Special interest groups are everywhere, they are powerful, and they don’t let go of power easily. They grab on to some sector or industry, seize a few politicians who love making laws, and tell those politicians they’ll give them a cut of their profits if they make it difficult or impossible for anyone else to compete with them. One of the oldest ongoing examples of this sort of thing is the Jones Act of 1920, which requires that all goods transported by water between U.S. ports be carried on ships built in the United States, owned and operated by U.S. citizens. The propaganda point was that it would protect the shipping industry in case of war. The actual point was that shipbuilders, protected from foreign competition, would be able to charge higher prices so that they could make more money.
The result, 100 years later, is that the U.S. shipbuilding industry is almost nonexistent. In 1950, there were 434 Jones Act compliant ships. Now there are less than 100 (see figure 1). It’s so expensive to ship domestically by water because of the Jones Act that few actually do it, and so there is virtually no industry at all.
Now, let’s kick it up a notch, to use a dated cooking phrase. Imagine that the lobbyists for the Jones Act back in 1920 were also minorities at a time when racism was a hot-button issue. Could you possibly say no to them, even if their influence by numbers and money would have a negligible effect on your reelection chances? Not a chance. You don’t want to be accused of racism and be the next target. In that event, the special interest group would be even more powerful than before. And so it goes that a historically protected special interest group, Native American tribes who were given a monopoly on the gaming industry outside of Nevada as a kickback for centuries of injustice, has now become even more powerful. They have successfully blocked California from legalizing sports betting, obviously wanting to preserve their monopoly.
This is something I warned about back in May 2018 when the U.S. Supreme Court finally scrapped the federal ban against sports betting. Here’s what I wrote back then, when gaming stocks, led by 888, skyrocketed on the ruling:
Perhaps investors are thinking that 888 can now reenter the United States via its strongest segment and gain back its lost glory. Perhaps and hopefully so, but now is still not the time to chase these moves.
Why not? Because rescinding a ban is a lot different from formally legalizing something. Now, as the 10th Amendment suggests, the power to regulate sportsbook goes to the States. Even though it says to the people, I can guarantee that no State is going to just let its people place bets without writing a 1,000 page bill about how exactly you are allowed to do it. These State legislatures need something to do with their time after all. They can’t just leave us all alone. They need to protect us from ourselves.
That day turned out to be a top, or very near a top, for many gambling stocks, including 888, GVC, The Stars Group, and others. The truth is when I was thinking about the difficulties of actually legalizing sports betting in the U.S. on a grand scale, I wasn’t even thinking about Native American special interest groups. I was just assuming that something would pop up to make it more difficult to actually get things going, because that’s just the nature of government. What happened here though, is actually worse than I thought, because of the timing.
In these times it is becoming increasingly scary and dangerous to stand up to minority groups on any issue whatsoever for fear of being labeled a bigot. That’s just the reality right now. It all becomes a race issue when it’s really just an issue of monopoly versus economic liberty. If tribal interest groups can stop sports betting legalization in California, they can do it in other states as well. They won’t be able to stop it everywhere and they won’t have an interest in doing so necessarily, but their victory in California will embolden them to step up opposition if they feel they have a chance of blocking any legalization bill, or worse, reversing one. Even in big states where sports betting is legal like in New York, it won’t be a significant industry until it’s legal online, and that possibility has other hurdles to overcome, like Sheldon Adelson and the special interest landed casino gambling lobbyist groups.
Then there’s the issue of coronavirus, which has caused the effective cancellation of some sports seasons altogether, most notably Major League Baseball. While not completely cancelled, the latest proposal is for a season of 60 games, with no fans in the stadiums. Talk about a depressing sports culture. Who knows if we’re going to see a normal NFL season starting in August or if the NBA is going to come back, given all this second wave stuff going on now.
There is a simple and rational way to get U.S. sports back on track, but I doubt it will be considered for being deemed ageist, discriminatory against people over age 65. The mortality rate for coronavirus for all those under 65 (both healthy and those with underlying medical condition) at this point is now calculated at 0.09% CMR (crude mortality rate). It’s unknown what the rate is for specifically healthy under 65, but it’s certainly much lower than 0.09%. It’s 0.28% for all age groups. So, all that really has to be done is to warn senior citizens with underlying health conditions to stay away from live games and have some legal mechanism for protecting the sports leagues from liability if they do come. No doubt this will be rejected out of hand because so many are so terrified of this disease, and those that aren’t terrified and think that perhaps this suggestion might be somewhat rational, are terrified of saying that they’re not terrified for fear of being labeled ageist.
That being the case, the best we can hope for now in my view is that the second wave burns itself out as fast as possible. Lockdowns are not coming back and there has never been a single vaccine approved for a single coronavirus of any kind, ever. So this thing is going to spread anyway and we may as well get it over with. Then, maybe, we can play sports again, and bet on them. Just not in California.