The Arbor Outlook: Gambling, State Coffers and a Paradigm Shift

“Just like the gambler says, ‘Read ’em and weep...”
— from “It Makes No Difference,” as performed by The Band

The only time I ever placed a bet was on the floor of a Las Vegas casino about 15 years ago. I was there for an investment conference and one night when no meetings were scheduled, I wandered down to a hotel lobby and threw a few quarters into a machine. I pulled the arm, saw only two lemons in the display, and strolled back outside into the warm night air. Mostly I remember a large, stuffy, smoky room, awhirl with noise and garish colors. There are those besotted with gambling fever, but I am not one.

That said, the Supreme Court’s recent ruling striking down the ban on sports betting is a fascinating cultural paradigm shift. It recognizes that many people desire to bet on sports. Estimates are that just under $5 billion was bet on the Super Bowl this past February, and only 3 percent of that betting occurred in Nevada. That’s a lot of money. Vermont’s total GDP in 2016 was only a little over five times that amount.

States with lingering financial problems, like my home state of Illinois, could reap significant financial tax revenue from the new law. And in many cases because of this predicament, some states will move faster than others to embrace legalized sports betting.

In New Jersey (which brought the suit against the federal prohibition) and Mississippi, sports betting will probably be approved almost immediately. That the former is one of the most highly taxed states and that the latter is one of our poorest in terms of state tax revenue speaks volumes about the relationship between state financial coffers and the passage of certain gaming legislation.

I don’t attend many sports events, so the idea of fans around me pecking on their phones to place bets on the next play does not bother me. That said, many new “fans” will attend sports events now for the express purpose of placing wagers while watching contests in person. Companies that own sports broadcasting rights will likely be beneficiaries of this new law, which potentially increases the value of sports leagues, franchises and venues. More people betting means more eyeballs on the games, more money for commercials, and bigger profits. Thus, the intersection of publicly traded investments and public policy is very clear.

Like pebbles tossed into a still pond, new laws create ripple effects that touch many walks of life, and the investment world is not immune. Nothing happens in a vacuum. And this legislation proves that.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 – www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.