Experts question the size of the Texas illegal sports betting market promoted by the former governor. rick perry

AUSTIN — In the push to legalize mobile sports betting in Texas, a powerful pro-gambling group says Texans spend a whopping $8.7 billion annually on illegal gambling. Former Governor Rick Perry promoted the number in a Sports Betting Alliance advertisement making the case for Texas to legalize sports betting.

But experts question the accuracy of the figure, saying it is impossible to pinpoint the size of an illegal market. Even the research firm that produced the estimate called it a “highly speculative exercise.”

“Given the high level of uncertainty in this approach, this estimate should be treated as low confidence,” the report said. Eilers & Krejcik Gaming LLC.

In the 2023 legislative session beginning January 10, lawmakers are expected to consider legalizing sports betting in the Lone Star State. Estimates of the economic impact of illegal betting are key to the momentum, as advocates expose how much the state could gain by taxing a portion of the profits.

The current estimate of the illegal market would generate tens of millions of dollars in potential revenue for the state over a two-year period. The lawmakers behind the push want to put those dollars toward education and public safety.

But experts caution against placing too much importance on the accuracy of estimates of Texas’ illegal market, in part because studies tend to rely on survey responses.

“By definition, if you’re studying an illegal market, it’s hard to know (the size of the market),” Koleman Strumpf, an economics professor at Wake Forest University who has studied the sports betting industry. “If a random person calls you and asks if you cheat on your taxes, would you be honest?”

They also distrust the view held by many advocates that regulating sports betting will prevent Texans from making unregulated and untaxed bets.

“The regulated market is not taking business from the unregulated market,” said Harry Crane, a Rutgers professor of statistics who has studied betting markets.

Cara Gustafson, spokeswoman for the sports betting allianceHe said: “There is no question that there is an extensive illegal market operating in Texas and it is clear from the report that the numbers used are estimates.” He did not respond to detailed questions about the figure and its accuracy and why the group trusts it.

Adam Krejcik, who is the head of sports betting at Eilers & Krejcik Gaming, said the disclaimers listed in the report were meant to tell any reader to take the projections with “the greatest grain of salt possible,” he said in a statement. email.

Sports Betting Alliance partners with Eilers & Krejcik Gaming, Gustafson said. Krejcik said the firm was commissioned to produce a study on the sports betting market in Texas.

Perry, who is a paid spokesperson for the Sports Betting Alliance, said The Dallas Morning News the figure is “the best number you can think of.”

“We know that it is a substantial number,” he said without offering details.

The former governor, who joined the group this fall, said he is not active in sports betting. The Texas A&M grad said he made a bet on his life: $25 for the Aggies to win the national championship about 10 years ago. He lost.

The legalization of sports betting faces an uphill battle in the next legislative session. Sen. Carol Alvarado, D-Houston, introduced SJR 17, a constitutional amendment that would legalize sports betting and allow a newly created Texas Gaming Commission to issue casino licenses for up to four “destination resorts.”

Two-thirds of the House and Senate must sign off for the bill to move forward. So, Texas voters would have the last word in the November election.

Last session, Lieutenant Governor Dan Patrick, who heads the Senate, said sports betting would not “see the light of day,” and the bills died.

Patrick’s office did not respond to a request for comment on his position on sports betting ahead of the 2023 session.

Governor Greg Abbott indicated ahead of the midterms that he would be open to casino gaming, the Houston Chronicle reported in October.

To say that people in the United States place billions in illegal gambling annually and that the practice needs to be regulated is not a new argument. In 2014, NBA commissioner Adam Silver wrote an opinion piece in The New York Times where he said that about $400 billion is illegally wagered on sports every year.

Since the Supreme Court in 2018 ruled the federal ban on sports betting, states have rushed to pass legislation legalizing it.

Currently, 31 states and Washington DC have some form of legalized sports betting, according to the American Gaming Association. Texas and California are the two largest states where it is still illegal, although live and simulcast parimutuel betting on horse racing is legal at the state’s remaining tracks, including one in Grand Prairie.

Voters in some states are still not convinced to legalize sports gaming. In November, Californians rejected two proposals to amend the state constitution to legalize mobile gambling.

A New York Times investigation last month concluded that projections of how much various states could collect in taxes from sports betting were “grossly inflated.” But some, like New York, exceeded projection expectations by adding a high tax rate

When Louisiana legalized it in 2021, for example, 25% of state revenue from sports betting went to early childhood education. The income generated could be used to finance different sectors of the state such as education.

louisiana officials estimates punters there will wager around $1.8 billion in the first full fiscal year of operation, and the state expects sports betting tax revenue to be higher than the projected $30 million in the first year. During the first five months of the current fiscal year, more than $15.2 million in taxes were paid to the state on more than $844 million in gambling.

The Eilers & Krejcik Gaming Texas Market Report is based on three studies with broad estimates of the extent of illegal sports betting in the US.

One report puts the illegal market in the US at $150 billion a year, a second says it’s $107 billion, and the final says it’s between $50 and $60 billion. Eilers & Krejcik Gaming takes a midpoint of $100 billion.

Half, who has published an article on sports bettinganalyzed the methodology for The Dallas Morning News and said he doesn’t have much confidence in the numbers.

The first report that projected the US market to be $150 billion dates back to the 1999 report by the National Gaming Impact Study Commission, which gave a range of $80 billion to $380 billion. . Commissioner John Wilhelm has been identified as the source of the estimate, saying as much at a 1998 commission hearing, show the transcripts of the meeting. He did not cite a source.

Strumpf said the size of the illegal market cited in the 1999 report is “essentially made up.” Board and the New York Times have also written stories challenging the accuracy of that estimate. Reached by text message, Wilhelm said he doesn’t remember much about the 1998 meeting or the number. He declined to comment further.

The other two studies are based on surveys to try to control how many adults in the country are making illegal gambling. The method can be unreliable because it involves taking a small sample of gamblers and trying to assign that behavior to the rest of the US population.

“That doesn’t make any sense,” he said in an email. Ultimately, she summed up the study this way: “If a student gave me this as part of a class project, I could be generous and give it a C, but it’s really failing.”

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