Time To Hug And Make Up? Connecticut Governor And Tribes Look Ready To Move Ahead With Gambling Expansion In 2021

Formerly competing interests in Connecticut may finally see eye to eye in 2021Formerly competing interests in Connecticut may finally see eye to eye in 2021

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Connecticut has, to date, been what one might describe as a “bridesmaid state.” That is, it has often seemed close to getting on board with the sports betting and online gambling trend, yet has always come up short.

That could be about to change in 2021. While wedding bells aren’t ringing quite yet, we could see a proposal in the near future.

On Monday, Gov. Ned Lamont sent a clear signal that he is prepared to make some of the compromises necessary to make gambling expansion happen.

“This is something that’s going on all around us, and I think Connecticut should participate,” he told reporters. “If we found out anything in the course of this horrible COVID cycle, more and more of the world is going virtual, more and more of the world is going online. That’s tele-health and tele-learning, but it’s also iGaming and sports betting. And I don’t think you want Connecticut left behind.”

This is an about-face for Lamont, who has previously expressed his disapproval of online gambling. The state’s tribes, which operate its two casinos, are optimistic:

“This feels like the stars are aligning,” said Rodney Butler, chairman of the Mashantucket Pequot tribe. “We’ve had ongoing conversations with the governor. He has been engaged, and we’re looking forward to getting into much more detailed conversations.”

“We deeply value our partnership with Connecticut that is generational and historical,” said Chuck Bunnell, his counterpart with the Mohegan tribe. “Certainly the pandemic has been a challenge to all of us globally, but I think it has brought some clarity to this industry and what the future may hold for our partnership.”

There are still some challenges ahead, but they now seem more surmountable.

Too many stakeholders, not enough flexibility

There are too basic reasons that a state can have a hard time with gambling expansion. First, there can be more resistance than support among the lawmakers or their constituents. Alternatively, there can be a lot of support, but too many stakeholders who all want a better deal for themselves or those they represent. Connecticut is a prime example of the latter scenario.

Within the state, there are the lottery, off-track betting (OTB) parlors run by Sportech PLC, and finally the tribes and their casinos, Foxwoods and Mohegan Sun. At the moment, the tribes enjoy a duopoly on casino gaming, and pay the state a 25% share of their slots revenues for the privilege. They will back out of that agreement if anything threatens their exclusivity.

One issue, then, was the question of whether sports betting falls under that umbrella. The tribes, naturally, believe it does. It was previously Gov. Lamont’s position that it didn’t, and he wanted to allow the lottery and OTBs to participate.

The other problem was that the tribes want to build one or more new casinos, outside of their reservations. The state was on board with that, but MGM Resorts International wasn’t about to let it happen. Its casino in Springfield, MA would have faced new competition as a result and it was prepared for a legal battle if Connecticut authorized the construction of any casinos outside of tribal lands without a competitive bidding process.

Those issues caused this year’s gambling expansion bills to fail just like others before them. However, a lot has changed recently, mostly due to the ongoing pandemic. The chances for next year are looking a lot better.

What’s changed in Connecticut?

It’s hard to find much of a silver lining for a cloud as dark as the one COVID-19 has cast over the nation. It has, however, changed a couple of things in ways which serve to remove some of these barriers in Connecticut.

Firstly, Gov. Lamont’s change of heart presumably has much to do with having noticed the difference in outcomes in states with online gambling and those without. Most states saw their gambling revenue drop to near zero during this spring’s lockdown. Pennsylvania and particularly New Jersey saw a much smaller dip, as online gambling activity soared to make up much of the difference.

Secondly, shifting priorities as a result of the pandemic have taken new casinos off the table for now. It’s an issue that might come up again down the road. However, even just delaying the question means that it will no longer be tied to the question of online gambling and sports betting. That is, of course, providing that lawmakers can seize this window of opportunity.

One additional factor unrelated to the pandemic is the departure of Jim Murren as CEO of MGM this year. Connecticut is his home state, and under its new leadership, MGM’s focus seems to have turned elsewhere. According to the Connecticut Mirror, it no longer has any Connecticut lobbyists on its payroll, after having spent $6.3 million in 2017-2018, and $1.1 million in 2019-2020.

What will be different in 2021?

Connecticut has seen several gambling expansion bills come and go over the years. Next year’s should look pretty similar, at least in their first drafts. The most notable difference in the bills themselves will likely be the absence of authorization for new casinos, assuming that does end up on hold.

The bigger difference will be in the attitude of the various parties.

MGM being out of the picture will go a long way. Meanwhile, Gov. Lamont embracing the idea of iGaming means the state holds a massive bargaining chip. The tribes’ interests are now in better alignment with the state’s, so they should be able to get most of what they want. Additionally, the promise of online casinos is sufficiently valuable that they should be willing to compromise on small things.

The main hurdle remaining is the question of whether the OTBs will get something out of the deal. They’re in a bad position and probably willing to settle for what they can get. It’ll be up to lawmakers to find something they can offer which will also be acceptable to the tribes.

There are a few different ways things could go. One reasonable compromise would be for the tribes to surrender exclusivity over retail sports betting and allow the OTBs to offer it on site. That’s small money compared to what they’re be receiving for online casino games and mobile sports betting.

One way or another, we won’t have to wonder long. Expect the ball to get rolling quickly after new year. The state’s new legislative session will begin on January 6, and this should be a high priority.

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