The NBA wants to be a partner in sports gambling but has been having trouble forcing teams to try to win
Legal Sports Report

Tanking Presents A Potential Problem For The NBA On Sports Betting And Integrity

NBA tanking and betting

How much of a problem is tanking — teams trying to lose to improve their draft position — for the NBA and the potential for expanded sports betting in the US?

Teams are still shamelessly trying to lose to get more ping pong balls in the draft. And that sets up the league for some bad optics when it comes to sports gambling.

The backstory of the NBA and sports gambling

NBA Commissioner Adam Silver has made headlines for his aggressive stance backing the potential repeal of PASPA (the Professional and Amateur Sports Protection Act) in recent months.

He was initially seen as a hero of legal sports betting and created a very positive move toward supporting sports bettors anxious to have the US Supreme Court strike down the 1992 federal ban on single-game wagering via Christie vs. NCAA (now Murphy vs. NCAA). However, he has recently come under more scrutiny and divided opinion.

Silver has appointed an NBA official, Assistant General Counsel Dan Spillane to lead the way explaining the NBA’s position in requesting and justifying an “integrity fee” — payable to the leagues — of one percent of every legal wager placed in every US state should the Supreme Court allow legalized wagering outside of Nevada. Their reasoning mainly is inherent in their belief they are providing entertainment and a product for the public to wager upon, and that there is a cost to protect the honesty and credibility of that investment.  

Adding to this they will be absorbing a sheriff-like role of ensuring that the honesty and credibility of each game will be protected. They will work with agencies and gaming software companies to detect any potential cheating and wrong-doing as it relates to sports betting, the NBA says.

The American Gaming Association and its president, Geoff Freeman, praised the NBA for their support to regulate sports wagering. But the casino lobbying group has criticized the call for integrity fees and other things the leagues want from sports betting legalization.  Going further, Nevada sports betting operators can easily put it into quantified numbers why this was a very misguided idea and outlandish concept as written for the NBA and other leagues to demand.

Why one percent doesn’t add up

Currently, the state of Nevada — where sports wagering is legal — accounts for an estimated three percent of the total US sports wagering market, according to the AGA. Most of the rest of the wagering takes place at offshore sportsbooks, with established brands including Bovada, BetOnline and 5 Dimes dominating the market. Street bookmakers cover the remaining balance.

In 2017 for example, the Nevada sportsbooks accounted for a combined $4.8 billion in sports wagering handle. If a one percent fee were levied on those wagers, it would result in an estimated $48 million total. Of that amount, the Nevada books won $250 million, approximately five percent of the handle. If the leagues got an integrity fee, that would mean in this example that the NBA (combining with other US sports leagues) would take almost 21 percent of Nevada revenue.

 When asked whether the NBA would consider tying the royalty to an operator’s sports gaming revenue instead of its overall handle, Silver responded that the league would be open to holding open negotiation to come up with a mechanism for achieving a “fair result.”

There are two things to take from that statement. First, expect Silver and the NBA to be negotiable to dropping the outlandish one percent figure to work with the casinos, corporations and new businesses that potentially will be offering legalized wagering pending the Supreme Court PASPA ruling.

Secondly, watch for the term “royalty fee” to replace integrity fee in the vernacular, not only from the NBA but other US sports leagues as well. Certainly, for legal purposes, royalty fee could end up being a much better term.

No integrity fee refunds

As for “betting integrity,” no one has forgotten it has been only a decade since the NBA tried to repair its own wagering scandal, when league referee Tim Donaghy plead guilty to federal charges related to wagering on NBA games that he called.

Today, we have state-of-the-art platforms from companies like Sportradar and Genius Sports — which work with leagues — with improved insight on online wagering to help detect suspicions wagering patterns and unusual betting activity. Quite ironically, the catalyst for this technology has been what is known as the illegal offshore wagering market in the US but legal in Europe and throughout many other countries.

Monitoring of corruption and illegal activity within sports and sports wagering is not infallible. Despite an anticipated successful appeal for PASPA and the dawn of legal wagering throughout the US, it is unlikely to envision any future “integrity refunds” for bettors. Again, “integrity fees” would be better known as “royalty fees” for the US leagues for legal purposes, tied to delivering content for sports wagering purposes.

March and April are NBA Draft tanking months

That all leads us to tanking.

It seems each NBA season yields an earlier date that a number of teams forfeit their playoff hopes — or stop trying to win altogether — and start positioning for the best draft choice possible. And in recent days, it’s become obvious that the NBA is having a difficult time trying to prevent tanking.

That will spark a huge concern should the NBA become a legal partner in the gambling business. For that means players are not potentially giving 100 percent (a.k.a. tanking), drawing a major suspicion toward a wagering bias.

Even more under the microscope will be NBA head coaches, who can change their lineup for each game. Some teams will sit starters with mysterious ailments, in the hopes of giving them less of a chance to win. And for good teams, surprise non-starters in March and April will be playing to give the regular starters rest before the playoffs.

All kinds of trouble await the NBA — perhaps more so than the NHL, MLB and even the NFL — with the birth of full legalized wagering for the U.S.  

The final game of the NBA 2016-2017 regular season offered a perfect example. To ensure they’d receive the best draft lottery position, the Brooklyn Nets did not play any of their traditional five starters against the Chicago Bulls in their final game on April 12, 2017.  The Nets instead inserted every bench player throughout and were crushed 112-73 as 10-point underdogs.  The Bulls needed the win as the eighth and final playoff seed, eliminating the Miami Heat that night.

Flash forward to a potential future US legalized wagering environment, and there will be chaos in this kind of scenario, especially if the NBA is a “partner” in the wagering like it wants to be. Something would have to be done to inform the public or at least enough disclosure to alert bettors like an injury report.  

The NBA and the players union would be wise to put together a new integrity plan for the draft as it relates to tanking. The idea that teams could potentially play less than their best to manipulate either their draft placement — in a world where legal US sports betting is pervasive — could be a huge problem for the NBA.

And if tanking is going on unabated in that scenario, is the NBA’s proposed “integrity” or “royalty” fees being put to good use? The league would need to do more than just improve ping-pong ball technology to ensure the integrity of its games related to draft position.

Larry Gibbs
- Larry Gibbs is VP of US Gaming Services, a full-service consulting and marketing research organization with 15 years’ experience in US gaming, creating ROI behavior studies and analysis for government, lobbyist and casino industry clients. His focused opinion and outlook have appeared in several gaming industry magazines and newspapers.
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