The Reality of Regulation in Our Sport, Through Others

Yesterday we looked at the excellent interview from ITP on Dink's radio show. He and Dink examined some of the issues for customers, and bettors in horse racing. It was great, but I thought taking a look at the environment they were talking about was probably a decent idea.

In some states and cities it's pretty tough to be an interior designer. In Louisiana, for example, it's more difficult to be one, than to become an EMT. It can take years and thousands of dollars in "fees".

Now, to probably you, me and most everyone else, this sounds silly - if someone is a bad interior designer, he or she will go out of business; this is what Yelp is for - but the way things are working nowadays, this is the new normal.

What happens, is an industry group who wants to create a form of monopoly lobbies (sometimes with wild assumptions) to those in power wanting regulation. This regulation acts as a barrier to entry, and the said group (who are likely grandfathered from any regulation, or have some sort of edge, because they helped write it) benefits. Governments do well, because the licensing fees go to them.

Now, I realize this is a hyper-political world where some people tend to look at what letter is before something before they agree or disagree, but this issue is not like that. President Obama's committee to study such issues has come out against this new regulatory environment, asking for "cost-benefit" analysis to be the overriding factor (to ensure consumers are protected). Some red states have it, some blue states do. The middle of the road Economist has been harping on this for years. It's non-partisan reality.

Recently, when the DFS brouhaha was going on - there were issues with security, employees entering teams etc - I feared that regulation would go along this route. I bantered back and forth with a few who made it a mission to "fix" the industry, because common sense said regulation was not going to protect consumers, it was going to increase prices and stifle choice. Just like it has with interior designers, or a hundred (thousand?) other industries, where regulatory capture takes hold.

The results thus far, of this "consumer protection" regulation?

Fees as high as $500,000 (in NY, natch) for existing providers (this stifles choice and as the article notes helps create a "duopoly").

 Prices, you guessed it, have gone up.

Notice the prices went up on who? The small guy or gal playing "under $25" tournaments, who were, ironically, the players the New York Times, New York AG and others were screaming to "help". If a 50% price increase is help, I'd hate to see what happens if they really, really want to help.

Folks who foresaw the above coming did not have some sort of crystal ball. They aren't the Long Island Medium lady. They didn't even need to look at President Obama committee's, or interior designers for insight.

They had racing. Lots of years of racing.

They saw a CHRB - a "regulator" of sorts - increase prices on consumers and applaud about it, with little discussion from a "cost-benefit" analysis. Look who makes up the CHRB.

They see wildly successful Kentucky Downs wanting more dates - to you, me, owners, trainers and consumers of the racing and betting product absolute common sense - and apply for such in Kentucky, only to be thwarted by a commission that is captured by large entities.

They see slots legislation written where revenue goes 50% to purses and 50% to the company who owns the slots, when the people lobbying for the deal were, you guessed it, horsemen and racetrack operators (almost mirroring the duopoly in DFS we are seeing now).

Those are three examples. I am sure you can come up with a hundred and three.

So, ITP and Dink had a great discussion. It was informative, much more right than wrong, and a lot of it had wonderful, sometimes lost, common sense. I happen to agree with ITP -- this sport, in North America, should be capable of doing $50 billion in handle.

But, because of an environment that strays away from increasing handle, and worries more about putting revenue in the proper boxes from those who bend the regulator and commission's ear, it's one tough row to hoe. The chances of it ever changing are probably close to zero.

Have a great Thursday everyone.