Cigars, booze, money: how a lobbying blitz made sports betting ubiquitous in the US

State Representative John Barker, a cattle breeder, retired judge and chairman of one of the most powerful committees in the Kansas legislature, had a glass of 30-year Redbreast Irish whiskey in his hand and a Don Tomas cigar from Honduras in his mouth.

Both had been passed to him as he entered a party a few blocks from the state capitol. It was co-sponsored by lobbyists who had recently turned to Barker for help legalising sports betting in Kansas.

“They keep a special bottle for me up there – they know I like it,” he said of the lobbyists as he surveyed the crowded room. “I’m in my element when I have a whiskey and a cigar.”

It was the eve of the vote on Barker’s long-debated gambling bill, a muggy spring night in April. This was the latest stop in a relentless nationwide campaign to bring sports betting to tens of millions of mobile phones, in what has been the fastest expansion of legalised gambling in American history.

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Less than five years ago, betting on sports in the United States was prohibited under federal law except in Nevada casinos and a smattering of venues in other states. Sports leagues argued that the ban safeguarded the integrity of American sports, while consumer watchdogs warned that legal gambling could turn fans into addicts.

But in 2018, the Supreme Court ruled that the federal prohibition was unconstitutional.

DraftKings, which has a presence in Ireland, and FanDuel – owned by Paddy Power parent, Flutter – are giants in the fast-growing field of fantasy sports. They had already mobilised an army of former regulators and politicians to press for sports betting in state capitals.

The gambling industry views sports betting as a stepping stone to an even loftier ambition: the legalisation of online casino gambling, in which Americans would be able to wager on poker and other games anywhere with an internet connection.

Soon, in a crucial reversal, sports leagues overcame their antipathy toward gambling, which they came to see as a way to keep increasingly distracted audiences tuned in. Casino companies also hopped on board.

It was a market, the industry hoped, that could be worth billions a year.

Gambling companies and their allies deployed a bare-knuckled lobbying campaign, showering state lawmakers with money, gifts and visits from sports luminaries and, at times, using deceptive arguments to extract generous tax breaks and other concessions, according to a New York Times investigation.

Industry lobbyists dazzled lawmakers with projections about the billions of dollars that states could expect to collect in taxes from sports betting – projections that have often turned out to be wildly inflated, according to a Times analysis.

The results of the lobbying campaign have been stunning: Thirty-one states and Washington, DC, permit sports gambling either online or in person, and five more have passed laws that will allow such betting in the future.

Many of those states did so on terms that were remarkably favourable to the gambling industry. Few imposed restrictions on companies using promotional offers – such as “risk-free” wagers – to lure neophyte gamblers. Those tactics have been banned in some countries because of their potential to hook people predisposed to compulsive gambling.

The vast and largely unopposed influence of the gambling lobby has been on especially stark display in Topeka this year.

Lawmakers in Kansas rewarded big political donors, some of whom used networks of shell companies and political action committees to skirt campaign finance laws, with legislative handouts and lucrative licenses.

The same month that Barker was enjoying lobbyists’ cigars and whiskey, he was also inserting provisions into the gambling legislation that would transform an already generous bill into what some supporters acknowledged was an outrageous giveaway.

And at the industry’s behest, Kansas lawmakers halved the tax rate on gambling companies’ revenue. Even as Kansans placed $350 million (€341 million) of bets this autumn, the state collected less than $271,000 in taxes.

“These states have leverage – they are just getting outmanoeuvred,” said Joe Weinert, executive vice-president at Spectrum Gaming Group, which analyses the gambling industry.

“The legislators have a fiduciary responsibility to the taxpayers to get the maximum amount possible. But these companies are just laughing all the way to the bank.”

The rapid rise of online sports betting has radically changed how millions of people consume sports and enabled them to legally engage in potentially addictive behaviour from the comfort of their livingrooms.

In Kansas, lawmakers had been debating sports gambling since 2018, but betting companies held out for sweeter deals, and the bills stalled. By early this year, 30 other states had approved sports betting.

In the first half of this year, Americans placed an average of nearly $8 billion per month in legal sports bets, compared with less than $1 billion a month three years earlier, according to SportsHandle, a trade publication.

The gambling industry views sports betting as a stepping stone to an even loftier ambition: the legalisation of online casino gambling, in which Americans would be able to wager on poker and other games anywhere with an internet connection. Six states already permit some so-called iGaming, and lobbyists are pressing more states to follow suit.

“It is time for your state to add iGaming,” Jason Robins, chief executive of DraftKings, told lawmakers at a recent conference that his company sponsored. “Not in the future, but now.”

If you had to pick a moment when the campaign to persuade states to legalise sports betting started taking shape, you might choose the day in 2014 when a lobbyist named Jeremy Kudon heard a radio ad about how people could win a “boatload of money” through fantasy sports.

A sports fanatic, Kudon worked at the international law firm Orrick. His speciality was helping young industries navigate regulatory and legislative challenges in state capitals.

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Now he was looking for his next fight. Fantasy sports had been around for years. But companies such as FanDuel and DraftKings were turning it into a big business by allowing people to stake money on their fantasy teams.

