While the country prepares for the start of its most popular sport, Congress apparently still wants to find a way to meddle in sports betting through official league data.
That news comes in a report by Gambling Compliance, which cites sources saying Sens. Chuck Schumer and Mitt Romney are discussing a bill. That could revive some version of the draft proposed by Schumer and Orrin Hatch earlier this year.
In place of the now-retired Hatch is his replacement and former presidential runner-up Romney. The text of the rumored federal sports betting bill has not been circulated, but according to GC, it will contain an official league data mandate through 2024.
This 2024 date is the same end period as in the bill introduced in December 2018, which never went anywhere.
History repeating itself?
Details remain scant although Schumer’s office confirmed the plans to introduce a bill.
The 2018 bill required that sportsbook operators use “authorized data” during a so-called transition period to determine the outcome of any wager:
With respect to any sports wager accepted on or before December 31, 2024, provide that a sports wagering operator shall determine the result of a sports wager only with data that is licensed and provided by—
(I) the applicable sports organization; or
(II) an entity expressly authorized by the applicable sports organization to provide such information.
After that period, under the previous version of the bill operators would be able to use another provider conditioned upon:
- State regulatory approval;
- The data is “of substantially similar speed, accuracy, and consistency,” to official league data;
- It is legally obtained;
- Compliant with any licensing or contract obligation; and
- Authorized to provide such data
The official data debacle
The battle over official league data has been brewing for months, with the leagues having little success in succeeding outside of Tennessee (for live betting) and Illinois (for wager not on final score / outcome).
The challenge for justifying such a mandate is that there is no evidence to suggest that official league data is superior to products provided by top-level firms without official data distribution contracts.
As has been written about extensively in the context of sports betting, sports leagues, broadly speaking, do not have a property right in the scores or results of their games. A federal mandate requiring sportsbooks to use official league data could establish a quasi-property right in something that no court in the United States has found to exist.
Who benefits from an official data mandate?
While we are yet to hear confirmation as to who pushed for the latest bill, there are some obvious benefactors. That notably includes professional sports leagues like Major League Baseball, the National Basketball Association, and the National Hockey League.
But, perhaps the league standing to benefit the most from mandated official data usage is the National Football League.
Both SportRadar and their chief competitor for North American official data deals, Genius Sports, would be poised to see their valuations skyrocket, as the companies currently dominate the American marketplace.
The official data mandate may also serve as a barrier to market entry for firms looking to generate capital and develop sufficient market strength to compete.
Official data ≠ integrity
An official data mandate has been talked about as a means of promoting integrity and ensuring that results are consistent across sportsbooks. At least such has been the party line from sports league executives.
But in reality, official league data mandates are largely creating a problem where there isn’t one, at least in regulated markets. The idea that a sportsbook would buy inferior or unreliable data is laughable; sportsbooks are profit-oriented businesses.
To make a profit, sportsbooks rely on customers. If a sportsbook is ending up with a different result than every other book, it is unlikely to survive.
Exactly the opposite
In fact, official data theoretically makes it easier to corrupt betting markets than when there is a robust marketplace with independent and economically motivated competitors. This is because official data mandates create a single point of failure.
Sportradar’s David Lampitt acknowledged this problem for some levels of sports and noted that the company supports a non-exclusive model for data sales.
Indeed, having multiple data feeds enables the identification of fraudulent activity. In perhaps the perfect display of irony, no example demonstrates the benefits of multiple sources of information better than the 2012 Intrade betting market on the presidential election between Barack Obama and Romney.
The Romney whale
In other countries it is widely legal to wager on events like elections. There are at least two limited small stakes means of doing so in the U.S. as well. These so-called information markets are historically better than polls at predicting the outcome of events like elections.
Intrade, the now defunct Irish prediction market, saw something unusual happening in the leadup to the 2012 election. It showed Romney significantly outperforming virtually every other poll, market, and model. In fact, the Intrade market continued to show Romney outperforming other measures through Election Night.
It was not until Obama was actually declared the winner that the market corrected. It is believed a single individual artificially maintained the price of contracts for Romney.
While the identity and motivations of a Romney whale are not known, it has been speculated that the effort to inflate the price of Romney contracts on Intrade was to continue driving voters to the polls by showing he still had a chance of winning.
What does this teach us about integrity of markets?
While an individual was able to manipulate a single market for a limited period of time, at purportedly a cost of about $7 million, other markets were unaffected. As a result of such an unusual pricing of one market, it became abundantly clear to observers that something unusual was happening. Effectively there was one anomaly worthy of further investigation.
While obviously a different context, the conduct of the Romney whale who artificially inflated the trading price of contracts on Intrade was at least partially identified as troubling or out of place because of various other markets. There was no single point of failure.
What to make of the federal sports betting bill talk?
Talk of federal regulation of sports gambling often sends a chill across the industry, though since 2006 the worst fears of the industry have not been realized. Until we see the rumored bill, it is impossible to estimate its likelihood of passing.
But as more and more states become operational, a greater proportion of the country stands to lose if a federal bill preempts existing state laws.