If sports betting is going to be legal, major leagues want a cut
By Eben Novy-Williams
For years, the fight over nationwide sports gambling was simple. Casinos wanted it legalized. The major sports leagues didn't.
Now, on the eve of a Supreme Court decision that could reshape gambling in America, the leagues have come around. Professional baseball and basketball have gone further: They also want a cut of the profits, drawing a new battle line with the casinos and sparking a state-by-state lobbying war.
The National Basketball Association and Major League Baseball are asking legislators to require casinos to pay the leagues 1 percent of all wagers placed on their sports. Casinos and sports book operators, unsurprisingly, are vehemently opposed.
Before the end of June, the Supreme Court will rule on New Jersey's bid to strike down the federal prohibition on sports gambling. Should New Jersey win, it will be up to each state to determine whether it will offer sports gambling and if so, under what terms.
At least 22 states have introduced or already passed sports gambling laws in anticipation of the court's decision. As state lawmakers hash out the details, league and casino lobbyists have descended on statehouses across the country to make their cases for and against the so-called integrity fee.
"If the integrity fee became part of the law, it's doubtful whether Kansas casinos would even put in a sportsbook," Richard Klemp, an executive at casino-operator Boyd Gaming Corp., told state lawmakers in Topeka last week. "Again, we don't expect to make a lot of money, but we do like to do a little better than break even."
The fee is by far the most controversial entry on the leagues' wish list, though there are others: The leagues want states to require bookmakers to use official data streams, share consumer information and allow the leagues final approval of what types of wagers are allowed on their games.
So far, the leagues haven't been very persuasive. A few pending state bills include the fee, but none has been codified into even provisional law. New York's proposed bill, introduced last week, a includes a 0.25 percent fee.
Even a small fraction would amount to hundred of millions of dollars. Americans could legally wager as much as $245 billion a year by 2023, according to gaming research firm Eilers & Krejcik, which amounts to a potential $2.5 billion for the leagues under the 1 percent model. A more conservative estimate suggests the amount wagered would be about half as much.
The leagues justify the fee as part royalty, owed to the league for rights to profit off its games; and part insurance policy, to offset the risk to the league that its games will be corrupted and the money it will spend to make sure they aren't.
"Sports betting is built on our games," NBA General Counsel Dan Spillane told a hearing of Connecticut legislators on March 1. "If something goes wrong, if there's a scandal, something that tarnishes the image of the game, that's going to be a cost borne by the sports leagues, and less of a cost borne by the operators that offer sports bets."
A representative from William Hill, one of the world's biggest gambling companies, made the bookmaker's case. Las Vegas casinos typically keep about 5 percent of the bets they take, he said, which means the NBA's proposed 1 percent cut is really a 20 percent cut of revenue.
"This is a low-margin business," said Dan Shapiro, William Hill's vice president of strategy and business development. "Any other taxes or fees would make it difficult for legal bookmakers to price the product competitively."
That math, touted frequently by casinos and the American Gaming Association, is open for debate. The NBA's research suggests that margins in the U.S. could eventually be twice as high, Spillane said, which would make the league cut akin to 10-15 percent of revenue. In Europe, major bookmakers make 17 to 20 percent at brick-and-mortar outlets and 7 to 9 percent online, in part because they offer more lucrative products. In a larger legal U.S. market, bookmakers have more incentive to invest in technology and their clientele will have a higher percentage of recreational bettors, which will also grow margins.
Every league would benefit from the fee, but so far, the NBA and MLB have been the public face in front of lawmakers. Major League Soccer supports the fee, while National Hockey League Deputy Commissioner Bill Daly said the NHL had no current position. A National Football League spokesman declined to comment and the National Collegiate Athletic Association remains the most staunchly opposed to any sort of legalized framework.
According to NBA commissioner Adam Silver, the NBA landed on the one percent number by looking at overseas jurisdictions like France and Australia, where other leagues are given a cut of the action wagered on their games. There is no such fee paid in Las Vegas.
West Virginia legislators recently passed a sports gambling bill that didn't include the fee or most of the other requests, despite active opposition from the NBA and MLB. After another big lobbying push and a conference call MLB Commissioner Rob Manfred organized with local media, Gov. Jim Justice declined to sign the bill, urging local lawmakers to consider partnering with the leagues.
Small as its market is, West Virginia will be a bellwether -- the more states that pass legislation without the fee, the harder it will be to convince others to include it. The leagues also appear willing to negotiate the number. "We've never suggested that this is the only way to look at it," Silver told reporters at the NBA All-Star Game last month. "To the extent that we sit down and there are other ways and better ways to reach a fair result, we're happy to have those discussions."
See original story here: https://www.ctpost.com/news/article/If-sports-betting-is-going-to-be-legal-major-12778454.php