Compromise Sports Betting Bills Look Like A Good Option

Thus far in the ongoing national debate about the future legality of sports betting, the bills proposed in (or passed) the various state houses fell into two broad categories. On one hand there were the ones that the pro sports leagues liked and the ones that the leagues refused to support but got passed anyway after much haranguing.

Well, now it appears that a sufficient number of states have put together what we’ll call a “compromise package” that we have to legitimately consider it a third position. This new variety of sports betting legalization bills, exemplified by the recently proposed Senate Bill 7900 (S 7900) from New York and similar bills coming out of Connecticut and Kansas, do take a little from the “blueprint” legislation proposal put forward by the National Basketball Association (NBA) and Major League Baseball (MLB). However, these bills and others like them make a not insignificant number of modifications to the list of requests (really more like demands) that the leagues and their massive combined lobbying arms want from the states in exchange for their support of legislation to make sports betting legal.

As previously mentioned, it was New York that led the way with this new middle of the road pathway with S 7900, which diverges from the joint MLB/NBA in a few key areas. Though the New York bill (which has set to be passed out of the state Senate’s Finance Committee) is fairly standard fare in that it requires reporting of suspicious wagering activity and provides for the general regulation of sports betting does has some features that the leagues probably weren’t so keen on. For one thing, the prospective New York sports betting bill massively downgrades the percentage of total revenues to be paid to the leagues in the form of the dreaded “integrity fee” from roughly 20 percent of wagering revenues to 8 ½ percent.

Compromise Sports Betting Bills Look Like A Good OptionThat’s a reduction from 1 percent of handle down to .25 percent of handle, and, given that we are talking about a sports betting market valued at somewhere between $150 million and $200 million annually, this cut represents a huge reduction in the money that the leagues will actually get. Still, the fact that the leagues will get this money – in some cases estimated to be about $20 million without having to do any extra work on their part – it is still a pretty good deal for them to just acquiesce to the states’ desire to retain more money. The slice of the pie may not be as big, but it’s still a good tasting pie, after all (you might even call it “rich.”)

The leagues’ lobbying arm had been pretty up front about their desire to secure this so-called “integrity fee” on the grounds that the money was needed to – as NFL commissioner Roger Goodell is so fond of saying (though the NFL is not involved in the lobbying efforts) – “preserve the integrity of the game.” The officially stated reason to collect these fees, which was technically a 1-percent off the top skim of handle (which comes to roughly 20 percent of the sportsbooks’ gross revenues) may be to ensure that game fixing and betting rackets don’t take over the major sports leagues. Nevertheless, the sheer amount requested as a payout to the leagues was a bridge too far for most states, who had to consider their own need to fill the public coffers via taxing those same sportsbook revenues and the needs of gaming operators to pay their employees and keep the lights turned on.

Though the reduction in the amount of the integrity fee, rent, royalty or whatever you want to call the amount paid out to the leagues to monitor wagering contests for fairness is the main divergence from the blueprint for legislation advocated by the MLB and the NBA, there are some other differences as well. All bets will be separated into one of two “tiers,” with “tier one” wagers being those involving simple outcomes (think of this as stuff like moneyline betting odds) and “tier two” wagers being things like props and so on. The leagues will have exclusive data rights – that being access to that information which can then be stored, tabulated and use at their own discretion – for “tier two” wagers only.

Another significant separation between the compromise position and the blueprint supplied by the leagues and their teams of hired lobbyists (which are currently actively working in almost a dozen states) is in the form of rules about wagering restrictions. The prospective bills proposed in New York and the other aforementioned states only allow the sports leagues to request betting restrictions on things like minor league games and on certain kinds of bets (though there are no details about what kind of bets those might be). Additionally, the leagues will only be able to request that betting of this sort does not occur when they don’t want it to – they don’t have any explicit authority to dictate to the sportsbooks operators or to the state gaming regulatory authorities when certain wagers won’t be allowed.

The reason why we are terming this recent phenomenon as a compromise or a third position on the question of sports betting legislation being proposed by the states is that it really appears to be a concerted movement among the leading edge of state legislatures. New York started the trend with its bill on March 7, but Senate Bill 455 popped in the Kansas state legislature just a few weeks later, and Connecticut’s proposed Senate bill S 540 just entered the conversation this Wednesday. So far, all three states have held at least preliminary committee hearings (though New York’s bill is the furthest along in the approval process), and all three states’ lower houses have as yet uncompleted competing or companion bills as well.

For all this talk about how the proposed bills differ at least somewhat substantially from the league’s blueprint of an ideal – or even “idealized” might possibly be the more operative description – it would behoove us to mention what aspects of these compromise bills that the leagues actually don’t seem to mind. For one thing, these really are compromises in the truest sense: while they do make big alterations to overreaching requests like the previously hefty and still vaguely slimy integrity fees, the prospective bills do consider the leagues’ joint position on a lot of issues. They have carve outs for placing sports wagers over the internet using designated mobile device apps, which the sportsbooks and the leagues equally like for branding purposes, information sharing provisions, data exclusivity and even a say as to what bets can be placed and when.

All in all, none of these bills, early along in the process though they may be, are a particularly bad deal for any of the stakeholders involved in the process of making sports betting a more widely legal and regulated activity around the country. The leagues’ supplied a blueprint and the state legislators did their job to curtail certain aspects that they felt were not in the best interest of their constituencies in the public and business sector. That is a sign of an extremely healthy legislative process and the progress made on this front is worthy of being commended.

That said, the alternative model for pushing ahead with sports betting legislation that would effect legal sports betting sites – we’ll call it the West Virginia method – amounts to throwing out the leagues’ requests and adopting a way of doing business that more closely adheres to what is good for the states. This devil take the hindmost approach seems to suit West Virginia just fine in that it was an intentional snub of the lobbyists from the leagues, but nearby Pennsylvania already passed its own sports betting legislation way before the leadership of the MLB and the NBA got together to concoct their blueprint in the first place. Still, other states like New York, Kansas and Connecticut have turned in bills that follow a calmer path toward adoption, and that – we think – is more likely to be the route taken by the other states and their dozens of sports wagering bills on file and up for debate in committee within the next few weeks.

It is also worth noting that none of this will matter a whole heck of a lot if New Jersey, which also has its own state level sports betting laws on the books waiting to take effect, is unsuccessful in its effort to get the Professional and Amateur Sports Protection Act of 1992 (PASPA) repealed by the U.S. Supreme Court. Whatever the case may end up being, we won’t have to wait long to find out what the highest court in the land thinks about the alleged States’ Rights abuses of PASPA over the quarter-century of its existence. That’s because the SCOTUS justices could return a verdict on the Garden State’s case as soon as April 2, but a yay or nay is almost assuredly not going to be delayed longer than June when the court’s 2018 term is up.

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