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Checking Into What MLB Told Washington State Regulators About Sports Betting

MLB

Major League Baseball‘s vision for what sports betting in Washington state might look like if a genie granted wishes played out earlier this month.

The public meeting of the state of Washington’s gambling commission is a sign of hope for those in the Evergreen State. MLB’s presentation might not be the same though.

Who was at the hearing?

The meeting featured testimony from three witnesses:

  • Marquest Meeks, senior counsel at Major League Baseball;
  • Fred Rivera, general counsel with the Seattle Mariners; and,
  • Brian Considine, legal and legislative manager for the state gambling commission.

Meeks and Rivera appeared jointly to speak about what Considine termed “sports integrity.”

Opening statement

Meeks began his testimony by stating his job is to “mitigate the risks of sports betting.” Meeks, who began his role in March, was the primary voice of the league with Rivera and mainly filling in the Seattle– and Washington-specific gaps.

A coalition of sorts

Meeks testified that MLB is in a coalition with the NBA and PGA Tour. What remained somewhat unclear was where the positions diverged, if at all.

Gambling commission members were curious as to how the MLB reps came up with a number of figures in the presentation.

The first question arose over how MLB generated annual tax revenue of $22 million per year over the next 25 years for the benefit the Mariners provide to Seattle.

Meeks deferred to Rivera, who said that an economic impact study was developed in connection with renegotiating a new lease for T-Mobile Park. Rivera noted that while the state has no income tax, the team contributes via at least five different tax levers into state coffers.

Favorable conditions

Indeed, it appears that the Mariners’ stadium relationship with Seattle is more favorable to the city than other major league teams.

Later in the presentation, several of the commissioners were puzzled by some of the numbers, which included projecting revenues from legalized sports betting. Director David Trujillo said that it is unhelpful to present numbers without qualifying information.

MLB relied on data from an Oxford Economics report published in May 2017. It was not only presented in several different scenarios, but it wasn’t included in the presentation. Also, it might no longer be the best resource for estimating the economic impact of legalized sports betting.

Sports betting isn’t necessarily bad, according to MLB

Meeks said that sports betting is not necessarily a bad thing if it is done right. Of course, this is the latest departure from the years of apocalyptic visions associated with sports betting put forth by the major American sports organizations.

Meeks said, “with the Supreme Court opinion, sports betting is going to happen.” After talking to those overseas, MLB learned one of the biggest mistakes it could make would be to ignore the legislative process.

The challenge, of course, with seeking opinions from those overseas, is that it is not operating within the same legal framework as the US.

Will you be my partner?

MLB wants to be partners in the legislative and regulatory process.

Meeks said that they must be partners because there is no betting without the MLB game. He did not say if the league would pack up and go home if it doesn’t receive a partnership promise ring in Washington state.

This theme of partnership is one that has been recurrent in sports league testimony. However, the partnerships sought have seemingly extended primarily from the state to the leagues, with leagues seemingly providing continued operation of teams.

Of course, while the economic impact of the Mariners to Seattle may be $22 million, the economic impact on Major League Baseball from the Mariners is likely greater. This value is likely to increase as a result of legal sports betting.

MLB introduces the five pillars

In the Washington testimony, MLB reps touted discussions with UK and Australian leagues and regulators as the basis of what a mature market should resemble.

This vision includes opt-out and integrity fee requests. Based on this, the league created “the five pillars (of sports betting).” MLB believes that Illinois and Tennessee are models moving forward.

Of course, these states include official league data mandates of some variety and have been fairly widely panned by many across the industry. Indeed, Tennessee and Illinois, both appear to be a ways away from launching despite bills passing months ago.

Tribal question persists

Commissioner Chris Stearns asked how MLB thinks it could charge tribes a fee when the state could not impose such a requirement. It is prohibited by the Indian Gaming Regulatory Act (IGRA).

Meeks said, “We are going to have to go to the tribes and talk to them and convince them of the merits of our argument.”

It’s unclear what MLB could offer the tribes that would create an incentive to offer up an integrity fee to MLB, especially after the tribes already negotiate with the state under IGRA.

MLB reps made clear that there are angles that pose challenges for sports league asks not encountered in states that faced few challenges in legalizing sports betting. As has been mentioned here and elsewhere, the states where sports betting legalization is going to be easy, have largely already legalized it.

Pillar #1: Cooperation with league investigations

MLB reps want operators to provide them with anonymized betting data, as well as a mandate that operators report suspicious activity to the sports leagues. While Meeks’ slideshow did not say “report the information to the sports leagues,” his testimony did include that stipulation.

