Risks abound as Pennsylvania expands online sports betting
As we appear to have entered pandemic status in the United States with the coronavirus, its impact on Chinese supply chains has rocked our financial markets and taught an important lesson: We live in a hyperconnected world, so we need to be extra careful in picking our business partners.
A challenge for lawmakers trying to grow Pennsylvania’s economy is figuring out which multinational companies vying for state contracts can be trusted. Many are largely unknown entities. Some companies based abroad have very questionable track records, not just in distant parts of the world but right here in the United States.
Last year the online-gambling company SBTech quietly struck a deal with Pennsylvania, where it plans to rapidly grow. What many in the Commonwealth might not know, however, is that SBTech has become ensnared in controversy as it attempts to expand its footprint in the US.
In 2017, Oregon awarded a lucrative contract to SBTech, despite allegations that the company, which is based in the Isle of Man, with a subsidiary on the island of Malta in the Mediterranean Sea, operates in black markets such as China.
SBTech categorically denies that it operates in any prohibited market. But it has been dogged by reports that it does business in Turkey, Iran, and other countries where sports betting and other forms of gambling are illegal.
But many in Oregon have had buyer’s remorse ever since partnering up with SBTech. Central to their concern is that SBTech refuses to release details of its deal with the state. In fact, SBTech has undertaken a legal spewing war over the disclosure of public records with Oregon Attorney General Ellen Rosenblum and others.
The legal back-and-forth came about late last year when the Oregon Lottery filed a not unusual public records request for SBTech and the State of Oregon’s contract to be made public. Instead of adhering to the request of the Oregon Lottery and disclosing the contract to the public, the sports-betting provider has chosen to sue not only the Oregon Lottery, but the director of the lottery, the Oregon Department of Justice, two news outlets, and Rosenblum herself.
Making matters worse, new reporting has confirmed that the Oregon Lottery’s sportsbook, run by SBTech, is off to a rocky start. Although it was initially predicted that Scoreboard, the state-sponsored gambling application, would produce millions in tax revenue to the state, it is now expected to run a multi-million deficit.
The chaos with SBTech in Oregon should serve as a warning sign to Pennsylvania and other states looking to benefit from the online gambling market.
The reality is that Pennsylvania can reap a windfall from online gaming and sports betting. Such revenue in Pennsylvania hit a record high last year, boosted by the state’s new online and sports-betting markets, both of which are the result of reforms passed in 2017 by Gov. Tom Wolf. Combined, online and sports-betting revenue contributed $118 million to the Keystone State’s $3.4 billion gaming-revenue haul.
The industry no longer depends on physical traffic, but that doesn’t mean that every magic Internet gnome on our phone should be trusted.
SBTech’s response to legal challenges in Oregon was not to show how accommodating they can be of their new customer, but to attack them in court. The lesson is, don’t take gambling companies looking to secure contracts at face value. We live in a hyperconnected world, so we need to be extra careful in picking our business partners.
Jared Whitley is a longtime DC politico, having worked in the U.S. Senate, White House, and defense industry. He has family in Bethlehem, Pennsylvania.