Correction: In an earlier version of this article, we incorrectly attributed NBA Commissioner Adam Silver’s comments in a Forbes article as having occurred this past week. In fact, Silver made the comments referenced therein during the All-Star Break in mid-February. We regret the error.
In mid-February, NBA Commissioner Adam Silver publicly weighed in on the ongoing multi-state tug-of-war over the direction and contours of legal sports betting legislation in the U.S. The battle? The leagues want money and control over an annual multi-billion dollar pie of sports wagers — in the name of preserving sporting integrity.
The NBA in lockstep with Major League Baseball had lined up talking points and lobbyists. Meanwhile, scores of lawmakers in a growing number of states have considered the possibility of expanded sports wagering, some of them realizing the types of questions they would need to ask and answer to properly account for the respective interest of the leagues, their states, their state gaming commissions (or lotteries), and their possible to-be commercial licensed operators.
“I would only say from the NBA’s standpoint we will spend this year roughly $7.5 billion creating this content, creating these games,” Silver said at the February press conference at the NBA All-Star Weekend. “Those are total expenses for the season. So this notion that as the intellectual property creators that we should receive a 1% fee seems very fair to me.”
In Mid-February, NBA Commissioner Adam Silver Re-entered the Conversation on Sports Betting Legislation. The Discussion Has Advanced at Breakneck Speed All Over the U.S.
We are drawing nearer to the decision date (between next week and end of June) in Murphy v NCAA, aka the Supreme Court Sports Betting Case, which could spell the elimination of the 1992 federal ban (PASPA) on full-fledged sports wagering outside Nevada.
Numerous hearings on sports betting have occurred over the past month in legislative committees nationwide. New bills are frequently getting introduced. Existing bills are moving through committees. Some states are pumping brakes, others pressing the gas. Some of these bills favor the leagues’ power grab, some bills are actually rational and would benefit states and leagues alike.
The leagues have made no less than five different types of arguments attempting to justifying the “integrity fee” and have even tried to deflect blame for the euphemism to the media. (When in doubt, blame the media.)
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While the leagues’ push for a 1% “integrity fee” off-the-top cut of wagers (equivalent to a 20-25% take from operator revenue) — purportedly to compensate them for integrity monitoring services and/or as a royalty fee — has garnered the most attention in statehouses and the media, the data rights issue is vital, too, and an overlooked subplot.
Because one of the main features of the the league-designed “Model Legislation” is the right to control which data sportsbooks use to grade wagers for both in-play wagering and in general, as well as the right to restrict state-licensed sportsbooks from offering certain wagers.
This control would allow the league to sell data that it produces in-house or has already sold rights to a partner to produce for it. And who knows how much that would cost an operator in the absence of any competing service.
A ‘Fair Result’ Was Silver’s Standpoint… So Now Where Do Thing Now Stand?
Almost exactly one month after Silver weighed in, some observers more bullish on the leagues’ chances to secure the passage of their version of a fair (i.e. profitable) piece of legislation, based on the influence they wield and the resources they have devoted to their messaging on the issue.
From my vantage, the leagues took the early lead in Indiana and Missouri and a few other states, but their arguments have become conflated and confusing. The arguments were disingenuous to begin with and now they’re now disassembling in plain sight.
From the outset, the leagues tied the 1% fee to “integrity” then admitted it was a royalty, now they call it some combination of both. “It’s the value of our product, the royalty aspect,” NBA SVP Dan Spillane said on March 1. “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.”
There’s only one bucket and the ball is on the rim. It’s greed. And it’s insulted the intelligence of of those who are listening, and a lot of lawmakers are in that camp.
"I don't see why we should give you 1% for anything" says Senator Facemire to MLB's Blair. "Why should we pay you to protect you own interests. Especially 1% off the top. "It's ike we're paying the insurance premium" on your game." #hammer
— Sports Handle (@sports_handle) February 12, 2018
Connecticut lawmakers were skeptical of the leagues’ ask in early March. One Connecticut state senator (Representative Craig Fishbein) pointed out that giving leagues the exclusive right to control data would be tantamount to granting them a monopoly. Another Connecticut lawmaker noted that giving the fee would mean less dollars for the state, and would put their state’s operators at a market disadvantage.
Rep. Fishbein: Couldn't bookmakers subscribe to another data service? Why wouldn't we consider instead of a private monopoly of data? Indeed. This has been addressed in United States Court of Appeals for the Second Circuit. https://t.co/prWLj9O5oJ.
— Sports Handle (@sports_handle) March 1, 2018
At a Connecticut public hearing this past week where Seth Young, on behalf of the influential, Foxwoods Resort Casino hammered the leagues’ argument in written testimony, and demonstrated the hypocrisy:
Also in Kansas this past week, another big stakeholder Hollywood Casino (owned by Penn National Gaming) hit hard against the leagues’ positions. Although, Kansas lawmakers as a whole appear to be pumping the brakes so they can better understand how the sports betting market works.
But another Kansas lawmaker pointedly asked and MLB official if the leagues were still taking taxpayer dollars to finance their stadiums. The MLB official admitted, after pause, that indeed they are.
Earlier this month West Virginia gave the leagues none of what they sought in a bill that is now law.
I believe the leagues are going to lose the “wars” in Connecticut, Iowa, Mississippi, and Delaware (which already has legal NFL parlay wagering and pays zero dollars to the leagues); and the leagues have already lost in West Virginia. New York (population 18 million) is an important wild card at this point, with a quasi, capped fee and some wonky tiered data structure currently on the table.
Notably and not surprisingly, the states without professional sports teams are having an easier time shaking the leagues’ influence.
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Some northeast dominoes may fall: Connecticut competes with neighbor Massachusetts, whose gaming commission recently published a white paper highlighting the potential negative impact of the “integrity fee” as a matter of finances and public policy (“anything that reduces the limited profitability of sports betting will impact the odds and products that legal sports betting operators will offer. If the betting options are not attractive to bettors, there will be little incentive for bettors to leave the illegal market”). Massachusetts competes with Rhode Island. Pennsylvania already passed a bill in 2017 without any league-pushed terms and the state faces a budget crisis.
That would be eight states right (CT, DE, IA, MA, MS, PA, RI, WV), including New Jersey which, if it wins the Supreme Court case, is going to immediately open betting shops. And they will give the league the middle finger, then get flagged for 15 yards on the ensuing kickoff for excessive celebration.
At some later date, no matter which side wins the Supreme Court case, the leagues will go over the states and push a higher, centralized power to adopt their positions: Members of U.S. Congress.
Funny, considering a states’ rights and federalism matter triggered the case in the first place.