A busy week of state-level hearings closed out with Indiana sports betting on the table Friday.
A study group from the Committee on Public Policy met to discuss two bills that have been sitting on their desk for months. Stakeholders from across the industry presented testimony, including a representative for the professional sports leagues.
The hearing was mostly educational and surface-level, but a back-and-forth with NBA counsel Dan Spillane spawned a few disagreeable moments.
The land of integrity fees
The Hoosier State holds a special place in the dialogue surrounding expanded sports betting. It was in the Indiana statehouse that league representatives first asked for their contentious integrity fee.
Here’s the language that appeared in H 1325 back in January:
A sports wagering operator shall remit to a sports governing body that has provided notice to the commission under section 2 of this chapter an integrity fee of one percent (1%) of the amount wagered on the sports governing body’s sporting events.
Indiana was first, but this request traveled from state to state in lobbyists’ briefcases. Just about every legislative body that’s considered a sports betting bill is familiar with this language.
It’s language the leagues came to regret. As lawmakers wondered aloud on multiple occasions, shouldn’t leagues already be monitoring the integrity of their games? Sports betting, after all, has been legal in Nevada and other jurisdictions for decades.
In the time since that bill appeared, the NBA has tried to pivot from the ill-chosen moniker to a straight-up royalty. It also since reduced its ask from a full 1 percent down to one quarter of a percent of all wagers.
Meanwhile, Commissioner Adam Silver continues to refer to the integrity fee by its original name in public conversation.
Spillane faces the firing squad
Spillane often draws the unenviable task of fighting for these fees, and he returned to Indianapolis to face legislative questioning. After Spillane presented his pitch, the committee became hung up on the included fees.
Spillane tried to explain:
“We certainly are not saying that unless we get compensation from legislation that we’re not going to do everything within our power to protect the integrity of our sport. That’s absolutely not the case. We are doing it now, we’re going to do more as betting becomes legal, and we’re going to do that regardless of what you decide here.”
However, Spillane continued, the NBA will need to invest additional resources to monitor integrity. And borrowing a page from MLB representatives, he offered that sports betting is being forced on the leagues against their will.
“It’s really unusual. It’s hard to think of any other industry that is built on top of another business — ours — that imposes risks on that business — ours — and that requires that other business to spend more to protect itself from another business that’s built on top of it.”
Rep. Jim Lucas wasn’t quite buying it, though. Citing his own small company, Lucas argued that maintaining integrity is simply “the cost of doing business.”
“You should be working — and it sounds like you are — working hard to maintain that integrity. I don’t understand that more pressure is going to be put on you if somebody else is betting on it. You should be maintaining that integrity no matter what — whether some somebody is betting a dollar on you or a million dollars on you. I don’t care.”
Now you see why Spillane and the NBA pivoted away from the term “integrity fee” when it comes to this request. It does not play well in statehouses.
NBA lobbying just tipping off
Rep. Ben Smaltz chairs the committee, and he interjected at one point to ask about the states that have passed sports betting bills to date. He wondered if any others have included integrity fees or royalty fees in their legislation.
“Not yet,” Spillane answered. He went on:
“We’re expecting that as legislatures return to session in the new year, this is going to be an area of intense interest. We’re going to see states start to pass bills, and I think it’s going to be a more serious process post-Supreme Court decision than it was before. So we’re certainly going to be making this case here and in every other state that is considering legislation.”
“So currently zero,” Smaltz responded flatly. “Nobody has done it.” Once again asking the right question, the chair inquired if private commercial deals between operators and leagues might be a better tack.
Spillane didn’t disagree, but he called it a “partial solution.” Referencing the deal between the NBA and MGM, he testified that fees aren’t “an axis of negotiation” under current law.
“We’re looking for the law to say: Actually, if a company wants to be offering betting on a sport’s games, it needs to share a small portion of what it makes on that betting with the sports league. And that would be something in addition to commercial deals or logos and things like that.”
Legal precedent is not on the leagues’ side, however, when it comes to royalty. Courts have previously held that leagues have no ownership over things like box scores and statistics. The NBA is asking for an updated statute, but the appetite for compensation seems limited in Indiana.
