What Just Happened at This West Virginia Sports Betting Meeting?

The West Virginia Lottery Building.

Nothing and a lot happened at a meeting at the state lottery building on Wednesday concerning West Virginia sports betting.

A lot, because first-hand accounts of this closed-door meeting paint a colorful picture between attendees. Among those in attendance: state lawmakers; a lobbyist for the NBA and MLB who has ties to Governor Jim Justice; representatives from the PGA, West Virginia University, and Marshall; former U.S. Congressman Tom McMillen, who now heads the Division I Athletic Directors Association; casino representatives; and a “citizen volunteer” for West Virginia Governor Jim Justice, who did not attend in person, but spoke by speakerphone. There was also some reported shouting, “shuttle diplomacy,” and an apparent conflict of interest in play.

In an excellent story by Brad McElhinny of MetroNews about the WV sports betting meeting, he writes that a registered lobbyist for Major League Baseball and the NBA who attended the meeting on their behalf, Larry Puccio, was “also leader of Justice’s transition team and lobbies for The Greenbrier, which has a casino and is owned by Justice’s family.” McElhinny also reports that Puccio is a lobbyist for The Greenbrier itself.

So to what extent was this whole thing a charade orchestrated by Justice to appease the sports leagues with which he does business, and to what extent, if any, could it effect any actual change to the already-passed West Virginia sports betting bill, and even sports wagering legislation in other states?

What Just Happened at This WV Sports Betting Meeting Involving Major League Baseball, Lobbyists, Local Universities, Lawmakers and ‘Bray the Intern’?

Gov. Jim Justice

What do the leagues want, of course? A direct cut of the action, namely 1 percent of all wagers in every state as a “betting right and integrity fee” (actually an approximate 20 percent cut of operator revenue), as well exclusive control over data that sportsbooks may use to grade wagers.

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Sources say that most lawmakers were very displeased about the fact that this meeting took place at all, and also that key members of the Senate were left in the dark about it at the outset. The West Virginia Lottery Sports Wagering Act (WVLSWA) passed in March by a veto-proof majority and then became law after Justice let it sit on his desk for five days, opting to go that route rather than signing, given his conflict of interest by virtue of his ownership in The Greenbrier.

[Also See: Winners and Losers of Landmark West Virginia Sports Betting Bill]

One member of the House of Delegates and a proponent for legalized sports wagering, Shawn Fluharty (D-District 3) wrote about Bray Cary, a “citizen volunteer” who works for Governor Justice and attempted to throw some weight around:

Comically, the Governor has credited himself with helping to negotiate the leagues down from their 1 percent “integrity fee” to one-quarter of a percent. Well, the bill as written grants zero percent. That’s some strange negotiating.

Justice has said that he still plans to call a special session later this month regarding the state arts department as well as the sports betting legislation. In all likelihood, the WVLSWA will remain unchanged. But as in sports betting, there is no such thing as a lock.

Apparently Justice’s conflict of interest created by his business ties to the leagues, who have feverishly lobbied for a cut in over two dozen states, is of no concern to him. Justice’s Greenbrier hosts the PGA Tour event the Greenbrier Classic (the PGA is now publicly aligned with the NBA and MLB) as well as some NFL and NBA teams for practices and events.

Consider Who Stands to Suffer and Gain Here

Giving any percentage to the leagues takes money from the state. The WVLSWA would send revenue to the State Lottery Fund, which benefits schools and education, senior citizens, tourism and state parks. The Act would also send funds directly to the Public Employees Insurance Agency Financial Stability Fund. This comes on the heels of the state dealing with a protracted teachers’ strike, ending just two months ago.

“I think we’re just gathering a little bit more information,” Justice said in advance of the meeting. “I really believe that we need to bring [the leagues] under the umbrella for the amount of the fee that they wanted, or we negotiated. I think that’s very, very minimal cost to the casinos, and I think it would be a good thing.”

What is the benefit of bringing them under the umbrella? Can anyone articulate any benefit to this? Will it satisfy Justice to have “played nice” with the leagues, or did he promise an actual modification? 

The leagues have framed it such that licensed operators will absorb the costs of an “integrity fee,” not states, but that’s smoke and mirrors because operators earning less revenue mean the states derive less, and the operators might be forced to offer patrons inferior wagering options, which comes at the expense of citizens for the benefit of leagues, and benefits the black market, by the way, which the leagues purportedly want to eliminate. It is always relevant to note that these leagues have stadiums funded in numerous states by taxpayer dollars, a point not lost on lawmakers in other states.

But Justice himself is toeing the league talking points on who actually absorbs the cost, writing in a press release today: “I insisted from day one that no part of an integrity fee for sports betting would be paid by the state. I demanded that the entire fee be paid by the casinos.”

Around the Country

In Nevada, the leagues, the state gaming commission and sportsbooks already work together to help ensure integrity. In New Jersey’s reformed sports betting bill (which won’t advance until after the court rules), there is no longer an “integrity fee” component potentially benefiting the leagues. Pennsylvania’s bill provides no fee. The 1992 Professional and Amateur Sports Protection Act (PASPA) allows Delaware to continue its NFL parlay wagering. The First State gives the leagues zero percent. Mississippi’s constitution will allow sports wagering pending federal law, and Oregon is similarly situated as Delaware, having been “grandfathered” in under PASPA. Neither of these two states currently stand ready to give the leagues a dime.

So again, what would West Virginia and its citizens gain here?  State officials and lawmakers view the passage of their bill — the only such bill passed so far this year legalizing sports wagering (pending a change in federal law, which may come via the Supreme Court on Monday in Murphy v NCAA), despite a huge flurry of activity in nearly two dozen states — as a point of pride and effective lawmaking. Their bill is also a good one, levying a 10 percent tax rate while neighboring Pennsylvania will charge a 35 percent tax rate, which is over five times what Nevada charges its operators. 

This meeting was largely a charade. But bringing WVU and Marshall to the table might get the attention of some more reticent lawmakers to reconsider the bill.  If Justice indeed calls for a special session, that might create a second charade, but it would extend the leagues’ runway to peddle influence over some lawmakers who are willing to listen.

I’ll call it -1150 that the law stands as-is. That’s an implied probability of about 92 percent. It’s a major long shot, but it’s still a narrow window created by the Governor, who is apparently acting out of self-interest to the detriment of West Virginians, against a bill passed by a veto-proof majority of state lawmakers who acted on behalf of the citizens.

Update: There could be some sort of private deal materializing between the potential sports betting operators and the leagues, involving the potential sale of data from the leagues, but Justice may have jumped the gun in announcing a tentative agreement. Read McElhiny’s latest today: “Justice’s ‘tentative deal’ on WV sports betting is news to casinos.”

“You have two private entities/profit makers that are in contractual arrangements with each other,” said Eric Schippers of Penn National Gaming. “And that’s how it should be handled. The state shouldn’t even be involved with it. I don’t know where the governor is coming from.”

Another wrinkle with some potentially wild ramifications that we cannot really unpack until we know more:

Purdum also reported on Thursday:

“If this is legalized, what the ADs said is that we’ll have to spend more money on compliance and we’re going to have increased risk,” McMillen told ESPN in a Thursday phone interview. “What was shown, at schools with regulated [sports betting] markets — Nevada, UNLV — they spend considerably more on compliance, because it’s more open, more transparent, more in your face than the other schools where it’s illegal. The fact of the matter is that the onus is going to fall on Marshall and West Virginia.”