblers to be at the Oaklawn, Southland or Saracen casinos to make a sports bet.

Saracen Casino Resort of Pine Bluff has been working on its app for about a year and expects to have it ready for Arkansans to bet on the Super Bowl on Feb. 13. The casino spent “in the six figures” to develop the app, Carlton Saffa, Saracen’s chief market officer, told Arkansas Business last week. The casino, owned by the Quapaw Nation of Oklahoma, made that investment, “coupled with a seven-figure marketing campaign,” Saffa said.

Oaklawn Racing Casino Resort in Hot Springs is working on its app, but it isn’t expected to be ready until later in the first quarter or maybe early second quarter, said Wayne Smith, Oaklawn’s general manager.

Oaklawn is making a “significant investment” in the app, but Smith declined to say how much.

Oaklawn didn’t start developing its app until recently. Smith didn’t have any projections on what revenue the mobile sports wagering would bring Oaklawn.

Saffa projects Saracen’s amount of revenue from sports bets will increase. Saracen’s casino had the lowest amount of sports betting with $12.5 million in the first 11 months of 2021.

“It’s not a matter of will it increase 10% or 20%; it will be a multiplier, so it will double or triple,” Saffa said.

Southland Casino Racing in West Memphis declined to discuss its preparations. Glen White, a spokesman for Southland owner Delaware North of Buffalo, New York, said via email that the company would reach out “when we are ready to talk about launching the app.”

The new rules approved by the Racing Commission, not yet final, require that at least 50.1% of the sports betting revenue remain with the casinos. National companies that offer mobile sport wagering, such as DraftKings Inc. of Boston and FanDuel of New York, are fighting that provision, saying they cannot operate in Arkansas under those conditions.

The rule changes require approval by the Arkansas Legislative Council, which is scheduled to meet at 9 a.m. Jan. 28. An agenda for that meeting hadn’t been posted as of Thursday.

Sports betting accounts for a relatively small percentage of casino wagering in Arkansas. In the first 11 months of 2021, the three Arkansas casinos reported $6.16 billion in bets from terminal and slot machines, but only $60 million in sportsbook bets, according to the Arkansas Racing Commission.

Arkansans can play the lottery on their smartphones. In its first full year of operation, Jackpocket of New York, which offers a mobile app for users to play the lottery, generated $2.95 million in revenue for its fiscal year that ended June 30, making it the No. 1 lottery retailer in the state.

Jackpocket told Arkansas Business via email that it has seen consistent growth since launching the app in 2020, and it doesn’t think the introduction of mobile sports betting will hurt its business.

“Sports betting expansion in general, and specifically online sports betting, is something that’s been happening at a rapid pace around the country for a few years now,” the company said. “Thus far, we haven’t seen a negative impact from it anywhere on our business, and believe the same will be the case in Arkansas.”

Casinos would be allowed to offer mobile sports wagering but not casino-type games, known in the industry as iGaming. “IGaming is not in the cards in Arkansas right now,” Saffa said.

Rise of Sports Betting

In 2018, the U.S. Supreme Court overturned a federal law that banned sports betting in all states except for Nevada. Since then, “we’ve seen remarkable growth, unlike anything I’ve seen in any industry in my career,” said Casey Clark, senior vice president of the American Gaming Association of Washington.

Now, 33 states and the District of Columbia allow sports betting.

When Arkansans approved casino gaming in November 2018, sports betting was included as a part of casino gambling. The first legal sports bet was placed in July 2019, and since then more than $100 million has been wagered on sports across the three Arkansas casinos.

Saracen Casino aims to have its betting app ready in time for the Super Bowl.

But sports wagers, for now, can only be placed on casino property. Someone in northwest Arkansas wanting to bet on the Razorbacks would have to make about a seven-hour round-trip drive to Oaklawn in Hot Springs to place the wager, since Missouri and Oklahoma don’t allow sports betting.

“You’re seeing significant consumer demand and interest in moving their activity out of the illegal market to legal, safer options that are now being offered to the majority of American adults who want to wager,” Clark said.

Legal sports betting revenue in the United States has been climbing since the first quarter of 2018, although it took a hit in the second quarter of 2020 when sporting events were postponed or canceled because of COVID-19.

Since the third quarter of 2020, the sports betting numbers across the country have been growing, as states have opened up legal sports wagering.

In Arkansas, October was a record month with $9.5 million in sports wagers.

It’s estimated that Amercans bet $150 billion annually on illegal sports wagers. “It’s not like Americans just started betting on sports when the Supreme Court invalidated the prohibition,” Clark said.

During the Racing Commission’s public comment period for the proposed changes, national mobile sports wagering companies objected to the rule that Arkansas casinos must keep at least 50.1% of the sports betting revenue.

The companies’ business model generally provides that they keep 85%-95% of the revenue.

“To my knowledge, that was the first time they’ve ever shared those internal numbers in public,” Saracen’s Saffa said. “I mean, anybody in the casino business knew they kept most of the money. But regulators and legislators I don’t think realize that.”

FanDuel argued in a Dec. 21 letter to the Racing Commission that after paying taxes a company such as FanDuel “would at most, expect to receive less than one-third of the revenue from the operations of an online sports pool.”

FanDuel also said that even if a casino found an operator willing to partner with it, under these conditions, “in order to control expenses, they would need to dramatically limit what they spend on marketing and promotions,” wrote Cory Fox, FanDuel’s government affairs and product counsel vice president.

Gamblers would stay with the illegal markets, hurting the growth of the online sports betting market, which would significantly reduce tax revenue to the state, he wrote. Fox didn’t immediately return a call for comment.

The Technology

Arkansas casinos will have to make sure users of the app are in Arkansas when they place their sports bets.

Saracen’s app “has embedded in it multiple checks to confirm you are within the state of Arkansas,” Saffa said. “This is not just about compliance with Arkansas rules; it’s about compliance with federal law. The [federal] Wire Act requires that we do not book bets across state lines.”

The app uses a geolocation service — which Saffa said is “not cheap” — that will know if the gambler is inside Arkansas’ state lines when the wager is made.

The app also will feature identity verification software to verify the player’s identity and age. Saffa said he doesn’t believe the introduction of the app will change the number of visitors to the Pine Bluff casino, which sees about 150,000 visitors a month.

Saracen’s app will allow users to place bets on a wide range of sporting events at the collegiate and professional levels and allow for in-game betting, such as who will be the first to score a basket or which team will hit a homerun first.

“When you open up the world of mobile wagering, there are all sorts of things that people are interested in, whether it’s European soccer or other basketball leagues,” Saffa said. “It’s exciting. You can bet from the comfort of your home.”

(Correction: Oaklawn Racing Casino Resort’s allows Arkansans to use their mobile device, laptop or desktop computer to bet on horse races held at Oaklawn in Hot Springs and other racetracks.)