Small online sports betting operators hoping to enter the North Carolina market when the state legalized online sports betting in June faced a major setback three months later.
In September, the state budget passed an amendment requiring sports betting operators to have a “written designation agreement” with a sports entity before applying for a sports betting license. This essentially gave sports teams and venues the role of industry gatekeepers.
During a public meeting this week, the NC Lottery Commission rejected a request from some small sportsbooks to delete or narrow the scope of the written designation agreement provision.
Chief NCLC Legal Officer William Traurig explained that the request came from small sportsbooks during the public comment period for the first draft of proposed rules for North Carolina online sports betting and parimutuel wagering.
Small operators worried they could be left out of NC market
Traurig, who provided a brief review of the public comments during Tuesday’s commission meeting addressed the request by first saying the NCLC “took the written designation agreement comments very seriously.”
“There was one that[…]concerned small operators not having an opportunity to get into the market due to an inability to probably get a written designation agreement.” Traurig said. “We were asked to ignore the written designation requirement and issue licenses without them. Unfortunately, due to the statute, we were not able to do that.”
The written designation agreement requirement is now part of the sports betting law. For it to be repealed, the North Carolina General Assembly must amend the law during a coming legislative session.
Traurig also mentioned that the current draft of rules does not include a definition for a breach of a written designation agreement, which could occur for various reasons.
“We didn’t incorporate changes that were requested to narrow the definitions of the written designation agreement. We also did not take the opportunity to define what a breach is of those. However, what we did clarify was requests where we had stated that all disputes had to be settled in courts within North Carolina. We do see that there is value as a private contract between the entities and allowing for alternative dispute resolution methods. So those are allowed.”
To be clear, “alternative dispute resolutions” do not allow sports betting operators to circumvent the requirement to partner with a North Carolina sports entity.
Alex Kane, CEO of Sporttrade, took to X (formerly Twitter) to share his comments on North Carolina’s rules with the broader public.
In other words, the regulators are *NOT* the first to decide who gets to operate in North Carolina, leagues/teams are.
How does this new rule benefit:
– NC tax base
– general pop. In NC
It doesn’t. Suspend the rule.
— Alex Kane (@a_kane47) November 14, 2023
High barriers to entry benefit the market leaders
House Bill 347, North Carolina’s online sports betting law, had a cap of 12 online operators that could do business in NC. An amendment to the state budget passed in late September changed that law. It stipulated that companies would now need to partner with a sports-related entity to gain access to the NC market.
Specifically, a sports betting operator must partner with a professional sports team, a motorsports venue, a professional golf venue, NASCAR or the PGA. Currently, this translates into 11 entities that can partner with an online operator.
This gives an even further advantage to industry behemoths like FanDuel and DraftKings as well as newcomer ESPN Bet which has Disney-backed deep pockets. All such operators have enough money to pay whatever dollar amount a North Carolina sports entity proposes.
The top players in the industry already have partnerships with major sports leagues and professional teams in other states. For instance, FanDuel has partnerships with over 20 pro teams and the big four leagues, plus the NHL, PGA, WNBA and WTA.
With lucrative longtime relationships with pro sports entities, the big players are in a prime position to seal a deal with one of the five pro sports teams in North Carolina. It is hard to imagine that even a medium-sized operator could leapfrog over the top operators to entice the Charlotte Hornets, Carolina Panthers, or Carolina Hurricanes into a written designation agreement.
The operator that a pro team chooses to align with would also be the only betting company that could offer a retail sportsbook at the home venue of the team.
The deadline for online submission of comments on the second round of wagering rules is Nov. 27. A public hearing is scheduled for Nov. 20.
To speak at the public hearing, you must register with the lottery commission one business day before the event. NC Sharp provides a guide on submitting public comments to the commission online or in person.