An interview with Katherine Baker and Josh Kirschner of Nelson Mullins. By Damien Connelly
March Madness continues, so does the Gambling Addiction, Recovery, Investment & Treatment Act, alongside the ongoing debate over federal sports betting excise taxes. Introduced back in January, the GRIT Act aims to tackle and investigate gambling addiction, with its funding drawn from the federal sports-wagering excise tax.
Sports Betting Operator’s Damien Connelly sets out to find out the implications of this new law from legal firm Nelson Mullins’ Katherine Baker and Josh Kirschner.
Could you please tell us about yourself, and your background and experience in the sports betting industry?
Kirschner: We are both founding members of Nelson Mullins’ Gaming Industry Group. Katie, a partner in the Boston office of Nelson Mullins, serves as the group’s chair, and focuses her practice on helping commercial and tribal gaming operators and vendors navigate the state, commercial, and tribal gaming landscapes, with a unique expertise in leveraging fintech-based solutions for her clients. Katie also co-founded and leads the firm’s Women in FinTech (WinFin) affinity group.
Baker: Josh comes to Nelson Mullins after serving as general counsel for a large, sports gaming operator. He is currently a senior associate in the firm’s Atlanta office. He counsels a wide variety of gaming, gambling, and sector-adjacent operators, vendors and other individuals on navigating state, commercial, and tribal gaming-regulatory regimes.
For those of our readers not fully appraised of the GRIT Act, could you provide a brief overview?
Baker: On January 11, 2024, Senator Richard Blumenthal and Representative Andrea Salinas introduced the Gambling Addiction, Recovery, Investment & Treatment Act, commonly referred to as the “GRIT Act”), The act is the first of its kind in that it would create the first-ever federal funding source dedicated to addressing and studying gambling addiction. The programs and grants created by the GRIT Act would be fully funded by the federal sports-wagering excise taxes, and would not include an increase in taxes. The act would appropriate 50 percent of all revenue generated by the excise tax to fund state grants to “address gambling addiction” and National Institute on Drug Abuse grants to “support research on gambling addiction.” In the immediate term, passage of this bill would authorize spending for 10 years and require the Secretary of Health & Human Services to submit a report to Congress on the effectiveness of the funded programs.
Image: Katherine Baker and Josh Kirschner of Nelson Mullins
This new, proposed legislation that has been introduced in both houses of Congress would establish the first dedicated stream of federal funding for gambling-addiction treatment, prevention and research. How it will affect major sports gaming operators?
Kirschner: Although this bill does not create any new obligations for operators, it will likely have a range of impacts on them. As an initial matter, the dedicated state funding in the GRIT Act may spur increased legislation and regulation by states that have already legalized various forms of gambling. The GRIT Act’s creation of a new funding source for state-responsible, gaming-grant programs may cause states to revisit current sports wagering legislation and regulatory schemes to include new provisions related to the creation or expansion of such programs, to provide a hook for GRIT Act grant eligibility.
Baker: This would complicate matters for sports betting operators that have already implemented responsible-gaming mechanisms and safeguards designed to address existing state regulatory requirements, as well as potentially increase their compliance costs. Second, it will undoubtedly turn up the already bright spotlight placed on operators to answer whether legalized gambling is being sufficiently regulated via the current patchwork of state laws and regulations, as well as whether these operators are properly protecting consumers, and providing proper controls, guardrails, and resources around responsible play. Third, it may entrench and give new life to the more-than-70-year-old federal sports-wagering excise tax, which is the primary reason the American Gaming Association opposes the bill.
What can we expect that the Secretary of Health & Human Services will likely be reporting on to Congress?
Baker: The bill directs the Secretary of Health & Human Services to “report to the Congress on the effectiveness of the programs and activities carried out pursuant” to the Act. These programs are the Substance Abuse & Mental Health Services Administration (SAMSA) grants to states to address gambling addiction and the National Institute on Drug Abuse grants to support research on gambling addiction.The GRIT Act is likely will extend beyond the current session of Congress, given an overall lack of movement on new legislation and the reality of a national election this year.
So what best practices should operators be incorporating into their operations ahead of this new legislation?
Kirschner: At the top of the list of best practices is full compliance with current state laws and regulations related to responsible play, and consumer protection. Second, operators should be prepared for a raft of new responsible-play and problem-gaming requirements, and a raising of the floor for what these requirements entail across the country. Operators should identify potential responsible-play-related tools and regulations, and work together with policymakers to introduce these, rather than allowing the policymakers and regulators to dictate terms on their own. Lastly, operators would be wise to study the UK Parliament Gambling White Paper and regulations imposed on EU-country operators for a roadmap on where responsible-play regulation may be headed in the U.S.
What kind of responsible-gaming messaging should sports betting operators be putting out to their retail and online patrons?
Baker: As some of the leading online sports gaming operators have done with the new trade association, the Responsible Online Gaming Association (ROGA), operators should be reiterating their commitment to responsible gaming to the public. This issue is of the utmost importance to the continued success of the gaming industry and should be treated as a shared responsibility among all stakeholders.
How will this complicate the recent and continuing legalization and growth of sports betting across states?
Kirschner: The GRIT Act and the larger, national discussion around the perceived, increased social costs of legalized gambling have shone a bright light on the industry. We do not think this will add new opponents to the legalization of sports betting. Rather, this bill will likely give new ammunition to opponents seeking to stop the growth of sports betting across the country. The effect will be to increase the regulation of sports betting within those states that have already legalized sports betting, which will increase the compliance cost burden on operators.
Preview Image: Shutterstock
*** This Exclusive Interview was originally published in April 2024 Edition of Sports Betting Operator Issue 10 ***
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