A Blog by Jonathan Low

 

May 17, 2018

Potential Consequences of the US Supreme Court's Sports Betting Legalization Ruling

With a lot of money on the line, will every referee's call on every play be open to review - and skepticism? Will college athletes finally be paid in order to ward off approaches from gamblers? Will a society in which trust is already eroding be driven further apart by disputes about the integrity of an increasingly politicized arena?

Well, yeah, maybe. But there's a ton of money to be made. Las Vegas has even secured its own NFL and NHL franchises. The betting here is that the money wins; the leagues will adapt as perception dictates. The longer term question of whether this ultimately engages or alienates American fans remains to be seen. JL


Nina Totenberg and colleagues report in NPR, Andrew Beaton reports in the Wall Street Journal, photo by Jim Decker in vegaseven:

The average NFL fan who is a non-bettor watches about 15-16 games a year. The NFL fan who is a bettor watches 45-50 games a year. "That kind of information is gold!" Legal sports gambling gives more fans access to a huge array of “prop bets” that would be available on every play of every game. "Leagues want a piece of the action." The NBA and MLB have already been lobbying states for an “integrity fee”-1% of bets -  cut of the action. Amateur (college) athletes are the most vulnerable to corruption because they are not paid. "Gambling is a huge fan engagement tool."
NPR The Supreme Court threw open the door to legalized sports betting. By a 6-3 vote, the court struck down a 1992 federal law that effectively prevented most states from legalizing sports betting.
"Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own," the court wrote.
The law called the Professional and Amateur Sports Protection Act, passed in 1992, prohibited sports betting, except in four states where it had already been legalized — mainly Nevada, and to a lesser extent Delaware, Montana and Oregon. It gave the other states one year to legalize such betting, if they wanted to do so.Separately on Monday, the Supreme Court also handed down decisions in two other important cases, dealing with personal rights. In Byrd v. US, the court ruled unanimously that police who stop a motorist for a traffic infraction may not search a rental car without a search warrant, even if the driver's name is not on the rental agreement. And in McCoy v. LA, the court, by a 6-3 vote, ordered a new trial for a capital defendant whose lawyer conceded his guilt to the jury, disregarding the explicit instructions of his client.
Which states will legalize?
The court's sports betting decision, written by Justice Samuel Alito, said the federal law had unconstitutionally commandeered the states' lawmaking authority. The law at issue here, he said, "unequivocally dictates what a state legislature may do and not do," thus putting state legislatures "under the direct control of Congress.

