Testimony from a National Basketball Association official at an Illinois legislative hearing on sports betting revealed that the Professional Golf Association is now supporting legalized sports betting with a so-called “integrity fee” imposed on all wagers of each league’s games, paid to the leagues—currently being plugged by both the NBA and Major League Baseball at various states considering bills to regulate sports wagering.
At an informational hearing on Illinois sports betting, NBA official Dan Spillane said, “Although not a part of the NBA family, I just want to note that a representative of the PGA Tour also is in attendance today, and I understand that they also are supportive of the views that (MLB official Bryan Seeley) and I will be sharing with you today.”
The existence of the PGA representative wasn’t merely a gimmick a la the airmen in A Few Good Men. After the hearing, Legal Sports Report confirmed that the Tour indeed supports MLB and the NBA, whose Spillane and Seeley (as well as numerous other registered lobbyists) have appeared at hearings in multiple states to push for legislation conferring various financial and other benefits to the leagues.
In Illinois, the PGA Tour officially joined the NBA and MLB in support of league-preferred sports betting legislation
The state Gaming Committee heard testimony from supporters and opponents of a sports betting bill introduced by state Senator and former NFL linebacker Napoleon Harris. The legislation would allow Illinois casinos to take wagers on amateur, professional and college sports and regulate online sports betting limited to state residents. State Senator Steve Stadelman, the committee chairman, said he doesn’t believe sports gambling would “be a panacea for the budget problems” in Illinois, but the state needs to be “part of the conversation.”
Among the speakers was gaming analyst Chris Grove, managing director of Eilers and Krejcik Gaming LLC. Grove estimated about $680 million would be spent annually on sports betting in Illinois via land-based casinos and mobile sites; a 10 percent tax would generate approximately $68 million in state revenue.
However, Grove urged legislators to reject the integrity fee promoted by Major League Baseball and the National Basketball Association. He warned the 1 percent fee on all handle actually would equal a 20 percent – 25 percent tax on gross gaming revenue.
League officials claim the integrity fee is needed to pay for the costs of ensuring competitions remain honest. They said a well-regulated legal betting framework could provide helpful information to perform their own internal investigations of league misconduct.
Spillane, representing the NBA, said previously the league “opposed the expansion of sports betting,” but after studying the issue, “the time has come for a different approach to give sports fans a safe and legal way to bet on sporting events while protecting the integrity of our competitions.”
Seeley, head of investigations for MLB, said, “If Illinois is going to legalize sports betting, there are some important things that need to be in the legislation,” namely, giving the league the ability to talk to bookmakers.
“We are not looking to prevent betting,” Seeley said, but adding that the MLB did not want to see betting in the minor leagues. “We do not want to create betting in those markets where there’s more risk for corruption,” he said.
Will Green, senior director, research at the American Gaming Association, warned against over-taxing sports betting. He said high taxes could “burden a legal sports book with unnecessary costs” and make legal businesses unable to meet the higher payouts of illegal companies that currently operate offshore. “It will cut the legs off of legal sports betting, quite honestly, before it has the chance to walk,” he said.
Tom Swoik, executive director of the Illinois Casino Gaming Association, agreed, noting, “If the taxes and these fees that are paid to operate sports books are so high, then the payouts can’t be as high as sometimes what’s being paid out in illegal betting. People are still going to continue to do the illegal betting because they can get a higher payout.”
Anita Bedell, executive director at the Illinois Church Action on Alcohol and Addiction Problems, her organization opposed expanding sports betting. She noted, “Nearly 10 percent of the high school students are gambling online, and more than 40 percent are gambling in any form. Sports gambling will increase problem and pathological gambling.”
A representative for the PGA Tour later gave the Legal Sports Report website the following statement:
“The PGA TOUR supports the regulation of sports betting in a safe and responsible manner. We believe regulation is the most effective way of ensuring integrity in competition, protecting consumers, engaging fans and generating revenue for government, operators and leagues. We are aligned with the NBA and MLB in this area, and we are looking for ways to collaborate with legislators, regulators, operators and others in the industry on regulation that serves the interests of all involved.”
The “interests of all involved,” in line with the NBA and MLB positions, includes what the NBA proposed as 1 percent off the top to each league on all wagers made on its games—or 20-25 percent of revenues for current legal sports books, which operates on margins less than 5 percent. Sports-betting advocates led by the American Gaming Association have called the integrity fee unworkable, making legal sports books unable to compete with the odds offered by illegal bookmakers.
States Prep Sports Betting Legislation
In case the U.S. Supreme Court lifts the federal ban on sports betting, nearly 20 states have passed or are considering measures legalizing it–including Louisiana, Minnesota and Connecticut
In Louisiana, the state Senate Judiciary B Committee recently approved Senate Bill 266, which would authorize sports gambling at the Harrah’s New Orleans casino, the state’s 15 floating casinos, its four racinos and about 200 video poker truck stop casinos, as well as around 1,000 bars and restaurants currently licensed to operate video poker. The measure now moves to the full Senate for consideration.
The bill’s sponsor, state Senator Danny Martiny, said, “When the Supreme Court rules, I can assure you that Mississippi will be up and running in 30 to 45 days, if not sooner, and so will Arkansas. Mississippi passed a bill to regulate sports wagering last year; Arkansas is not actually considering any such legislation.
If the Supreme Court overturns the ban and the Louisiana legislature passes SB 266, the issue would be determined by voters on a parish-by-parish basis in November, as required under the state Constitution for any expanded gambling measures.