The trouble was that by introducing money into the equation, fantasy sports appeared to be crossing the line into sports gambling, which was illegal in most states.

Kudon pitched FanDuel, whose radio ad he had recently heard, on a strategy to preemptively affirm the legality of its service. FanDuel, founded in 2009, hired him. Next, Kudon signed up DraftKings, which started in 2012.

“We needed a national strategy,” Kudon said in an interview, recalling his thought process at the time. “We need to go out there and pass 10, 15 bills and get ahead of this.”

An early step was to recruit – and pay – experts to argue to state officials that fantasy sports was not gambling.

One expert paid by DraftKings, Abraham Wyner, a University of Pennsylvania statistics professor, testified that in fantasy sports, “players with the most skill will usually and consistently defeat players with less skill”. By that logic, fantasy sports didn’t constitute gambling, which many states defined as a “game of chance”.

As Kudon pushed to permit fantasy sports, a legal battle was under way in New Jersey that would determine whether his clients and others would be able to offer full-fledged sports betting.

In 2012, then-governor, Chris Christie, signed a bill to legalise sports betting. The goal was to revitalise Atlantic City, whose once-bustling boardwalk casinos were struggling.

But the New Jersey act was in open defiance of a federal law that banned sports betting outside Nevada and a few other locations.

The big US sports leagues, as well as the NCAA, sued to strike down New Jersey’s law. They argued that sports betting could cast suspicions on the integrity of athletic competitions. The Justice Department sided with the leagues in defence of the federal ban.

In June 2017, the US Supreme Court agreed to hear the case. The following May, it struck down the federal ban on sports gambling, ruling it infringed on states’ rights. It was the moment Kudon and his clients had been preparing for.

They had already been working with lawmakers in numerous states who were eager to hobnob with current and former sports officials who had been star players.

In Kansas, lawmakers had been debating sports gambling since 2018, but betting companies held out for sweeter deals, and the bills stalled. By early this year, 30 other states had approved sports betting.

Lawmakers in Topeka decided to try one more time. In the House, the 50-page bill, sponsored by Barker, had the gambling industry’s fingerprints on virtually every page.

One provision ensured that casino companies would get a cut of sports-betting business. Another expanded the list of venues where sports betting would be allowed. Among the new sites were a Nascar racetrack and the stadium of the Sporting Kansas City soccer team.

The racetrack was next to the Hollywood Casino, which in recent years had donated a total of $60,000 to more than a dozen Kansas politicians and state party committees.

The casino’s parent company, Penn Entertainment, had hired a fleet of lobbyists to advance the sports-betting bill. Another $150,000 came to lawmakers from other casinos, lawyers and lobbyists tied to the legalisation effort, records show.

Barker stood at the dais at the front of the state house chamber. It was just before midnight April 1st. He ticked off a few last-minute changes that he and other house leaders had inserted into the sports-betting package. The changes sounded technical, but they represented lucrative concessions to the gambling industry and key campaign donors.

One new provision would set aside most of the already reduced gambling tax revenue for a special purpose: the construction or renovation of a sports facility for one or more unidentified professional teams.

Six Republicans simply voted “present”. Several lobbyists said this was part of their strategy. A number of the “present” senators had secretly agreed to vote “yes” if the bill was falling short of the 21 votes needed for passage.

On the house floor that night, a lawmaker asked Barker to explain the rationale. “I was asked to carry it by leadership,” he replied.

It was a reference to the house speaker, Ron Ryckman jnr. At a subsequent meeting with his colleagues, Ryckman would say only that the change had come at the request of unspecified “real estate developers,” according to lawmakers who heard his remarks.

Those developers, the Times found, had much to gain. The most likely site for the new stadium – envisioned as a possible future home for the Kansas City Chiefs football team, currently located across the Missouri border – was an area west of Kansas city.

The location was already a sports and entertainment hub. Sporting Kansas City’s stadium was there. So were the Nascar racetrack and the Hollywood Casino.

Another 400 acres of land there were controlled by Homefield LLC, whose owners included executives with Sporting Kansas City. Those executives were drawing up plans to use the 400 acres for a sports and hotel complex.

Just before the 2020 election, Homefield and a network of related companies routed tens of thousands of dollars in contributions to Ryckman and other legislative leaders, according to campaign disclosures and corporate records.

One other important provision had sneaked into the house bill: a tax break, like those in 18 other states, to let gambling companies deduct at least some “free bets” and other promotions from their taxable income.

The house speaker, the majority leader and governor Laura Kelly, a Democrat, had all endorsed the package.

The House passed the bill by one vote. Now it was headed to the state senate.

The senate vote took place two days later. It was shaping up to be a nail-biter. Critics took to the senate floor to warn their colleagues about what legalised sports gambling might do to the state’s most vulnerable residents.

Six Republicans simply voted “present”. Several lobbyists said this was part of their strategy. A number of the “present” senators had secretly agreed to vote “yes” if the bill was falling short of the 21 votes needed for passage. A text message would be sent, and in an instant, their votes would change.

That wouldn’t be necessary. The vote was 21-13. - This article originally appeared in The New York Times.