Professional Team Sports in Las Vegas: What the Research Says

Professional Team Sports in Las Vegas:

What the Research Says

UNIVERSITY OF NEVADA, LAS VEGAS l FEBRUARY 1, 2016

Bo J. Bernhard, Ph.D.; Anthony Cabot, Ph.D.; Kahlil Philander, Ph.D.; and Mark Lipparelli, M.B.A.

(Brett L.L. Abarbanel, Ph.D., academic editor; Katherine Jackson, project manager; Shekinah Hoffman, managing editor)

Executive Summary

Stakeholders and commentators have long debated the merits and appropriateness of Las

Vegas as a host city for a professional sports franchise. These debates have engaged each of the

four major U.S. sports, including, perhaps most prominently, the National Football League

(NFL), which continues to express concerns about gambling and Las Vegas. This report

examines the empirical evidence that confirms or refutes these concerns. Fortunately, many

common (and understandable) questions have recently been addressed in the rapidly-emerging

scientific literature on gambling impacts. Taken together, the analyses in this report constitute

the first comprehensive, objective, and (where possible) scientifically-based assessment of the

oft-articulated issues that arise in this context.

These kinds of concerns fall under multiple academic categories, and because of this, we

have assembled a multi-disciplinary team with approximately 100 years of collective experience

in examining these very kinds of gambling-related and Las Vegas-related issues. This team has

been retained by the University of Nevada, Las Vegas for ongoing analyses and advising, and

this report is part of that engagement. This report has been subjected to a peer review (including

experts both inside and outside of academe), overseen by an editor of an academic journal with

relevant expertise in this field. In the interests of accessibility, and to provide a comprehensive

evaluation of the issues, we have organized the major questions and answers into the following

academic categories:

Business: The sports gambling business is the industry that most concerns stakeholders

in the NFL and other leagues. This report starts by summarizing the current state of this industry

¨C both legal and illegal ¨C providing a thorough review of this massive, global marketplace.

Law and Regulation: Integrity tends to be the most prominent issue for those concerned

about locating a professional sports team in Las Vegas. After all, the city boasts a sizable legal

sports gambling market, and the fear is that this activity could lead to game/match fixing and

related issues. This report examines each of these potential threats to the integrity of professional

sports, and then analyzes the approaches that Nevada, the federal government, and the gaming

industry deploy to address these threats. We conclude (as do many other analysts) that due to the

rigor of Nevada¡¯s regulatory practices, in many ways the state¡¯s approach would actually provide

sports leagues with their best opportunity to protect themselves when it comes to the allimportant issue of integrity. Given current estimates that 80% of global sports wagers take place

in illegal, unregulated, or under-regulated markets, professional sports leagues would benefit

from a shift that moves more of these wagers into legal, regulated, and more frequently checked

settings.

Economics: The tools of economists are uniquely capable of assessing costs, risks, and

benefits, and this report provides a ground-breaking and thorough economic evaluation of

commonly perceived risks associated with locating a team in Las Vegas. Overall, the available

evidence suggests that a team¡¯s (re-)location to the city is likely to have no effect on the

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prevalence of game fixing. While the convenience of access to place legal sports wagers in Las

Vegas provides some small changes in incentives, most game-fixing-related wagers are likely to

continue to happen in the underground economy. There is little incentive for criminals to use Las

Vegas sports books to place wagers, as Nevada has a strong regulatory and enforcement structure

in place, characterized by commitments to compliance by bookmakers, transparent accounting

processes, robust minimum internal controls, and what economists would call ¡°high prices¡±

(including risk of detection) relative to remote or illegal wagering. While the research team was

satisfied that the current system is adequate to achieve these positive outcomes, we identified

several areas where institutions could be improved for even greater security.

Psychology and Public Health: To psychologists and public health experts, perhaps the

major concern about gambling has to do with its pathology ¨C now termed ¡°disordered gambling¡±

in the Diagnostic and Statistical Manual. Based upon an evaluation of new research on how

populations adapt to gambling ¡°exposure,¡± and of new research on athletes and gambling, we

find that more gambling exposure does not necessarily lead to more gambling problems in the

ways that were previously thought. Of course, ¡°exposure¡± is widespread in the U.S. today, as 48

of the 50 states have legalized gambling. This research suggests, at the very least, that the

relationship between exposure (for instance, among players and team employees residing in Las

Vegas) and gambling disorders is hardly linear. Furthermore, Las Vegas currently has expert,

experienced problem gambling resources, and as such, a coalitional approach to prevention and

education should yield positive outcomes. While disordered gambling remains a very legitimate

and devastating concern to those who suffer, we find no reason to believe it should be a

disqualifying or unique concern for the city as it pertains to possible team (re-)location, should

certain best practices be embraced.

