The NBA is pushing for the legalization of sports betting in the US for the money. This should shock no one.
To what lengths it will go to secure its piece of the pie from a world in which sports betting is widely legal in the US might shock you, however. The NBA — and its lobbying partner Major League Baseball — is apparently willing to oppose legislation if it doesn’t get a cut of the action directly from states.
NBA opposition in Iowa
The revelation this week that the NBA and MLB would actively oppose a sports betting bill — at least as written — came this week in Iowa.
In a lot of states, lobbyists must publicly register for whom they lobby. In Iowa, that goes a step further. Lobbyists must indicate if they are “for,” “against” or “undecided” regarding bills on which they are lobbying.
Four lobbyists that rep NBA and MLB have said they are “against” the Iowa bill. Just last week, the NBA testified in a New York Senate hearing that it would support legalization, as long as states agreed with their tenets for a regulated market.
There’s also an interesting subtext here. All of these lobbyists also work for the same firm that is representing daily fantasy sports companies DraftKings and FanDuel. It’s likely both of those companies would like to eventually get into the sports betting business on friendly terms for their businesses. The NBA/MLB model where one percent of all sports betting handle — called an “integrity fee” — is paid to the leagues is not friendly to either businesses or states.
Why is NBA/MLB opposing a bill?
To be sure, there are problems with the Iowa bill. It’s short on details and codifies little on integrity matters as it relates to wagering and the games on which wagering will occur.
But the biggest issue the NBA and MLB likely see is the lack of the “integrity fee” they are asking for. A sum of one percent of handle paid to the leagues could result in a windfall of hundreds of millions of dollars for the leagues, down the road.
Going immediately to “against” the bill appears to indicate what the leagues will do if they don’t get their way. The NBA has long said favored a regulated market; Commissioner Adam Silver‘s op-ed on the subject is now several years old.
There are apparently some fairly big limits on what type of regulation the leagues will accept, however. And my earlier view that Silver is just a hypocrite is starting to look prescient.
How silly is the “integrity fee” as we’ve seen it to date?
The NBA and MLB are asking for one percent of sports betting handle. That may not sound like much. But here’s an example from the American Gaming Association indicating how much leagues could stand to make:
While a one percent fee paid to sports leagues may seem innocuous, the reality is that it is 20-29 percent of total revenue of sportsbooks. On average, a sportsbook keeps just 3.5-5 percent of the total amount wagered before taxes and other expenses. Here is a quick, by the numbers, example of how this works:
If a sports book accepts a $100 wager:
- $95 goes to winning bettors
- $1 would go to the NBA
- $0.34 goes to the state government, modeled after Nevada’s 6.75 percent state tax on Gross Gaming Revenue
- $0.25 goes to the federal government, as part of the 0.25 percent federal excise tax on the handle
- $3.41 would then go to the sportsbook (this covers all advertising, labor, property expenses, and technology)
The NBA and MLB want to make that much money, simply for existing? That’s going to be a tough sell.
The NBA is not a champion of sports betting; it’s a champion for more money
The NBA has gone from 1. not actively lobbying for regulation, to 2. lobbying Congress and saying state regulation was untenable, to 2. lobbying states — all in the space of just six short months.
What’s changed? The US Supreme Court agreed to hear the New Jersey sports betting case. The verdict in that case this year could result in the federal ban on single-game wagering outside of Nevada sports betting being struck down.
The NBA and MLB, at least, appear to see the writing on the wall and believe they are going to lose that case. (Both are litigants opposing New Jersey’s efforts to skirt the federal ban, PASPA.)
We still only have one example of what the NBA and MLB are going to do when confronted with a bill without an integrity fee. Will this opposition manifest in other states where its concerns are not addressed, or an integrity fee is not included? That remains to be seen.
There’s also a matter of degree. How much lobbying will they do if they don’t get the integrity fee? States like Iowa and West Virginia are tough targets, because MLB/NBA don’t have top-level franchises in those places. Indiana — where the integrity fee first appeared, has the Indiana Pacers in the NBA.
But if the leagues don’t work collaboratively on good sports betting policy around the country — whether it benefits them in direct financial terms or not — then it’s clear they are only in it for the money, and nothing else.
