Data is what makes the sports betting world spin.
The fastest, most accurate data is the most desirable. But the data market is far from a highly competitive marketplace, thanks in large part to states that have mandated that companies use official league data, something available from only a handful of companies.
By creating barriers to entry, lawmakers in places like Illinois, Virginia, and Tennessee are almost certainly stifling innovation. But the data market’s consolidation around a handful of companies is not that much different than what is happening in the sports betting market at-large, as a small handful of well-resourced companies outspend and outlobby little companies.
Sports betting data companies not alone
Of course, state lawmakers play a role too, with high licensing fees that small companies cannot pay.
These are all problems suffocating the competitiveness of the sports betting industry, but it is far from the only industry suffering from similar issues.
A recent decision from the D.C. Court of Appeals regarding data feeds for the financial industry might be enlightening for the sports betting industry, even if it is not directly implicated.
NASDAQ v. SEC
According to the D.C. Court of Appeals’ decision, the case centers on 2020 orders from the Securities and Exchange Commission (SEC).
The first order involved consolidating the National Market System (NMS), which communicates market information including market quotes, and aimed to create a single plan to disseminate market data. NASDAQ, the New York Stock Exchange, and CBOE Global Markets all sued to argue that the decision was “arbitrary and capricious” in violation of the Administrative Procedure Act.
The Plaintiffs challenged three provisions of the plan. The crux of the provisions would have effectively limited the power of the Plaintiffs in the ability to have a say in the new data distribution plan.
What did the SEC want?
According to Bloomberg, the SEC was hoping to create a one-stop shop for financial market data, requiring the Plaintiff “exchanges and the Financial Industry Regulatory Authority, a self-regulatory organization, to consolidate their existing plans for public data feeds.”
But it was not just about consolidation. The SEC sought to include other stakeholders as voting members. People representing brokerage firms, and traders were supposed to have votes governing the new system.
Why did the SEC want to do this?
While consolidation may seem like a negative, the SEC reportedly issued the orders out of concerns about potential conflicts of interest between the markets’ responsibilities to disseminate data based on being the markets process transactions, and the markets acting as the sellers of the data.
This certainly seems to sound a lot like official league data.
What was the decision?
In the end, the D.C. Court of Appeals held that the SEC’s interpretation of the Act with regard to its authority to add the non-exchange stakeholders was “unreasonable and therefore invalid….”
The D.C. Court of Appeals, however, did hold that the infringing provision was severable from the remainder of the plan, allowing the rest of the plan to come into being. But, even there, the plan was called “no more than a call for a proposal that would then be subject to further notice, comment, and revision.”
What about sports betting and data?
This case does not have any direct effect on sports betting, or even sports betting data. But the facts of the case have sports betting analogies that are worthy of discussion.
Most notable is the discussion of conflicts of interest surrounding official league data. Across the country, various states have mandated the use of official league data, which is data provided by a league-approved distributor.
All this data originates from the same point. Legislative mandates effectively freeze out those companies that do not want to play ball with the sports leagues for no justifiable integrity reason.
Bad data is a self-correcting problem
Problems with data take longer to deduce when they originate from a single source than when there are multiple sources of independently gathered data.
Think for a moment: if you have 50 people watching a baseball game and 49 people see a hit and mark it in their scorebook, but one guy spills mustard on his shirt and misses it and assumes the player walked and records it as such, when a person looks at those 50 scorebooks, it will be pretty obvious that Mustard Guy is wrong.
But if you say everyone has to use Mustard Guy’s scorebook, everyone using it gets bad data. The idea that official league data is integrity-enhancing compared to a robust market where the leagues or individual teams are free to compete simply does not hold water.
What should be done on sports betting data?
States that have official league data mandates should work rapidly to repeal them. The whole industry will benefit from a market that is competitive and innovative companies are allowed to compete.
The provision that data be offered at “commercially reasonable” terms has done little to bring competition to the market. Instead, it remains just a small handful of companies.