Suppose a North Carolina sports betting operator terminates its written designation agreement with its pro sports team or venue for any reason. In that case, that operator will also lose its sports betting license in the state.
The first round of rulemaking by the NC Lottery Commission’s Sports Betting Committee clarifies this rule by stating that an operator has no more than 72 hours to report to the NCLC any of the following:
– Any alterations, changes or modifications to the written designation agreement.
– Any breach, discontinuance or other cessation of the written designation agreement.
Upon such a breach, discontinuance or cessation of a written designation agreement, “the Sports Wagering Operator shall engage in timely and complete efforts to wind up its operations and ensure payments and refunds are provided to interactive account holders.”
This rule underscores the degree to which an operator’s license depends on its partnership with a designated pro sports entity in North Carolina.
Written designation agreements and sports betting licenses
A prospective North Carolina sports betting operator must receive a “duly executed” written agreement with a North Carolina pro sports team, an approved golf course or race track, the PGA or NASCAR to apply for an online sports betting license.
The first round of rules in the North Carolina State Lottery Commission Rules Manual For Sports Wagering And Pari-Mutuel Wagering further stipulates that “A letter of intent to enter into a Written Designation Agreement is not a substitute for an executed Written Designation Agreement.”
The law not only makes clear that applying for an online operator license in North Carolina requires an official written designation agreement. It also specifies that any written designation agreement is contingent upon the sports betting party holding a valid license.
Rule 2B-006 explains that a written designation agreement “shall state a clear contract term length, with any option to renew being contingent on the renewal of the Sports Wagering Operator’s License.”
Sports betting licenses are subject to renewal every five years under North Carolina law. Should a sportsbook fail to renew its license or have its license revoked for any reason, that sportsbook would also have its agreement terminated.
Further, the same rule clarifies that the non-sports betting entity in the agreement (the pro sports team, venue or governing body) can have its authority to enter into a written designation agreement revoked. For example, if one of the state’s two golf courses stopped hosting an annual PGA event, under the law it would not qualify for a written designation agreement. The sportsbook partnered with that course would have to wind down operations immediately.
What does this mean for both parties?
On the non-sports betting side–the pro sports entity’s side–a terminated sports betting license could mean as little as removing signage from the sports betting partner and as much as shutting down a retail sportsbook operated by said partner. Along with that, the sports entity would lose its percentage of the sports betting revenue accrued by its partnered operator.
On the sports betting operator’s side, it means a swift shutting down of all operations in the state and paying out all outstanding winnings to its players. This could be potentially extremely costly.
A sports betting operator who has its sports betting license terminated has to wait a minimum of one year before re-applying for a license. If, in the case that a sports entity has its authority to enter into a written designation agreement revoked, an operator losing its license in the process would not face the same one-year probation before it could re-apply for a license.
As the NC Lottery explained to NCSharp, the one-year probation facing operators only occurs after the “revocation of its license by the North Carolina State Lottery Commission for compliance issues for holding a license in the State of North Carolina, not its severance from [its] partner in the industry.”
Choosing NC sports betting partners wisely
The North Carolina state budget bill’s changes to the sports betting law gave tremendous power to the state’s pro sports entities to gatekeep the sports betting industry.
The inclusion of the written designation agreement not only ensures that the state’s pro sports teams benefit directly from the new industry. It also ensures that both operators and pro sports entities choose their partners wisely with an aim for a long, healthy and profitable relationship.