The partnership between the NBA and MGM Resorts gave the sports betting world a lot to talk about. There’s also a lot to unpack and until full details come to light, the non-exclusive partnership raises as many questions as it answers:
- Is this the beginning of leagues having a monopoly on official data, and perhaps creating monopoly prices down the road?
- What’s the value to the sportsbooks of official branding and content from the leagues?
- Does the deal create a barrier for entry that will prevent local and upstart gaming companies from being able to compete with national companies that can justify the cost of these deals?
One question the deal answers is the integrity fee situation. The first-of-its-kind deal in US sports betting likely signals the death of the integrity fee, which has been debated in statehouses across the country.
Here’s why …
Lawmakers can breathe a sigh of relief
Some have argued that the deal gives credence to the leagues’ case, that it’s a signal that casinos believe integrity is needed.
I see the deal as more of a get out of jail free card for state lawmakers:
Respectfully disagree with this premise. If anything, this commercial agreement is something states will point to as a reason to REJECT integrity fees. Why should the state mandate what private entities can negotiate commercially? https://t.co/I6ueDMyfMz
— Chris Grove (@OPReport) August 2, 2018
These lawmakers were already in the unenviable position of being caught between the lobbyists of two multi-billion industries: sports and gaming.
Effectively, the deal offers lawmakers who harbored concerns about upsetting a sports league a convenient excuse: you can work that out with the casinos privately, just like MGM and the NBA did.
The mechanics of the deal further complicate integrity fee discussions. The agreement doesn’t cover a single MGM property in a state that already has sports betting — it covers all MGM properties. As such, any state with an MGM casino will have to account for the existing deal:
That’s an interesting point. Then, if a state adopts rights/integrity fee, would MGM be excluded? Reconcile statute with contract.
— Darren Heitner (@DarrenHeitner) August 2, 2018
Why the NBA made the deal
So why would the NBA enter into an agreement that effectively ends its chances of receiving a state-mandated integrity fee?
Simple — it saw the writing on the wall.
The deal is a tacit admission of two things:
- Thus far, the leagues’ demands for integrity fees have fallen on deaf ears.
- The NBA doesn’t expect that to change going forward.
Not one of the eight states that has legalized sports betting has included an integrity fee. In fact, it’s been a non-starter in all but a few states where sports betting legislation is being considered.
Further, the integrity fee debate has slowed legislation in the few states where it has some momentum, most notably New York.
The general aversion to these fees isn’t surprising considering the leagues’ cut would come out of the pocket of not just the sportsbook operators, but the states. And since the leagues have been unwilling or unable to explain how they would use integrity fees for the greater good, lawmakers are rightfully skeptical about the leagues’ intentions.
At the NCLGS Conference in mid-July, the subject of integrity fees popped up many times. Whenever it came up, it was far more likely to be met with scorn or ridicule by state legislators on hand than to receive support.
At the same time, backchannel chatter indicated sportsbook operators are willing to sit down with the sports leagues and hash out a deal along the same lines as the NBA-MGM partnership. It sounded then like the leagues weren’t interested, but just a few weeks later the deal was announced.
The NBA appears to be packing it in on the integrity fee front and taking what they can get from sportsbooks. I suspect other leagues will soon follow suit.
This isn’t to say integrity fees won’t come up in future legislation. But the leagues’ demands will be the equivalent of a team 20 games out of a playoff spot tanking for a better draft pick.