While the Constitution State is aggressively moving toward drafting Connecticut sports betting legislation, lawmakers are clearly not married to paying the NBA and Major League Baseball the “integrity fee” both leagues have been lobbying for.
During Thursday’s Public Safety Committee Informational Forum, legislators from both the House and Senate repeatedly pressed representatives from the pro leagues about how the state – and their constituents – would benefit from paying the 1% fee the pro leagues have been pressing for. And what they would get from it. The fee, which ultimately works out about a 20-25% percent cut of sportsbook gross gaming revenue, is included in legislation working its way through other state assemblies.
The panel of lawmakers repeatedly called out the pro leagues, referring to the integrity fee as a “royalty” or a “processing fee.”
Connecticut Lawmakers Preparing Legal Sports Betting Legislation Did Their Homework, Not Interested In Giving Away Requested ‘Royalty’ to Leagues
Under pointed questioning, NBA Vice President Dan Spillane did admit that the fee is not solely to preserve the integrity of the game. Representative Alphonse Paolillio (D-New Haven) pushed on this point, saying that NBA commissioner Adam Silver’s comments during the league’s All-Star weekend earlier this year referred to the fee clearly as a royalty. Spillane did not disagree.
“It’s the value of our product, the royalty aspect,” Spillane said. “And then the risk that comes along with it. It’s a form of insurance … I guess we could have broken the fee down into buckets. It’s akin to a royalty of the value of product we deliver.”
From Representative Paolillio: “I think the [NBA] Commissioner is calling it what it is and getting away from the integrity talking point.”
But several of the Connecticut lawmakers believe sports betting already provides great value to the leagues, in terms of engagement, potential marketing relationships and sponsorships.
We also learned that Representative Fishbein — giving an example of fantasy sports and the effect of having some financial stake — stays up into the wee hours to monitor the players on his fantasy baseball team.
Rep. Fishbein: I believe that gambling does increase your viewership. Fishbein is a commish of a longstanding fantasy baseball league, he says! If not for fantasy baseball "I wouldn't be up at 1am listening to a Mariners game on the west coast." Hahaha.
— Sports Handle (@sports_handle) March 1, 2018
Verrengia: "What I'm not for is legislation that in some way, shape or form would line the pockets of MLB, NBA or any other major sports owners." Says there's value — in mktg in arenas or whatever. Those are the benefits of legalized sports wagering and additional rev streams.
— Sports Handle (@sports_handle) March 1, 2018
There appeared to be little tolerance for the idea of paying the leagues any sort of fee
“I want my people to get the most bang for their buck,” said Representative Michael Dimassa (D- New Haven, West Haven). “So if there’s a 1% fee I want some accountability.”
The biggest zinger may have come from Representative Daniel Rovero (D-Killingly, Putnam, Thompson), who took the time to make a pointed joke, saying he was “glad I didn’t get involved with you people,” when talking about going into business. Rovero went on to say that he thought the leagues were asking for too much.
[Stay tuned at our Facebook page and Twitter @sports_handle for the latest]
The general gist appears to be that Connecticut is not amenable to paying the “integrity fee” or a royalty. While Spillane and his Major League Baseball counterpart Vice President, Investigations & Deputy General Counsel Bryan Seeley tried to point out that the fee would come from sportsbook receipts, the panel would have none of it, effectively saying that any money being paid to the leagues was not money that would stay in Connecticut.
A DraftKings representative had a word at the panel, too
Just this week the daily fantasy sports leader DraftKings announced the hiring of a sportsbook director. They’re betting on sports betting, like many others, and the Massachusetts-headquartered company had a seat at this table. Here you can view the full prepared remarks of Sarah Koch, Assistant Director of Government Affairs at DraftKings. Emphasis added:
According to reports by the American Gaming Association and a study by Ernst and Young, more than 750,000 Connecticut residents are currently betting on sports illegally to the tune of more than $1.5 billion in bets per year, nearly all online. Gaming industry experts Eilers and Krejcik project that if legalized sports betting is offered only at Connecticut’s casinos– with no online options – the illegal market would continue to thrive and more than half a million Connecticut residents would simply continue betting online with offshore sites.
If Connecticut wants to eliminate the thriving offshore sports betting market, the state should consider allowing online sports betting. Not only would online options help end the black market, the state would see greater benefit. According to Oxford Economics, including online sports betting would more than double the estimated gross gaming revenue in the state from $130 million for casino-only betting, to almost $300 million by adding online options.
Final thoughts
While the whole “integrity” or “royalty” is getting some traction in Missouri and Illinois, Connecticut didn’t show interest in putting the state or constituents on the hook for it.
Rep. Jeffrey J. Berger: To acquiesce to your request, NV and no other state would not be subject to that fee, and we might be at a disadvantage.
Now they're discussing Wire Act! Seely says states won't be competing that way. (This ignores taxation/revenue and operate revenue)
— Sports Handle (@sports_handle) March 1, 2018
As Connecticut and other states continue to sift through information and ideas while crafting sports gambling legislation, they should all take note. They won’t get any help – and will likely get a lot of pushback – from MLB and the NBA should they choose not to pay off the leagues for what Connecticut lawmakers clearly view as a poorly veiled kickback. Connecticut lawmakers had planned additional hearings for March 8, but those hearings have been postponed to March 13, due to snowstorms.
Asked Representative Kurt Vail (D-Somers and Strafford) of MLB representative Seeley: Would you still be in favor of [legal sports gambling in Connecticut] if we eliminated that 1% fee?
“No,” said Seeley, without hesitation.
But it is now obvious that the leagues would settle for a lesser amount, if they don’t have to settle for nothing.
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