Let’s start here: Barring a catastrophe, West Virginia will be the first state in 2018 to enact a sports betting law.
The state will join New Jersey, Pennsylvania and New York with laws on the books ready to go should the US Supreme Court strike down the ban on single-game wagering outside of Nevada sports betting.
Still, the NBA and Major League Baseball are doing everything they can to stop that that law from happening. To borrow the parlance of the respective sports, the NBA has put on a full-court press to see the provisions it wants in the bill. MLB called in a pinch-hitter in the bottom of the ninth, as Commissioner Rob Manfred made his plea yesterday.
We know the MLB and NBA want several things from sports betting legislation; most importantly, they want a one percent tax on all wagers placed or an “integrity fee” codified in any bill. Without that fee and other desired provisions, they are moving to stop this or any other similar bill from passing.
But why do they care so much about what West Virginia is doing about sports gambling?
The MLB and NBA’s outsized reaction
The state is a signature of the governor away from passing a bill. Even if the governor vetoes it — Manfred has said he would ask Gov. Jim Justice to do just that — the votes exist to override that veto.
Calling in Manfred to talk to West Virginia media and lobby the governor directly is quite the escalation in tactics from the two leagues. Until now, lobbyists and league executives have done all the heavy lifting on the WV sports betting bill.
No offense to the folks in West Virginia, but it looks like an outsized reaction to the legislative effort. It’s a small state, with a population under 2 million. The amount of money the leagues would make from getting one percent of handle — or about 20 percent of revenue — would amount to pocket change for the major US pro leagues.
But there are larger concerns in play for the leagues.
Leagues are playing from behind in WV and elsewhere
The leagues awoke from their slumber on the potential of US sports betting being legalized on a state-by-state basis either late last year or early this year.
After once insisting a federal framework was the only way to effectively deal with sports betting regulation, the leagues were confronted with the reality that states were going to act well before a federal solution happened. As a result, they quickly pivoted to lobbying in a variety of states.
But the lay of the land was not friendly in West Virginia from the jump:
- There are no MLB or NBA teams in the state, meaning they have less pull than they might elsewhere.
- The bill in WB was already pre-baked. The state has been working on the subject since last year. When the bill was introduced and with the support of the powers that be in the legislature, its passage was already a heavy favorite. There was little chance the leagues were going to influence the legislation.
- The leagues putting their hands out asking for a huge chunk of money is poor optics in almost any state, but especially so in a state like WV.
Despite those forces working against the leagues, taking a loss in WV is still a potentially dire scenario.
No cut for the leagues in any state so far
The states that have already legalized sports betting have nothing the leagues want, especially that integrity fee/tax:
- Nevada sports betting: It’s existed for decades without giving money to the leagues. The leagues have a snowball’s chance in hell of getting money from Nevada.
- NJ sports betting: The leagues have actively opposed New Jersey in its effort to legalize sports wagering. Give me a maximum bet on “never” on the prospect of NJ cutting the leagues in.
- PA sports betting: The state enacted a sports betting law in 2017, well before the leagues started to lobby. While the state may go back into its law to fix an extremely high tax rate, the state is not likely to change its law just to give the leagues a cut.
- New York sports betting: A draft bill surfaced with a 0.25 percent tax on handle payable to leagues that would actually have to be tied to integrity. The leagues don’t really want that either; they want the whole enchilada. (The state also has a law on the books that already legalizes wagering only at the state’s commercial casinos, with nothing for the leagues in there, either.)
Now we’re adding West Virginia to the list, and the leagues are taking a direct loss when they actually tried to get what they wanted.
Bad precedent
A variety of other states are considering sports betting bills. Those legislatures will now be confronted with a list of four states that don’t have the integrity fee included. If I am a lawmaker in any of those prospective states, I point to that list and ask the leagues “Why I should give you money, when none of them did?”
That’s why West Virginia is so important. It’s precedent for other states and bad precedent for the leagues. With each state that doesn’t agree with the leagues’ position, the league’s ability to effectively lobby will diminish.
We saw this manifest in the daily fantasy sports space — in reverse — where friendly laws have come down like rain on the industry in recent years. Early adopters in legalizing DFS and calling it a game of skill reinforced efforts in states that passed laws later. (Interestingly, the same lobbying firm that got a lot of those laws passed is also spearheading the NBA/MLB lobbying.)
But this is why the leagues think West Virginia is so important. Getting shut out of the bill there could have ramifications in other states. And even though we’re in the early innings of sports betting legalization, that might mean they get shut out everywhere.
