This is the second of a two-part look into the federal sports betting bill. If you are reading this first, go back and check out the opening article.
On a Wednesday, six days before Christmas, Sens. Orrin Hatch (R-UT) and Chuck Schumer (D-NY) elected to drop a 101-page federal sports betting bill on the world.
The bill closely follows a discussion draft circulated weeks earlier. Let’s dive in starting with Title II.
Title II – Wagering Trust Fund
Title II of the new bill creates a wagering trust fund. This is the first time we have learned that the federal government expects to generate $12 million from the federal excise tax.
In addition to the $5 million set aside for the surveillance of gambling and $3 million for the Clearinghouse, the National Sports Wagering Commission does not appear to get $2 million in funding under this provision.
Title III – The Wire Act and Sports Bribery Act Amendments
The amendments to the Wire Act are substantial, as the proposed bill would eliminate the words:
Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal…
And replace them with:
for the transmission of a sports wager accepted pursuant to an interstate sports wagering compact …, layoff bet or wager, or information assisting.
The intermediate routing question
Perhaps the biggest clarification regarding the Wire Act is that we clear up any questions regarding intermediate routing.
For purposes of this section, the intermediate routing of electronic data shall not determine the location or locations in which a bet or wager, or information assisting in the placing of a bet or wager, is initiated, received, or otherwise made.
The Wire Act amendments also create the process for a state to bring Wire Act charges. This is a delegation of federal power to state law enforcement officials, and also creates a civil Wire Act violation that would allow for the federal government to intervene in the action.
Interestingly, the sports leagues or other individuals miss out on a private right of action like the leagues had under PASPA.
Targeting offshore and illegal markets
The biggest addition in this section from the draft which circulated was a provision for “Enhancing Enforcement Against Unlicensed, Offshore Sports Wagering Websites.”
That’s an article for another day, but it is worth noting that this provision could potentially create some big issues for the U.S. at the World Trade Organization. The proposed amendment would allow the U.S. Attorney General to obtain a cease and desist order against websites offering unlicensed sports wagering to U.S. customers.
This section is a bit of a mess in regards to how it attempts to rein in offshore betting. This provision appears to add little to the existing powers under the Wire Act to shut down offshore sportsbooks targeting U.S. customers.
The codification here is likely a duplication of powers the government has in other parts of the U.S. code. This provision appears to be more problematic than it is useful. The problem with the Wire Act and with UIGEA has always been enforcement. This does not appear to solve that issue; it simply creates an additional provision.
On the Sports Bribery Act
The Sports Bribery Act amounts follow what was contained in the circulated draft for the most part, and they are a positive change (in the interest of full disclosure they appear largely based on an academic article I co-authored with Ryan Rodenberg, in 2015).
The amendments would add extortion and blackmail to the prohibited activities to influence the outcome of an aspect of a sporting event. It also adds a provision banning the wagering on non-public information, which is an excellent addition to the types of match-fixing conspiracies that may arise where a player (or coach, referee etc.) is complicit in the fix.
There are also additions for whistleblower protections. I would advocate extending these further and see this as a positive step in changing the dynamics that often inhibit witnesses or victims from coming forward with information about match fixing.
Title IV – Gambling Addiction Prevention And Treatment
This section amends the Public Health Services Act, and mandates establishment and implementation of programs for the prevention and treatment of gambling addictions.
The bill calls for the establishment of an advisory committee that will be responsible for issuing an annual report to the Secretary of Health and Human Services based on their surveillance of gambling addiction.
This provision is likely one of the biggest benefits of the bill, as it has promise to add resources to the study of gambling addiction and for further study of the issue on a national level. That is something that is much more difficult for private entities to conduct.
It is exciting to see the federal government interested in studying and developing an increased awareness relevant to the epidemiology of gambling addiction.
Title V – General Provisions
This section was not included in the draft bill. The first section of the bill deals with state and tribal gaming authority.
Interestingly, for purposes of the Indian Gaming Regulatory Act (IGRA), a mobile wager will be deemed to be made at the physical location of the equipment used to accept the wager. So if a tribal casino were to launch an app, bets placed on the app would be deemed to be placed at the brick-and-mortar casino. (They still need to occur in the same state.)
This provision does not preempt any other state or tribal law; instead, it sets a federal floor and tribes and states can impose more stringent requirements. This type of language is key, as the federal government has the power to regulate sports betting and it cannot commandeer the states to do it for them. Hatch and Grassley have learned from the drafting failures of PASPA.
The big addition here is the mention of severability, which was raised in the Murphy v. NCAA litigation. Under this bill, any invalid portion does not render the entire bill invalid, only the one portion.
In theory, an unconstitutional provision could be excised from the bill. Provided that the extraction does not doom the entire purpose of the bill, the remainder of the non-constitutionally cancerous provisions would survive.
What can we take away?
The big takeaway from this bill is that apparently at least some Senate Democrats and Republicans can come together and agree on something. We are a few days from Christmas and a few weeks from Senator Mitt Romney taking over for Senator Hatch.
This bill has many moving pieces; it seems unlikely that there would be enough support to get this through even if Hatch had not announced that this draft was meant to stimulate discussion.
As I mentioned with the draft version of the bill, this piece of legislation does not make any one group happy, but the sports leagues are definitely happier than they were under the draft version. An additional two years of mandated official data should pretty much guarantee that the market for unofficial data is fully suffocated by the time 2024 rolls around.
This could even potentially be bad news for data brokers like Sportradar and Genius Sports if the leagues ever decide they do not need middlemen. Odds of this bill passing in the new Congress remain low, but now that there is a real bill introduced the odds went up exponentially from when there was simply a draft with blanks to be filled in percolating.
We will have to wait for the new year to see how keen the new Congress is to muddy their hands in sports betting.