Sociology: For many observers, a prime concern about a Las Vegas team has to do with a

perceived lack of community. Though defining ¡°community¡± can be difficult (and contentious),

we find that the city does indeed suffer from significant problems in areas such as population

transience, water scarcity, and the predominance of gated communities, among other issues.

However, these problems do not appear to be significantly different from those faced in cities to

which Las Vegas is often compared ¨C specifically, other major metropolises in the American

South and West that currently have professional sports teams. For instance, as Los Angeles

receives (re-) consideration as an NFL city, it appears that Las Vegas shares many similar

strengths, weaknesses, and dynamics.

Criminology: Finally, many stakeholders have expressed concern that there is simply

more criminological trouble in Las Vegas, due to the city¡¯s famous offerings. For instance, it has

been assumed that casinos contribute to higher crime rates (and hence, that having a team in Las

Vegas would lead to crime problems, simply because it contains many casinos). As a strong

literature has emerged in this area, however, this belief has gone unsupported. In fact, it seems

that casinos have crime impacts that are similar to other entities that draw large crowds ¨C like

stadiums. At a more general level, FBI Uniform Crime Rate statistics would rank Las Vegas

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among the safer communities in the NFL were it to join that particular league. Of course,

professional athletes have committed high-profile crimes ¨C but it is also clear that these can and

do happen anywhere. Finally, the Las Vegas Metropolitan Police Department (LVMPD),

occasionally in collaboration with university-based researchers, has become an exporter of

intellectual capital, as police departments around the world seek LVMPD¡¯s counsel based upon

the city¡¯s policing of major and complex events. As with gaming operations and regulation, it is

not the case that Las Vegas is necessarily any ¡°smarter¡± or ¡°better¡± than other jurisdictions when

it comes to policing ¨C it is just that the city has learned from frequent experience with more (and

often more complex) policing challenges than most other locales. As a result, we conclude that

Las Vegas may, once again, actually provide useful insight into how best to avoid the very kinds

of problems the city is often assumed to generate.

Finally, this report makes several recommendations that would be advisable should a

team move to Las Vegas, including recommendations for collaborative relationships between a

potential team, for collaborative relationships between a league and its community partners, for

regulatory enhancements to Nevada¡¯s already-strong approach, and for compliance and

employee training plans for the team itself.

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Table of Contents

Executive Summary ............................................................................................ i

Introduction......................................................................................................... 1

The Sports Wagering Industry: Business Considerations ............................. 3

1.1

Legal Sports Wagering in Nevada ............................................................... 5

Sports Integrity and Sports Wagering Integrity: Regulatory and Legal

Considerations .............................................................................................................. 7

1.2

Introduction ................................................................................................... 7

1.3

Understanding Sports Wagering on NFL Games ........................................ 8

1.3.1 Mathematics of Point-Spread Betting .........................................................10

1.4

Understanding Sports Integrity...................................................................12

1.5

Understanding Wagering Integrity ..............................................................19

1.6

Factors that Contribute to Game-Fixing .....................................................22

1.6.1 Venality of Bookmakers ..............................................................................23

1.6.2 Venality of the Players or Others that Can Influence Game Outcome ........25

1.6.3 Large Underground Betting Market ............................................................27

1.6.4 Low Detection Rates ..................................................................................31

1.6.5 Enforcement of Integrity Rules by Sports Organizations .............................33

1.7

Licensed Nevada Sports Books ..................................................................34

1.7.1 Nevada Sports Books and Employee Licensing .........................................35

1.7.2 State Oversight of Nevada Sports Books ...................................................37

1.7.3 Federal Oversight of Nevada Books ...........................................................50

Marginal Effects of Team Relocation: An Economic Analysis ..................... 51

1.8

Remote Wagering.........................................................................................51

1.9

Further Legal/Regulatory Options to Reduce Risk ....................................54

1.9.1 Integrity Agreements ..................................................................................55

1.9.2 Suspicious Activity Reports ........................................................................55

1.9.3 Additional Information Sharing/Early Warning Systems/Forensic Reviews .55

1.9.4 Special Integrity Unit ..................................................................................56

1.9.5 Review of Specific Wager Types ................................................................57

1.9.6 New Criminal Sanctions .............................................................................58

1.10 The Microeconomics of Sports Wagering ..................................................58

Psychology and Public Health: Disordered Gambling Considerations ....... 64

1.11

1.12

1.13

1.14

Gambling Disorders .....................................................................................64

Exposure to Gambling and Adaptation to Gambling Disorders ...............65

Problem Gambling in an NFL Population ...................................................68

Support Services..........................................................................................69

Other Sociological and Criminological Considerations ................................ 71

1.15

1.16

Lack of Culture and Community .................................................................72

Trouble: Is there more in Las Vegas?.........................................................75

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