West Virginia sports betting became law this weekend despite Gov. Jim Justice declining to sign the bill. He didn’t veto it, either. Instead, Justice left the bill sitting on his desk for five days, at which point it lapsed into law by inaction.
Those close to the situation fully expected Justice to sign the bill. The House and Senate had each passed the measure with veto-proof margins in previous weeks, and the governor had expressed his own support for sports betting.
So what happened?
Last-minute push from MLB
Justice seems to like the idea of WV sports betting but not the bill as written. In a press release on Friday, the governor said he will urge lawmakers to reconsider the law it just passed.
“After the U.S. Supreme Court issues its decision on sports wagering, to address any provisions of the legislation that might be in conflict, I will ask the legislature to look at the advantages of partnering with the major sports leagues,” he said. “I believe there could be real value to this partnership.”
Major League Baseball is under the impression that it will result in a special session. The league released its own statement:
Major League Baseball appreciates the willingness of Governor Justice to correct the significant flaws in the sports betting statue by calling a special session to amend the law. We believe that with the Governor’s leadership, the amended statute will better protect the citizens of West Virginia and the integrity of sports, and also increase revenue for the state in the long run.
MLB commissioner Rob Manfred has been diligently working the angles with local media, and he found a cozy “in” with the governor. WV MetroNews notes that Larry Puccio, who is lobbying for the leagues, was the leader of Justice’s transition team.
Justice also owns The Greenbrier — one of the five facilities authorized to offer sports betting. He said on Monday morning in talking with WVMN that he didn’t want to sign the bill directly for fear of creating bad optics. He also said he is “absolutely a proponent of the bill” in that interview.
The governor’s inaction and call to reevaluate indicates that the leagues will oppose both active sports betting bills and finalized laws going forward.
Does the WV sports betting law have ‘significant flaws’?
We’ve written before about how much work WV lawmakers poured into sports betting and how quickly this bill passed. The Lottery Commission, who helped craft it, started the process with a comprehensive third-party study last year.
There are a lot of stakeholders to appease with gambling legislation like this. Customers and their money need to be protected, first and foremost. Sportsbooks should be reasonably profitable, and the state should receive some revenue to allocate, too. And, of course, the sports leagues want to make sure their games are being played and bet on fairly.
To that end, the NBA and MLB have crafted their own blueprint for sports betting bills. It is the only model legislation they’re supporting, and it contains a few points of controversy. Most notably, they’re requesting an integrity fee as a royalty for their place in the industry. The leagues have pitched their proposals to lawmakers in several states, including WV.
For the most part, the proposals have not been well-received. During testimony in the Senate, for example, a lottery counsel Danielle Boyd laid out the industry from top to bottom. She spoke with knowledge as she covered the integrity fee, delivering the commission’s stance:
“We believe that this fee is essentially being proposed to finance something that is already occurring,” Boyd said. “It’s hard for us to wrap our heads around how the cost of monitoring integrity would increase in a regulated market.”
She took it one step further and contended that a transparent market could even reduce integrity costs and concerns.
WV lawmakers have already ‘looked at the advantages’ of partnering with the leagues, as the governor suggested. And they’ve dismissed the notion. It would be pretty surprising if they’re willing to go back and revisit the idea now that the law has fully passed.
More comments from the Governor
After releasing his statement, Justice elaborated on his stance in an interview with WVPBS:
I personally believe that there is a real benefit to a partnership with the major leagues, and I think there’s some cleanup work that needs to be done with the bill.
And as far as a one precent integrity fee — and now that’s down to a quarter of a percent, which is not a lot of money to tell you the truth, and the casinos surely ought to be able to afford that.
And I really believe that partnership with the major leagues is something we really need to look at, and maybe cleaning it up and maybe perfecting the bill, and making it into a model legislation that maybe the whole country can use.
Although the governor did not specifically say he will call a special session, it certainly sounds like that is the plan. There’s plenty to pull from his statements, but two points stick out.
‘Not a lot of money’
First, the governor’s claim that the integrity fee is “not a lot of money,” is quite a surface scuff. It’s misleading at best, and it’s exactly what the leagues want lawmakers to believe.
In practice, one percent of handle actually amounts to about 20 percent of revenue in an industry with notoriously tight margins. That means that the leagues would probably be making more from WV sports betting than the state, which is taxing revenue at a rate of 10 percent. There are billions of dollars on the line each year if the league model is widely accepted.
Even at .25 percent, it’s a sizable chunk of money.
The Lottery Commission warned that additional fees and taxes make it more difficult to compete with illegal, offshore wagering.
‘A model legislation’
That last line is a curious one, too, and it’s something that Justice mentioned in Friday’s press release.
The idea that WV sports betting should provide “a model legislation” is a seed planted by the sports leagues. It happened in New York and elsewhere, where they pitched their template as the one that should be embraced around the country.
Leagues have always preferred a unified solution to sports betting, especially if that comes at the federal level. But at the state level, this ‘model’ language is almost being used as a tool of flattery. What governor wouldn’t want to hear the NBA tout their state’s laws as a model for others to follow?
Incidentally, New York sports betting is responsible for that “quarter of a percent” line from Justice. The state’s most-recent bill would give the leagues just a quarter of what they’re seeking, and that may actually end up being a model for other states. Justice seems open to the adjusted rate, at least. (NY’s bill would cap the amount at two percent of revenue, however.)
Despite his qualms on the leagues’ behalf, the governor reaffirmed his support for the new law: “I’m really happy that we got the sports wagering bill through,” he said. “And absolutely I think it will be good. Because so many people are betting on games it’s unbelievable, and the state’s not deriving any benefit from it.”
Would a special session happen, or change anything?
Even if Justice calls the special session that MLB and NBA apparently want, it seems unlikely that it will result in a real change.
The few lawmakers that opposed the legislation or wanted to see meaningful changes to it wanted West Virginia — not the leagues — to get more money from the law. Giving the leagues a cut of money instead of earmarking more for the state — basically for doing nothing that is going to tangibly help West Virginia — would not be a popular change to the law.
And that’s not to mention that the bill already passed overwhelmingly in both chambers. The impetus to change it is going to be low.
Basically, the play for the NBA and MLB is hoping to create doubt in other states that have not yet passed sports betting laws. Will that work? It’s better than nothing if you’re those two leagues.