Shots Fired: Leagues And Casinos Set To Do Battle Over Legalization Of Sports Betting

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If it wasn’t clear a war was coming before, a hearing held Wednesday about New York sports betting saw battle lines being drawn.

Who is the war between? On one side its the NBA (and eventually the other pro sports leagues, presumably). On the other, it’s the US casino and gaming industry.

In the world of business, it’s the equivalent of a heavyweight fight. Who will come out on top? We’re not even out of the first round yet.

What the NBA wants out of sports betting

The NBA spoke publicly — via assistant general counsel Dan Spillane — about its desire to see regulated sports betting in front of NY legislators.

The league said it wants legal sports betting, as long as New York — and presumably other states — follows its guidelines for what should be in a law. Its idea for an “integrity fee” — what amounts to a one percent tax on sports betting handle paid directly to the leagues — first appeared in an Indiana bill.

But that was handled via lobbying behind the scenes. Yesterday, the NBA vocally floated the idea for the first time to New York lawmakers.

The handle tax might sound like a small amount of money, but it translates to roughly 20 percent of all revenue that a prospective sportsbook would generate. (Handle is the amount of wagers taken; revenue is the amount of money sportsbooks win from bettors.)

The result of the NBA’s insistence on “integrity fees” in New York was the casino industry lashing out at the idea that the leagues themselves deserve a piece of the pie.

Casinos strike back

The gaming industry — via the American Gaming Association — was unequivocal in its criticism of the NBA.

Here are two of the subject lines of AGA emails in my inbox:

Shots fired. Geoff Freeman, president and CEO of the AGA, offered this statement:

“We are pleased that the National Basketball Association (NBA) today joined with the gaming industry in support of vigorously regulated sports wagering. We can all agree that the 25-year ban on sports wagering has been a failure in every regard. Now, let’s get real about eliminating the illegal market, protecting consumers and determining the role of government – a role that most certainly does not include transferring money from bettors to multi-billion-dollar sports leagues.”

The casinos, of course, want to make sports betting profitable for themselves. They see the leagues as lobbying for their own cut as butting into business that doesn’t concern them. (I took a look previously at how much leagues could make from integrity fees if sports betting were to be widely legalized in a scenario in which New Jersey wins its US Supreme Court case.)

Certainly, the leagues deserve to be included in discussions about how sports betting is regulated around the US. The idea that they deserve a cut of all the action is one that the casino industry takes umbrage with and is suspect logically.

A rising tide lifts all boats

What will the NBA do in states where lawmakers don’t include an integrity fee? Will they become opponents of legalization in those states?

That’s at least feasible, as the NBA’s interest in state-level lobbying is new just this month. Despite its insistence that a regulated market is preferable, it wants to be able to make money from the legalization of sports gambling. Scenarios that don’t create a direct revenue stream may not be palatable to the league.

But here’s the thing: The commercial gaming industry and the NBA both know that sports betting is good for both their businesses:

The squabbling here is only — and yes it’s a big “only” — over the money. The casinos are certainly not going to hand over one percent of handle to the NBA just for existing. Nor is the NBA just going to roll over and not try to get a cut.

Compromise on sports betting?

There has to be a middle ground somewhere. The NBA and casinos should be finding a way to lobby for legislation that suits both their needs, as they both want the same thing at core.

There are costs for the NBA that emanate from an expansion of sports betting; a one percent tax on handle to offset those costs is excessive, however. The casinos have an interest in having the leagues not provide an opponent that could slow the proliferation of sports wagering.

Instead of fighting each other, the NBA and the casinos would be best served to get on the same page and present a plan they both agree upon. That would make it smoother sailing for sports betting bills around the US.

The guess here is that kind of compromise is not imminent, based on the reaction from the AGA. That means we’re in for a fight that’s going to play out in statehouses around the country. Casinos carry a lot of weight on the lobbying side of the things. Pro leagues do as well, at least in states where they have teams.

The coming war will be interesting to watch. Let’s just hope that the war doesn’t result in a stalemate that scuttles the legalization of sports betting.