Arkansas regulators withdraw mobile sports betting rules; market likely to launch after Super Bowl

Arkansas Racing Commission’s attorney Byron Freeland has pulled proposed rules for mobile gambling from a legislative panel’s agenda, which could mean the state’s three casinos won’t be able to take wagers for the February 13 Super Bowl. The Arkansas Legislative Council was expected to discuss mobile sports betting rules on Wednesday.

Freeland made the decision to pull back the proposed casino gambling rules after the commission approved changing one word during a brief meeting late Tuesday morning, finance department spokesman Scott Hardin said, according to Arkansas Democrat Gazette. The Racing Commission is part of the finance department.

The changed word was “revenue,” which has been replaced with “receipts.” But the decision to pull the proposed rules is also set to allow for additional time to address questions raised by state legislators and other interested parties as of late. "By holding the rules until February or March, we ensure continued full transparency,” Hardin said. 

The word revenue was replaced in a paragraph that reads: "Operation of an online sports pool shall be prohibited in circumstances in which a majority of the net gaming revenue, as defined in Amendment 100, from the online sports pool is paid to a third-party vendor assisting in the operating of the sports pool."

According to Freeland, the change was made in response to public comments, which questioned what the commission meant by net casino gambling revenue. The lawyer told the commission that there is a legal argument that if a third-party vendor gets a majority of the revenue from sports gaming it would violate Amendment 100 to the Arkansas Constitution.

“The Commission understands the word change approved today, although small, also results in additional questions,” Hardin said in a written statement, according to Arkansas Times. “The state could still see mobile sports betting launched by March if the Arkansas Legislative Council approves.” This would imply missing the Super Bowl date, the biggest event for sports betting.

The delay might also gain time for the Commission to tackle disagreement among stakeholders about a revenue-sharing rule approved late last month, which requires sportsbook operators to partner with existing retail casinos to gain mobile betting access in the state. This rule sets casinos to receive at least 51% of revenue from the partnership.

Unanimously signed off on December 30, the 51% split would set Arkansas apart from other states offering sports gaming: national average share is between 5% to 15% with local casinos, explains Arkansas Democrat Gazette. Most states allow operators and casinos to negotiate their revenue-sharing agreements.

The rule led to controversy among national operators, including heavyweights DraftKings, FanDuel and BetMGM, which voiced their displeasure with the policy. John Burris, lobbyist with the Capitol Advisors Group, who represents the previously named operators plus Fanatics and Bally’s, had asked the commission to amend the proposed rules on December 30.

Burris asked the regulator to change the rules in order to allow companies to negotiate their own split agreements with land-based casinos, while giving the venues complete control on whether to “accept or reject” the offers. The change was ultimately not made.

“In addition to the unprecedented nature of the proposed regulation, imposing such an artificial cap on vendors’ revenue share, in this case not more than 50%, is not based on any market considerations and would only serve to impede competition,” a BetMGM representative had told the commission. “In short, the cap would make it impossible for sports betting platform providers to enter the Arkansas market and serve the state’s residents.”

“There have been concerns expressed by numerous legislators about the late change in the language of the rules for mobile sports betting,” Gov. Asa Hutchinson said in a statement following the news. "The change does not appear to be significant, but in fairness it made sense to consider the rules in regular order at the next meeting.”