Congress, he said, can regulate sports gambling directly, but it can't pass the buck to the states, telling them how to regulate their own citizens.
While the Court's decision was couched in constitutional terms, the results were a lot more mercenary.
"Gambling is a huge, huge fan engagement tool," said Andrew Brandt, director of sports law at Villanova University. He quoted Nielsen research which estimates that the average NFL fan who is a non-bettor watches about 15-16 games a year. The average NFL fan who is a bettor watches 45-50 games a year. "That kind of information is gold!" Brandt said.
Brandt went on to list a number of states that are "on deck" to enact legislation that would legalize sports betting — among them New Jersey, Pennsylvania, Delaware, Connecticut, Iowa, Mississippi, New York, and West Virginia. Another dozen states have publicly announced plans to do so at different speeds. One state that is an "absolute no" for sports betting is Utah, which has an anti-gambling provision written into its state's Constitution. But most experts expect a majority of the states to legalize sports betting in the next year or two, thus providing the states with a new and needed tax revenue stream.
College athletes the most vulnerable
With every player in the sports world seeing dollar signs, there is one problem player — the amateur athlete.
Amateur athletes are the most vulnerable to corruption because they are not paid, noted Michelle Minton of the Competitive Enterprise Institute.
That's why the NCAA could throw "a wrench in the works," said John Wolohan, professor of Sports Law at Syracuse University. Professional players make too much to risk throwing a game, he said, but a kid on full athletic scholarship with no money in the bank is much more susceptible when someone approaches him and says, "Hey, you're playing Colgate tonight. You guys are favored by 20 points. Here's $5,000. Make sure it's under 20."
Potential impact of the court's ruling
The ban on legalizing sports betting was also known as the Bradley Act, after author of the bill, former basketball great Bill Bradley, who served three terms in the U.S. Senate.
In an NPR interview, Bradley said his motivation was simple, and personal. "Betting on sports was betting on human beings, and I thought that was wrong," he explained.
Bradley said that in invalidating the 1992 law, the Supreme Court "ignored the impact of their ruling on sport," turning "every baseball player, basketball player, football player into a roulette chip." And he said that with this ruling, there is "nothing to prevent betting on high school or even grade school games."
Bradley said there was virtually no congressional opposition to his bill back in 1992, though he added that Donald Trump, with failing investments in Atlantic City casinos at the time, lobbied against it, believing that sports betting was the answer to his financial problems there.
After the bill passed, New Jersey did not seek to legalize gambling in its one-year window of opportunity. It was not until 2011 that the state, starved for tax revenue, began trying to get out of the ban. Only when it finally got its case to the Supreme Court did it finally prevail.
After oral arguments in December, then-Gov. Chris Christie, R-N.J., said on the Supreme Court steps, "If we're successful here, we can have bets being taken in New Jersey within two weeks of a decision by the court. We're like boy scouts; we're prepared."
The American Gaming Association estimates that illegal sports betting has grown to $150-billion-a-year market. Expectations are that legal sports betting could significantly outstrip that number. America has seen a cultural shift on the question of sports gambling in recent times. NPR's Uri Berliner reported in 2015 that ESPN has been increasing its coverage of gambling by, for instance, directly referencing the point spread set by oddsmakers.
And while the major U.S. pro- and college-sports leagues have "always sought to distance themselves completely from gambling," as Berliner put it, NBA Commission Adam Silver came out in favor of legalizing (and regulating) sports betting in 2014.
Then there's the popularity of daily fantasy sports — an industry that has weathered legal challenges of its own. Fantasy sports leagues amount to "thinly veiled gambling," as ESPN's Rob King told Berliner, and have helped push sports betting into the mainstream.
It's no wonder that news of Monday's decision sparked a surge in gaming stocks on Wall Street.
Jason Robins, CEO of DraftKings, in an interview with NPR, estimated an increase of $15 to 20 billion in revenue in the fantasy sports industry alone if a majority of states end up legalizing sports betting. The ruling Monday opens up a lot more "cool experiences and products we can offer to our customers," he said.