Senate Bill 322, Martiny’s companion bill that would have legalized online gambling over iPhones and computers, was tabled over concerns it would cannibalize the land-based casino industry. Martiny commented legislators don’t want to raise enough money to fill the budget gap, but they also don’t want to make the required cuts. Stating more gambling could help balance the budget, Martiny said he may revisit SB 322 later.
In Minnesota, state Rep. Pat Garofalo, chairman of the House Job Growth and Energy Affordability and Finance Committee, said, “If the Supreme Court removes the ban, and if we do nothing, the offshore sports books will flood social media and scoop up bettors who think they are regulated, legal and taxed.” He added what lawmakers do now “will decide who gets to take billions in sports wagers and make tens of millions of dollars.” However, Garofalo noted he would not submit a sports betting bill the state’s tribal casinos would oppose. “Non-negotiable,” he said.
Connecticut legislators are considering a bill that would legalize sports betting in the state should the U.S. Supreme Court lift the current ban on the practice as well as authorizing online lottery games.
SB 540, which is only the most prominent of several bills addressing sports betting, has been referred to the Committee on Finance, Revenue and Bonding.
Sportech, based in New Haven, has estimated that the cash-strapped state could increase tax revenues by about $100 million over five years if it legalizes sports betting.
Connecticut could generate approximately $100 million in tax revenues over the first five years of legalization, predicted New Haven-based wagering company Sportech.
Several months ago, the Public Safety and Security Committee (PSSC) held fact-finding hearings on the industry. At that meeting the lawmakers rebuffed attempts by the NBA and Major League Baseball to get a share of any revenue from such wagering, in the form of an “integrity fee” or “royalty.” Both leagues are attempting to obtain control of the data for sportsbooks.
However, the Committee on Finance, Revenue and Bonding, has a different view. SB 540 has whittled down the leagues’ request for a 1 percent fee to a 0.25 percent “betting right and integrity fee.” The state would collect a 15 percent tax, which is more than double what is collected in Nevada and compares to 10 percent passed by the West Virginia legislature.
Both leagues are asking for a piece of the action. “The sport betting business is built on our games,” said Morgan Sword, senior vice president of league economics and operations for Major League Baseball.
Under the bill the operators would be required to purchase data from the leagues in a two-tiered system, with one tier for final scores and the second tier for all other types of wagers. The bill would also allow mobile sports betting using mobile devices or the internet. It would put such wagering under the umbrella of the Commissioner of Consumer Protection.
House Bill 5307 would require the commissioner to adopt regulations for sports betting once the Supreme Court acts in the case of Murphy v NCAA (previously known as Christie v NCAA.) Currently only four states are exempted from the sports betting ban. One of those not exempted, New Jersey, has sued the federal government to throw out the law. The Supreme Court could rule on the case as early as this summer.
One of the two tribes that operates casinos in Connecticut, the Mashantucket Pequot Tribal Nation, which operates Foxwoods, last week announced its support for online gaming and sports betting.
Foxwoods Executive Director of Online Gaming Seth Young used the occasion to try to bolster the case for continuing the tribes’ monopoly of Las Vegas style gaming in the state.
Young told lawmakers, “We estimate Connecticut can collect $40 million in new revenue over five years through legalized sports betting, starting at $6.5 million in year one and escalating to $9 million by year five.” He added, “But the greater opportunity is in combining online gaming and sports betting operated by the state’s exclusive gaming partners, the Mashantucket Pequot and Mohegan Tribes, which would generate a massive $127.7 million in revenue to the state over the course of five years—more than double the opportunity for sports gambling and daily fantasy sports combined. It would also offer Connecticut the best chance at capturing the existing black market.”
Young added a warning against a proposal by the sports leagues that would give them some authority over the wagering. “The demands of the sports leagues make supporting this bill, as written, a vote for the continued success of the unregulated black market, a vote against revenue enhancement to the state, and a vote against common sense,” he said.
Young favorably compared Connecticut to New Jersey and Massachusetts as a destination state. “We believe online gaming will be a major contributing factor to stability and future growth for our state,” he said.
But he sternly added that both tribes believe that sports betting falls under their exclusive authority under the compacts. “It is the Tribe’s position that sports gambling, daily fantasy sports betting, and iGaming fall under the exclusivity agreement,” said Young.
The state’s lottery supports sports betting and has pledge to turn over new profits realized to the state once expenses are paid out.
New Jersey Anxiously Awaits Decision
Monmouth Park Racetrack in Oceanport, New Jersey has to wait a little longer to know if it will open its $1 million sports book on its opening day May 5 as the U.S. Supreme Court gain delayed ruling on New Jersey’s attempt to implement sports betting.
New Jersey has challenged a federal ban on sports betting under the professional and amateur sports protection act. Hopes had been high that the court would release its ruling last week, but none was issued. The next scheduled date for release of SCOTUS rulings is April 17.
Monmouth Park officials have said they expect to be accepting bets on sporting events within two weeks if the Court upholds the state’s case. The track has spent $1-million to convert an existing area in the grandstand into the William Hill Sports Bar, which was recently expanded and could be converted quickly into a sports book, according to the Asbury Park Press.
Meanwhile, daily fantasy sports company DraftKings has reportedly contacted several Atlantic City casino interests about partnering to offer sports betting. The company recently opened an office in Hoboken New Jersey in anticipation of the court ruling.
The Associated Press reports that the company has contacted potential casino partners in Atlantic City. DraftKings spokesman James Chisholm said the company “is perfectly positioned to succeed in a legal sports betting market.”
At least 19 states already have authorized sports betting, pending a favorable court ruling, or have introduced legislation that would do so, according to Eilers & Krejcik Gaming, which tracks state-by-state gambling legislation.
