Why Does Louisiana Not Have Sports Betting?

If you’re looking for a place to make some wagers this season, odds are you won’t find them in Louisiana. The state’s legislative branch has effectively shut down operation of an online sportsbook after authorities alleged that it was being used to facilitate illegal activity. The site, DraftKings.com, had a physical presence in the state but had no formal regulatory approval, which is required to do business there. And, as of the time of this writing, a proposed piece of legislation that would have removed all regulatory restraints on online gambling in the state has died in committee.

It All Started With The NCAA Investigation

It was back in October 2017 when the NCAA launched a nationwide investigation into the use of college sports to facilitate gambling. This came after a similar probe in 2014 had revealed similar allegations in several other states. One of the target schools in the most recent investigation was Louisiana Tech University, whose football team is known as the Bulldogs.

According to documents obtained by the Associated Press, the NCAA probe revealed that from 2011 to 2015, Tech’s football program amassed more than $5.3 million in payments to 25 high-profile coaches and players from several NCAA conferences, including the Southeastern Conference (SEC). The funds were made available through online betting pools and various forms of gambling. Investigators also found that in some cases, the winnings exceeded the costs of the payments by large margins. For example, from 2011 to 2014, the Bulldogs amassed more than $2.9 million in profits from online gambling via a DraftKings account. In 2015, they had $3.4 million in winnings from DraftKings and betting on the NBA. The total cost of the 25 payments — which included travel and lodging — was roughly $54,500. (The NCAA typically does not publicly disclose the results of its investigations, but the information was made available in response to a public-records request.)

An Offline Operator With A Major Presence In The State

While the NCAA investigation was underway, the state of Louisiana was working to establish legal online gambling. In June 2018, the Louisiana Senate passed legislation to allow state-regulated offshore sportsbooks to open in the state. (Offshore sportsbooks are operated by companies that have no physical presence in the state but take bets and pay winnings from anywhere in the world.)

But in the end, the bill never received a vote in the House. The previous month, the Louisiana Lottery announced that it had teamed up with New Jersey sports betting firm, BetOnSports, to establish an online shop that would allow Lottery winners to make wagers on sporting events. BetOnSports, which already has a physical presence in the state, would manage the site and process the transactions. However, after authorities in New Jersey shut down the nation’s first legal online gambling shop, BetOnSports ceased all operations in the state. (In September 2018, the company closed down its entire New Jersey operation.)

A Regulated Operator That Would Face Extensive Legal Battles In The State

After BetOnSports pulled out, the state took a look at the legal landscape and determined that it had no choice but to regulate the industry. In December 2018, Louisiana’s gaming regulators — the Louisiana Gaming Control Board — established a framework for legal sports betting and introduced legislation to do the same. (The bill would have allowed for up to three legal sportsbooks to open in the state, with the Gaming Control Board regulating and licensing all gambling operations.)

However, this attempt at legalised sports betting was stymied when, in February 2019, the Louisiana State Police (LSP) began investigating the board over allegations that it had violated the state’s public-records law. (The investigation, which has not been made public but which several news outlets reported on, centers around whether board members improperly withheld documents pertaining to the regulation of legal betting.)The Battle Between The State And The Operator

In an effort to avoid a legal showdown, the board and the LSP negotiated an agreement where the firm would cease all operations in the state, while the board would not pursue legal action against it. (The agreement was made public but the terms were not.) In return, the board granted the company formal licensing to do business in the state. (The board has the authority to grant or deny these types of licenses but, as of the time of this writing, it has not yet decided whether to renew the license of the company that owns DraftKings.com.)

After news of the investigation broke, sportsbooks closed down in the state, and the Louisiana legislature passed a bill to take the site offline. While DraftKings was already forced to close down operations in a handful of other states, the company quickly filed an injunction challenging the bill. (Similar legislation has been proposed in Texas and Oklahoma but has not advanced to the same degree in those states.) In the meantime, the NCAA still has yet to announce the results of its investigation into Tech, but the university is certainly not celebrating — especially since the probe is still ongoing.

Why It Is Still A Battle

Even after the firm secured a license to operate in Louisiana, the legal battle over sports betting in the state continues. (The board has appealed the injunction, arguing that the case should be thrown out because it conflicts with the state’s sports betting ban.) Although the company would no longer be able to run an online betting operation in the state, it has retained the right to petition for a new license if it complies with all laws and regulations. (According to reports, the firm has applied for a license but has not yet been issued one.)

Meanwhile, the NCAA still has not publicly disclosed the results of its investigation into Tech but has assured the public that it is continuing to gather information.

A Test Case For States That Want To Legalise Sports Betting

If you’re looking for a place to make some legal wagers this season, the situation in Louisiana is a lesson in how messy and protracted a battle over sports gambling can be. (Although, to be fair, the state did eventually pass legislation allowing for legal sports betting.) But more importantly, it’s a cautionary tale for states that are interested in implementing legal wagering.

Despite the legal uncertainties, offshore sportsbooks are eager to do business in Louisiana and other states that have legalized sports betting. The industry has profited greatly from the trend of U.S. states moving toward legalised sports betting, and many are willing to invest in order to ensure that they’re prepared for the booming business that follows. (It goes without saying that offshore sportsbooks are not affiliated with the NCAA.)

No Room For Error

Unlike many businesses, the sports-wagering industry is extremely sensitive to legal uncertainty. If even a hint of scandal were to emerge, companies would face the threat of a complete shutdown. (This is even more of a concern for companies that operate in countries where the legal environment is less than favourable.) When it comes to sports betting, there are simply too many ways that things could go wrong. (Imagine a scenario where someone bets on the wrong team? Or where a member of a team was found to be using steroids. Or where a head coach takes a large sum of money and attempts to influence a game with the help of performance-enhancing drugs. All of these things could lead to serious legal consequences for the sportsbook company in question.)

So when it comes to legalizing sports betting in America, it’s important that the states that do so make sure that they legal structures are sound and that appropriate safeguards are in place. Otherwise, they could be opening themselves up to unnecessary lawsuits and criminal prosecution.