Wall Street Journal
The major American sports leagues had an unmistakable response to Monday’s historic Supreme Court ruling that paves the way for legalized sports across the U.S.: We’re ready—and we want in.
Just a decade ago, that would have been unimaginable. Then, the NBA had just been rocked by a referee involved in sports gambling. Memories of famous scandals, from Pete Rose to the 1919 Black Sox, still loomed over MLB. The NFL, America’s gambling behemoth, opposed the practice perhaps more vigorously than any other major sports body.
But in the months and years leading up to Monday’s 6-3 decision, which invalidated a federal law that banned sports betting in most of the U.S., these leagues have been preparing for a different type of future. Both behind the scenes and publicly, their attitudes have shifted in anticipation of a new reality that had come to feel like an inevitability.
“The leagues want a piece of the action, somehow, some way,” said Frank Vuono, co-founder of 16W Marketing, a New-Jersey based sports marketing agency.
The leagues have already laid the groundwork for how they would like to proceed in a landscape where fans may be laying bets before—and during—games, whether that’s from seats on their couches or in the stands. These bets will go far beyond the classic wager on who will win a game and by how many points. Legal sports gambling gives more fans access to a huge array of “prop bets” that would be available on every play of every game. They are bets on propositions such as, “How many threes will LeBron James hit in the third quarter?” or “Will the Patriots score a touchdown on this drive?” Such bets are common in the U.K., where soccer fans can make wagers on Premier League matches while at the stadiums.
The stances of the leagues visibly changed even before the Supreme Court made it clear the leagues did not have a choice. David Stern opposed legalized sports betting during most of his 30 years as NBA commissioner, but Adam Silver, who took over in 2014, supports it. The NHL became the first major league to place a franchise in Las Vegas. The Golden Knights, in their first season, are in the playoffs. The NFL’s Raiders will move from Oakland to Las Vegas in the next couple of years.
On Monday, the leagues said they would work to protect the “integrity” of the game in states where sports betting becomes legal. The challenge that invalidated the federal law on sports betting came from New Jersey, but other states have already either passed legislation or voiced support of action to follow that.
“As each state considers whether to allow sports betting, we will continue to seek the proper protections for our sport, in partnership with other professional sports,” MLB said in a statement.
Not all leagues, though, have taken the same approach in their behind-the-scenes efforts to gear up for this moment and capitalize. And some of the proposals have already faced resistance from gaming experts and industry executives.
In recent months, the NBA and MLB have already been lobbying states for what has been commonly referred to as an “integrity fee”—1% of bets typically—to extract a cut of the action. The leagues believe the fee is the necessary trade-off for the increased administration that would be required to protect the sports and guard against anything nefarious, such as game-fixing.
This idea has gained traction and generated discord. A bill introduced in the Kansas House of Representatives earlier this year, for example, proposed a 0.25% fee on wagers to go back to the respective leagues.
Gambling experts and industry executives, however, have come out strongly against these proposals. They say a 1% fee can amount to upward of 20% of net revenue for gambling operators and that such an action could keep the practice unregulated and underground. After the NBA proposed a 1% fee in New York in January, Geoff Freeman, CEO of the American Gaming Association, an industry trade group, said that the role of the leagues “most certainly does not include transferring money from bettors to multibillion-dollar sports leagues.”
In a statement Monday, Silver said the league “will remain active in ongoing discussions with state legislatures.”
The NFL isn’t insisting on a fee and NFL commissioner Roger Goodell has been less outspoken than Silver on the subject. Instead, said a person familiar with the league’s plans, the league will push for legislation that requires sports betting operations to use official, league-sanctioned data. The NFL believes this will protect consumers and guarantee quality control. Licensing this data would likely involve some sort of fee.
Down the road, there may be even bigger payoffs: The potential to license games or highlights so that fans can bet on the NFL and watch it too—all in one place. So, for example, if a bettor wagers that a football team will score on its next drive, it could watch the action on their phone.
“The money is in the video,” said the person familiar with the NFL’s plans.
The NFL and NBA both called Monday for a federal framework that would set a standard for regulations in each state where sports gambling is ultimately realized. “Congress has long-recognized the potential harms posed by sports betting to the integrity of sporting contests and the public confidence in these events,” NFL spokesman Brian McCarthy said in a statement. “Given that history, we intend to call on Congress again, this time to enact a core regulatory framework for legalized sports betting.”
Sen. Orrin Hatch (R., Utah) said in a statement Monday that he plans to introduce legislation in the coming weeks to “protect honesty and principle in the athletic arena.”
While these sports bodies see opportunity, the NCAA faces a dilemma. The NCAA has consistently opposed sports betting, even refusing to hold championship events where sports betting is legal. The NCAA already faces growing questions about how it compensates college athletes, a drumbeat that may only grow louder with the potential for new money flowing in from gambling.
Now, the court’s decision appears to be spurring the sprawling, member-led organization to reconsider.
On Monday the NCAA’s chief legal officer, Donald Remy, said in a statement: “While we are still reviewing the decision to understand the overall implications to college sports, we will adjust sports wagering and championship policies to align with the direction from the court.”

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