Of course, lacking from pillar No. 1, and what one would conceivably be a vital part of a so-called “partnership,” appears to be a demand that suspicious activity be reported to law enforcement, or another entity, with actual investigative authority beyond its employees.

Reporting suspicious activity to the sports leagues neglects the primary means of stopping match-fixing, which is through the police.

Even in countries like Australia that MLB cites in the presentation, match-fixing is stopped by the police, not by private sports leagues, especially without the power to conduct investigations with witnesses under oath or effectuate an arrest.

Pillar #2: The opt-out

MLB reps argued to the commission that it should have an opt-out.

It wants to ban betting on balls and strikes, in addition to betting on Minor League Baseball. This, as was pointed out by commission chair Sizemore, suggests that MLB seems to want to be a regulator.

Members of the commission pointed out that this is not a privilege afforded by Nevada. No state should shut down communication with the sports leagues. However, the leagues are not elected; they act in their best interest, so to afford them veto power delegates public authority to private actors.

Pillar #3: Official league data

MLB reps also continued to ask for official league data. Meeks says that within 500 milliseconds, MLB’s state-of-the-art data technology can transmit verified accurate data.

It is purportedly only asking for official data on bets that take place after the event has started. They call this “Tier II data.”

Meeks said the official data combats the black market. This argument neglects the fact that official data, which originates from a single source, creates a risk by having a single point of failure. This fact is something that even the league’s data distributors acknowledge may pose a threat to integrity.

Into the wild blue yonder!

Meeks advanced MLB’s argument for official data stating they use “Air Force-grade radar.” If this is a thing, fantastic, but it is unclear what the value is to a bookmaker.

Much like Statcast, this sounds like cool technology that enhances the viewing experience. However, its commercial value is certainly overestimated by the sports leagues.

Meeks argued that those who obtain data via scraping websites are pirates “using hacking tools.”

However true this may be, the implication that this activity is thus illegal is far more complicated. At least one federal court has held that scraping publicly available data is not a violation of the Computer Fraud and Abuse Act even if it violated the terms of service. After all, search engines scrape websites to generate search results; so are they pirates?

MLB’s slide deck further argued that its scoring is 100% accurate, without inconsistencies, and the suppliers of unofficial data are “inaccurate” and “only as good as the human operator.”

This statement has a lot going on: Is MLB’s scoring 100% accurate? Ask Gary Sanchez.

Errors are not uncommonly changed to hits after the game. It remains unclear why the sports leagues continue to argue that official data is perfect. However, there is seemingly little to no evidence beyond league conjecture that unofficial data is not accurate.

Pillar #4: The royalty

If you were wondering, MLB is still requesting the 0.25% on handle. The league argues that it amounts to “less than 4% of the billions of dollars of revenue that operators will generate from taking bets on games.” This amount remains unconnected to any intellectual property interest that the leagues have.

Meeks argued that the royalty is “more rooted in the fact that you can’t have bets without baseball.” He goes on to say there is no comparison of an industry taking on risk where they are not given compensation.

But some comparisons can be made. For example, auto mechanics who say they repair Fords without paying a royalty to the Ford company. Or razor blade companies that advertise compatibility with certain types of razors.

Sen. Conway asked if any state has given a royalty; Meeks conceded no. Meeks said that the idea was drawn from mature markets overseas. He says overseas leagues are receiving 1% on average and up to 2% in France.

Meeks said there is a requirement in the UK, Australia and France to pay a royalty to the sports leagues, which are, on average 1% and up to 2% in France.

This statement, however, is not 100% accurate. The UK does not require payment by legislation or otherwise of a royalty, integrity fee, or anything else by bookmakers to sports leagues.

It is unclear if the testimony was corrected at a later time.

Pillar #5: Mobile betting

MLB’s final ask was that Washington state (and conceivably everywhere else, too) pass mobile-enabling legislation.

The argument was that it is the most direct way to cut into the illegal market. Without question, this is one of the essential factors in reducing the illicit betting market.

What do we make of this?

Not much.

MLB is putting on a traveling roadshow, as are the other leagues going anywhere considering legal sports betting. This testimony included many of the same talking points that have appeared over the last few years.

Following a question, it was further highlighted that there is a continued push for federal minimum standards from some of the leagues.

This is only the beginning of sports betting in Washington state. There will be another hearing in November to discuss integrity issues surrounding market integrity.

John Holden
- John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.

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