Republican Utah Senator and former presidential candidate Mitt Romney is poised to take the place of his predecessor Orrin Hatch on a bill that would set certain “federal guidelines” for legal sports betting, according to a Friday report from Tony Batt of Gambling Compliance.
At the end of 2018, longtime Utah Senator Hatch, alongside New York Senator and Democrat minority leader Chuck Schumer, introduced the “Sports Wagering Market Integrity Act” (SWMIA), which among other things would force states to seek approval from the U.S Attorney General for their sports betting regulatory frameworks, and would also mandate licensed operators purchase “official league data” from sports leagues.
Of more than a dozen-plus states to legalize sports betting since the Supreme Court struck the federal ban in May 2018, only two, Illinois and Tennessee, have passed a law mandating such a commercial agreement that critics have assailed as anti-competitive and monopolistic.
As of Thursday night’s kickoff for the 2019 NFL regular season, 13 states had legal sports wagering actively occurring in their borders (some on tribal properties only) and several more have legalized but not yet greenlit or licensed operators to begin taking wagers.
Past and future of federal sports betting regulation
According to Batt, Schumer has sought a Republican counterpart and co-sponsor to take the place of the retired Hatch, a former co-sponsor of the 1992 federal sports betting ban known as PASPA, which the high court struck down on states rights’ grounds.
“There is much work to be done, but I hope this bill will serve as a placeholder for the next Congress, should they decide to continue working to address these issues,” Hatch said of the Sports Wagering Market Integrity Act in December 2018.
Batt writes that Romney and Schumer are now “collaborating.”
Across the various states that have or plan to offer legal sports betting — from New Hampshire to Oregon — there are deep differences in how each state has approached the regulation of sports betting. Some state lotteries oversee things, some put a very small cap on the amount of licensed operators; they charge all different tax rates and application fees, some will grant certificates for mobile/internet betting for companies that don’t have a physical property, some allow wagering on collegiate athletic teams in state and others do not, and so forth.
There is an acknowledgement in the Hatch-Schumer bill that “all forms of gaming have historically been regulated at the state level, and legal sports wagering markets are and should be established and regulated principally by the states, but sports wagering affects interstate commerce more than most other forms of gaming.”
Yet, that bill also says in the “findings”:
“While each State may decide whether to permit sports wagering and how to regulate sports wagering, there is an important role for Congress in setting minimum standards for sports wagering that affects interstate commerce and providing law enforcement with additional authority to target the illegal sports wagering market and bad actors in the growing legal sports wagering market.
It’s not yet clear if Schumer will re-introduce the “placeholder” federal sports betting bill in the same or largely similar form, or if the senators will offer one with material changes in seeking to establish certain “minimum standards” for states to follow with respect to legal sports betting.
The Schumer-Hatch bill would have:
(1) Create changes to The Wire Act and The Sports Bribery Act, with the former changes allowing for dissemination of sports betting information across state lines; and
(2) Establish a “National Sports Wagering Clearinghouse,” a non-profit organization charged with operating a national repository of anonymous data that would have to be provided by sports betting operators.
Even with bipartisan support from prominent Senators Chuck Schumer and Mitt Romney–as well as NCAA and pro sports leagues–any new federal sports betting legislation is a significant underdog to pass.
— David Payne Purdum (@DavidPurdum) September 6, 2019
While there are potential benefits to some interstate sports betting uniformity and consistency, there is also serious downside (as always) to Congress getting involved. Indeed, Congress’ work in PASPA helped proliferate an illegal offshore betting market that U.S. jurisdictions are now combating.
And certain markets that were born to fly and already cruising, such as New Jersey’s, which has seen over $3 billion in legal bets and millions in operator revenues and state taxes, do not want Congress meddling and dictating again. Especially given the historical backdrop of Congress’ “commandeering” in contravention of state sovereignty via PASPA. Will Schumer be able to get the votes of Democratic New Jersey senators Cory Booker and Bob Menendez, or enough votes from senators in a variety of “red” or reddish states that have legalized, such as Indiana, Mississippi, Pennsylvania, and West Virginia?
Still a couple potential benefits of federal regulation: An update/modification of The Wire Act might allow interstate pooling of wagers and greater market liquidity, and interstate compacts might increase consumer choice. And from an integrity standpoint, broadening of The Sports Bribery Act to add penalties for extortion and blackmail.
The road ahead
But don’t hold your breath for the best or logical outcome here, or for the effort to move at all.
First of all, given the amount of states to have already legalized and begun reaping benefits, they are likely to resist U.S. Attorney General involvement and a Congressional mandate levied on licensees to buy data from sports leagues that they don’t necessarily need or want.
Of course the pro sports leagues have plenty of pull over Chuck Schumer, whose state is home to nine pro sports teams and headquarters of all four major pro leagues (NFL, NBA, NHL, and MLB). In New York, currently only in-person retail sports betting is permitted at four upstate casinos and tribal casinos. But a leading bill that would open up mobile wagering statewide and cleared the state Senate in May would have required payment of a “royalty” of 0.20% of all legal sports bets — payable from legal operators, benefiting the pro leagues. No state has yet to pass a law including this “integrity fee” or “royalty” or “compensation” for which the NBA and MLB have lobbied.
Romney is the former Governor of Massachusetts, which has not (yet) legalized sports wagering and is also home to the headquarters of DraftKings, the daily fantasy sports giant that’s emerged as a sports betting power in New Jersey with a rapidly expanding national footprint.
The pro sports leagues have held in their pocket the possibility of a federal hammer to get their way. All four major pro U.S. sports leagues, the NFL as of August 2019, now have authorized an “official” sports betting data feed through the Switzerland-based Sportradar (in some cases non-exclusively).
Meanwhile, Sportradar, engaged in a war of its own with fellow third-party data providers including Genius Sports, has signaled that “official data” is mainly just a moniker. Writes David Lampitt, managing director of sports partnerships at Sportradar, in an article published Monday (emphasis added):
The issue, ultimately distils down to whether there should be one single source of data on a sporting event (often referred to as ‘official’ data) or whether multiple suppliers should be allowed to collect, store and use data from that event in parallel (referred to as ‘open source’ data).
It is natural that certain sports lean towards the former option, instinctively feeling that being the ‘single source of truth’ on their competitions is both philosophically and commercially attractive. The difficulty is that intellectual property, database and competition law generally align with the latter, meaning that open-source data is also perfectly legitimate, even if it may not be as fast, reliable or detailed as the official version.
This often leaves data supply companies in an uncomfortable middle ground between their sports partners on one side and the legal and commercial realities of their competitors and their sportsbook customers on the other.
On a superficial view it may seem that the interests of these organisations will always be divergent. The sports are of course keen to maximise revenues and exercise a level of control over the live data on that sport; in the middle, data supply companies are competing for access to that live data to provide services to their customers in a very competitive market; and on the downstream side, bookmaker customers naturally want product choice, value for money, as well as multiple sources of data for failover reasons.
Whilst those interests may seem hard to reconcile, it is our clear view that they can be mutually compatible (myth #2 busted) as long as official data arrangements are structured in a way that does not seek to exclude healthy competition in favour of information monopolies.
The establishment or not of such an “information monopoly” will likely be one of the major sticking points as Romney and Schumer continue a conversation about a federal sports betting bill.
