The New York State Senate held a hearing on Wednesday to “discuss the potential of sports betting in New York State,” bringing together various stakeholders, foremost the National Basketball Association.
No witness’s testimony was more important or potentially impactful than that of NBA Executive Vice President and Assistant General Counsel Dan Spillane, which is why he testified first.
The essence of the testimony, and the NBA’s position on the potential sports betting expansion into New York and throughout the United States: The NBA wants — and deserves — compensation. This position was rebuked by a representative of leading Nevada bookmaker William Hill, Joe Asher, who said the NBA was effectively asking for “a piece of the action.”
Does The NBA Deserve a Monetary Stake on Sports Betting on Their Games, And Will The Lobbying Charm Offensive Help Them Get It?
Spillane’s prepared remarks first touched on the state of sports betting, PASPA, and the Supreme Court case Christie v NCAA (in which the NBA and other leagues oppose New Jersey) that will shape the future of sports betting in New York and throughout the United States.
Let’s cut to the money question. On behalf of the NBA, Spillane said they “support the passage of a comprehensive sports betting bill that would serve as a model for a 50-state solution—whether that happens in Congress or on a state-by-state basis.” The decision in Christie v NCAA will impact whether a federal framework or state-by-state rollout occurs.
In either case, the NBA wants a cut, and why wouldn’t they? They’re in the entertainment and money-making business. The NBA’s true motive probably lies somewhere between ambition and greed. Now as for the legislation that the league wants, here’s the most telling of the five key legislative components the NBA is seeking (emphasis added):
The legislation should recognize that sports leagues provide the foundation for sports betting while bearing the risks that sports betting imposes, even when regulated. Without our games and fans, there could be no sports betting. And if sports betting becomes legal in New York and other states, sports leagues will need to invest more in compliance and enforcement, including bet monitoring, investigations, and education. To compensate leagues for the risk and expense created by betting and the commercial value our product creates for betting operators, we believe it is reasonable for operators to pay each league 1% of the total amount bet on its games. This approach draws from how sports betting is legally regulated in some other international jurisdictions, like Australia and France.
There’s so much to unpack here — here’s three points straight from the jump:
- That’s the same 1% that the NBA successfully lobbied for in an Indiana bill, House Bill 1325, sponsored by Rep. Alan Morrison (R-District 42). In the bill, the 1% is dubbed an “integrity fee,” which is not explicitly defined. HB 1325 is proceeding to committee and at some point will be reconciled, in a fashion to be determined, with a cousin bill in the state senate that includes no such fee.
- That’s 1% of the total sums wagered — also known as the “handle.” But in effect, it’s about 20% of all the sportsbook’s typical 4.82% revenue generated on wagers. And that’s before taxes and operating costs and everything else. Gaming law expert I. Nelson Rose breaks down the potential (and massive) impact such a fee might have right here. “I personally would never invest a cent into a business like this” Nelson Rose concluded.
- Spillane said “Nevada has a small but long-standing regulated sports betting market.” I don’t think that’s a swipe at Nevada, because compared to the massive, widely-acknowledged amount of illegal, unregulated, untaxed sports betting that occurs right now, Nevada’s market probably does only represent about 2-3% of the overall U.S. market. But more importantly, Nevada currently pays zero percent for wagers on NBA and any other games. How would the NBA negotiate a fee where there has never been one? Is there any legal standing? Why on earth would Nevada sportsbooks agree to this?
Later in the hearing, Joe Asher said of the NBA’s 1% ask is basically for a “cut of the action” and that “integrity fee” is a euphemism. And he goes on point out how the league(s) already have much to gain.
Asher of @WilliamHillUS says that there's huge ancillary benefits of sports betting for leagues– sponsors such as in the English Premier League. Also profit by sale of data to operators. Also increased fan engagement and value of the broadcast. #NYSsportsbetting
— Sports Handle (@sports_handle) January 24, 2018
Take their basketball and and go home?
Spillane claims that “without our games and fans, there could be no sports betting.” Well, this is true. But if they don’t get 1%, do they shut down operations? Do they have a intellectual property right to the live and final results of their games? (The cases aren’t exactly analogous but one attorney has already defeated MLB in the Supreme Court regarding ownership of data.) Do they charge newspapers to print box scores? What is special and unique about wagering on games that allows them to take a rake?
As Asher outlines, the NBA and other leagues still stand to substantially benefit from sports betting without a direct cut. Nine of 20 English Premier League teams have sports betting-related entities as their main sponsors. And data shows that fans who’ve wagered watch more games per season and for longer periods of time.
I suppose there’s no harm in the NBA trying before the Supreme Court rules and the Association has no leverage — in the event that New Jersey prevails and states being opening up shop. If PASPA stands, a federal solution would become increasingly likely.
At present, New Jersey Representative Frank Pallone (D-06) has proposed the GAME Act, which would basically allow states to opt-into a federal sports betting framework with certain reporting and consumer protection requirements. Notably the bill as currently constituted contains no cut for the leagues. The kind of lobbying we’ve seen in Indiana and here could potentially change that.
One more point on the NBA’s position that without their games, there is no sports betting. In light of all the ancillary and potentially more direct revenue (e.g. sponsorship) that expanded sports betting would generate, what if another league or promotion, like the UFC, still wanted sports betting on their games/fights without attempting to claim 1% or any percent?
Sports law professor and researcher Ryan Rodenberg made the case at SportsHandle that such league(s) could seek a “carve-in” to state gaming, allowing sports betting on their events. Which would signify the reverse of a “carve-out” that NCAA president Mark Emmert is seeking to exempt collegiate sports events from wagering.
To which state or member of Congress will the NBA go to next to make its case for 1%? Will they seek less than 1%? There are many questions and moving parts as we await the Christie v NCAA decision, and news drops at a breakneck pace about other states looking at legislation. Keep your head on a swivel.