As President Biden Cracks Down On Tech Mergers, States Promote New Sports Gaming Oligopoly

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President Biden wants the federal government to crack down on market consolidation in the tech sector. Yet a number of state governments are doing just the opposite in sports gaming markets, passing legislation to foster market consolidation in DFS and sports gambling.

... [+]that the U.S. federal government would begin cracking down on market consolidation in the tech sector by more heavily scrutinizing proposed tech industry mergers. Meanwhile, a number of state governments are doing just the opposite in sports gaming markets, passing new legislation to foster market consolidation in daily fantasy sports and sports gambling.

The state-law-created oligopoly in the sports gambling and daily fantasy sports markets represents the antithesis to President Biden’s broader action as it arguably has a chilling effect on innovation and attempted new market entry in both gaming markets. These state-generated barriers to entry have come to exist in three different forms. One mechanism that some states have adopted to prevent new and smaller companies from entering the marketplace is through imposing registration fees that are sufficiently high that they ensure new operators will lose money in their early years. For example, in Delaware, Indiana and Pennsylvania, any company that wishes to offer a fantasy sports contest must pay a $50,000 registration fee.

Other states, meanwhile, have simply failed to license new market competitors whatsoever, helping to ensure that the industry’s oligopoly of yesterday remains its oligopoly of tomorrow.

Finally, some state licensing boards have even implemented quotas on the number of licenses available to offer online sports gambling or fantasy sports contests. These quotas began in the realm of licensing traditional sports gambling where jurisdictions such as Washington, D.C., have adopted as few as one online sports gambling operator . However, more recently, Connecticut extended the idea of licensing quotas into fantasy sports as well.

 

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