Lottery releases emergency rules for sports betting

The Lottery Commission released the rules through the Secretary of State’s rule filing system July 9 after approving them June 21.

The West Virginia Lottery Sports Wagering Act gives the Lottery Commission the power to promulgate emergency rules setting up the sports betting system any time before Dec. 1, after which the agency will need to submit rules through the normal rule-making process.

“The Lottery’s emergency rules seem to provide a very thorough, thoughtful approach to ensure secure implementation of sports betting in West Virginia in a manner that also optimizes commercial opportunities and revenue generation,” said Delegate Shawn Fluharty, D-Ohio.”

Casinos can submit requests to Lottery for immediate commencement of sports pool or online sports pool operations. The license fee for casinos is $100,000. Licenses are valid for one year, and if the casino doesn’t meet the rules within 270 days, the permit can be pulled.

“This now puts the casinos and racetracks in a position to apply for a license and be licensed by the Lottery to be a sports betting venue,” said John Cavacini, president of the West Virginia Racing Association. “With that happening, the tracks now have the confidence of going out and picking their vendors and purchasing equipment and making capital expenditures that would have been hard to do without having to have a license in hand.”

The rules lay out the specifics on building sports betting lounges at the casinos. Casinos can contract with third-party vendors to develop sports-wagering apps, but the apps can only accept online and mobile wagers from patrons located physically inside the borders of West Virginia. The Greenbrier Casino has already contracted with sports wagering company FanDuel as its third-party vendor.

The rules call for casinos to create an “integrity monitoring system,” defined as “a system…which an online sports pool operator receives and sends reports from sports pool operators to assist in identifying suspicious activity.” Casinos will need to conduct a system integrity and security assessment prior to starting operations and annually by an independent professional.

Both Fluharty and Cavacini said they’ve had constant contact with Lottery in crafting these new rules.

“I’ve had discussions with the Lottery from day one of this process and they’ve worked diligently to provide casinos the necessary infrastructure for on-site and mobile/online wagering and finalize agreements with other business partners to maximize commercial value,” Fluharty said.

“We were part of the stakeholders who met with the Lottery on several occasions and had discussions,” Cavacini said. “We had the CEOs of all the casinos in for meetings with the lottery. The Lottery and the tracks worked together developing some rules.”

While both said they were pleased with the first emergency rules, they both acknowledged that sports wagering is new territory for West Virginia and expect some tweaking of the new rules along the way.

“Generally speaking, I’d say that in most cases the rules and regs fit the parameters of what we suggested,” Cavacini said. “There may be a couple of areas we need to talk about, but we’ll do that next week.”

“The bureaucratic process is not always a pleasant one, however, I believe we are moving forward in a manner that will get us up and running in time for football season which is a peak revenue time for the state, especially while our neighbors are failing in their attempts at sports betting,” Fluharty said.

According to a report submitted by the Secretary of State, the Lottery estimates sports will have an economic impact of $5.5 million in its first year. Of West Virginia’s neighbors, only Pennsylvania has enacted any kind of sports betting legislation, but with a 36 percent tax rate.

“Honestly, I think we will be in good shape to reach the $5.5 million not for any other reason other than the other states that are contiguous,” Cavacini said. “I think we’re going to have a good year and two years. Most of our resort facilities at the hotels are sold out every weekend anyway. This is going to help out during the week. It could lead to additional rooms being added at the casinos and hotels simply because people are going to come across the border for the weekend.”

Still, there remains a concern among lawmakers that Gov. Jim Justice still wants to implement an integrity fee paid back to the professional sports franchises. Justice has expressed interest in reviving integrity fee legislation, possibly through a special session. Larry Puccio, lobbyist for Justice’s Greenbrier Resort, also is a lobbyist for two major league sports teams who want to see an integrity fee.

“The Justice administration may continue to push the fee…but no matter how many times they revisit it, they will continue to be met with the same unequivocal opposition from the Legislature and the citizens of West Virginia,” Fluharty said. “We are tired of out-of-state interests dipping into our state coffers and I will not stand for it.”