International edition
October 18, 2018 | Edition Nº3597

On the grounds that legalizing sports betting will entail a monitoring burden

Sports leagues intend to push tax revenue from legal sports betting

Sports leagues intend to push tax revenue from legal sports betting
Industry insiders claim the leagues could even make an intellectual property case — since they’re the ones facilitating the games, they may claim a slice of the gambling pie.
United States | 06/13/2018

Industry insiders claim the leagues could even make an intellectual property case — since they’re the ones facilitating the games, they may claim a slice of the gambling pie. Sports leagues could also have an easier time snuffing out cheating when more betting happens in the open.

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n the Supreme Court decision that opened the door for states to legalize sports betting, the major American sports leagues were losers, literally. The NCAA was the other party in a legal fight with New Jersey, which wanted to have sports gambling legalized after voters there approved it in a 2011 referendum. All the other big U.S. leagues backed the NCAA, which was on a run of wins in federal court until the justices sided with New Jersey.

On Monday, New Jersey’s governor signed a new bill to formally legalize it there.

Now that sports gambling is spreading, though, leagues aren’t crying about it. The leagues have fought for years to keep sports betting illegal, but they’re positioned to be among the biggest winners where it’s made legal. Their opposition has quieted.

“I think, originally, it was sincere,” says John Wolohan, a sports law professor at Syracuse. “If you had to talk to some of the commissioners today and say, ‘Are you upset with this?’ I would say no.”

Leagues will push for tax revenue from all sanctioned sports betting on the grounds that legalizing it will put a monitoring burden on them.
The mechanism has come to be called an “integrity fee” by both supporters and opponents. How it work: Sportsbooks would pay some amount of the handle — the total amount bet — into a fund that would then go to the leagues. The gaming industry does not like that idea. A tax on handle is significantly more expensive than the taxes casinos already face, which are only on revenue. Gaming operators are used to paying taxes when they make money, but an integrity fee would have them shell out for both winning and losing bets.

The NBA and MLB are already pushing state legislatures to adopt integrity fees. Their argument is that the legalization of sports betting will carry increased monitoring costs for leagues to ensure the integrity of their games. It might, because it figures that sports betting’s legalization will prompt more people to participate in it. A 1 percent tax is commonly floated. New York’s proposed bill has the rate at 0.25 percent of handle. New Jersey’s bill does not include such a tax.

“I think the argument is there,” Wolohan says. “So, all of a sudden, we’re gonna go from one state, Nevada, and now we’re gonna be monitoring 30 states or how many of the states get into this. So, will there be increased monitoring costs? Maybe.”

On another hand, the leagues already have core measures in place to protect against match-fixing.
Most of them are already in business with companies that use algorithms to check offshore and underground sportsbooks (where possible) for suspicious bet patterns. Sports leagues could have an easier time snuffing out cheating when more betting happens in the open.

“The more you monitor, the more you see,” says Laila Mintas, the deputy president of Sportradar US, one of those monitoring companies that counts several leagues among its clients. “If sports doesn’t have that monitoring in play, you don’t know what’s going on, and you cannot say, ‘Hey, they have no alerts. There’s nothing happening.’ Because they’re not monitoring, of course they don’t see anything. It’s very difficult to evaluate.”

The leagues could also make an intellectual property case — that because they’re the ones facilitating the games, they deserve a slice of the gambling pie. But the rationale isn’t as important as that the leagues get their money, some way or another.

“I understand that there is a need for some heightened integrity,” says Dan Etna, the co-chair of the sports law practice at Herrick Feinstein LLP, an international firm with offices in New Jersey and New York. “But on the other hand, let’s not kid ourselves. This is just a new, fertile revenue source for them to tap into. You can’t convince me otherwise.”

Leagues will try to assert ownership of certain game data, so they can sell it to sportsbooks for a healthy price.
Every sportsbook needs a way to feed in data about the games people are betting on. That ranges from the simple stuff you can find in a box score (the final score and basic player stats) to more granular play-by-play information that might show up in an ESPN.com live game-cast. Sportsbooks need this stuff in order to operate at any scale. They don’t have people watching every single game and manually reporting back on who won, or Googling to figure out the results of in-game bets like, “Who’s going to score the first touchdown?”

The leagues all have their own data feeds. In the past, they’ve sold access to daily fantasy sites DraftKings and FanDuel, which is how your DFS games are always populated with up-to-the-minute stats you can see on your iPhone. The battle ahead is whether state legislatures and courts will grant the leagues exclusive rights to that data. In the past, American courts have been stingy about granting the leagues total control.

The bill in the New York State Assembly makes compromises on the subject. It says sportsbooks can use whichever data sources they want to determine the outcome of straight-up bets on winners and losers. But for in-game betting on specific events, the New York bill requires the books to buy the data from the leagues. Some states are likely to settle all the way on one side or the other, pleasing either the leagues or the gaming industry.

“The leagues need to conduct an assessment — I’m sure they already have — of what assets do they have that are very part and parcel to a sports gambling business that they can use as negotiating chips to extract things such as an integrity fee, access to bettor data directly rather than through some commission, things like that,” Etna says.

Everything depends on individual states’ legal climates, but possibilities abound. Leagues could build their own betting websites and apps. They could attach betting software to their streaming offerings, like NBA Game Pass or MLB.tv. They could even put betting booths inside stadiums, opening the action to fans while they’re attending games.

“I bet you are going to see books right at the games, Wolohan says. “I bet you’re going to be able to walk into Yankee Stadium and they’ll have a book right there in the concourse where you can place money on the game that day. ‘Give me whatever the runs are, the Yankees are gonna win. Also, give me a prop bet on the first inning that there’ll be two hits’, or something like that. I have little doubt that that’s gonna happen within a relatively short period of time.”

 

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