Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Advanced Search Go
Free Newsletter Sign Up

NBA, MLB in Lobbying Lockstep for a Piece of Sports Betting

Feb. 16, 2018, 8:26 PM

The National Basketball Association and Major League Baseball have locked arms in nationwide lobbying efforts to shape state legislation that would authorize sports betting should the U.S. Supreme Court lift a federal ban.

States are awaiting the high court’s ruling in Murphy v. NCAA—New Jersey’s attempt to repeal part of its state ban on sports betting in an effort to revive the struggling Atlantic City region. The Supreme Court agreed to review the case after a lower court ruled that the partial repeal violated the federal Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits states from “authorizing” gambling related to professional and amateur sports leagues.

The NBA and MLB are actively lobbying in eight of the 16 states pursuing sports betting legislation, according to a Bloomberg Tax analysis of state lobbying disclosures. The analysis also showed that the NBA and MLB are tackling lobbying measures jointly, often using the same lobbying firms and agents to conduct state level outreach.

As both leagues throw their weight into the sports betting conversation, each is seeking a set of legislative criteria ranging from age restrictions to the regulation of internet gaming. Most notably, the leagues are pressing for an “integrity fee"—a 1 percent payout of the amount wagered on league sporting contests.

And when state legislation doesn’t satisfy NBA and MLB requirements, both leagues are quick to denounce the measure.

Lobbying Landscape

Sixteen states have proposed sports betting legislative measures. Based on lobbying disclosures, the NBA and MLB are actively lobbying in Illinois, Indiana, Iowa, Kansas, Missouri, New York, Rhode Island, and West Virginia.

There are approximately 30 lobbyists working on behalf of the leagues. New York, home to both the MLB and NBA headquarters, has the highest concentration of active lobbyists—a total of 11 from two firms.

The leagues also have engaged several firms, such as Orrik, Herrington & Sutcliffe LLP, which spearheaded lobbying initiatives for the legalization of fantasy sports betting on behalf of FanDuel Inc. and DraftKings Inc.

Illinois is the only state where only the MLB, but not the NBA, has a registered lobbyist. In Missouri, Iowa, Kansas, Rhode Island, and West Virginia, all known lobbyists are co-registered for both the NBA and MLB.

League Reaction

As state legislators have unveiled sports betting measures, the leagues’ responses have been mixed. Indiana’s sports gambling legislation is perhaps viewed as the most favorable for the leagues—it’s the only state that includes the 1 percent integrity fee.

Indiana H.B. 1325 was referred to the Committee on Public Policy Jan.16. The bill’s sponsor, Rep. Alan Morrison (R), previously told Bloomberg Tax that both the NBA and MLB participated in discussions on the drafting of the bill. In West Virginia, the Senate Finance Committee advanced sports betting legislation (S.B. 415) Feb.14. The bill would allow sports betting across the state’s five casinos and through mobile apps. However, the MLB and NBA’s reactions to the measure was negative, likely due to the exclusion of an integrity fee.

“Any sports betting legislation must include clear, robust and enforceable protections to mitigate any possible risk to our game,” the MLB said in a Feb. 12 press release responding to the West Virginia bill. “The law quickly advancing in West Virginia unfortunately falls short of meeting those critical standards.”

The NBA and MLB had similar negative responses to Iowa legislation (H.S.B. 592), with six lobbyists for the leagues saying they were against the measure. Similar to West Virginia, Iowa’s bill would allow the state’s casinos to accept sports wagers and would permit mobile betting—but it lacks an integrity fee.

In New York, Dan Spillane, senior vice president and assistant general counsel for league governance and policy for the NBA, made it known that the league wants a 1 percent cut. In written testimony submitted Jan. 24, Spillane said the 1 percent fee is necessary “to compensate leagues for the risk and expense created by betting” and for the commercial value its product creates for betting operators.

Illegal Gambling Market

“Clearly the MLB and the NBA realize that this is a money making opportunity for the gambling industry,” Daniel Etna, a New York-based partner at Herrick Feinstein LLP, told Bloomberg Tax Feb.14.

“Obviously in states that don’t provide for that integrity fee, it becomes problematic for the NBA and MLB because they don’t want to be shut out of the revenue waterfront on these gambling platforms,” Etna said.

However, the inclusion of an integrity fee has drawn ire in the gaming world.

The American Gaming Association came out against Indiana’s proposal in a Jan. 9 statement, calling it “short-sighted” because the fee would help foster an illegal gambling market.

Geoff Freeman, American Gaming Association president and CEO, told Bloomberg Tax via email Feb.15 that states should enact sports betting legislation that deters gambling on the illegal market.

“Policymakers should demand that all stakeholders demonstrate how their proposal will put the illegal market out of business,” Freeman said. “If stakeholders can’t meet this basic threshold, their proposal should be deemed self-serving and be disregarded.”

Unchartered Waters

Nevada, where sports gambling is legal, is often viewed as the role model in gambling regulation. But states mulling an integrity fee model are navigating uncharted waters, Ethan Wilson, policy director for commerce and financial services with the National Conference of State Legislatures, told Bloomberg Tax Feb. 14.

“There is not a ton of precedent in this area,” Wilson said.

The Nevada Gaming Control Board believes conversations between the leagues, state legislatures, and gaming operators are essential.

“The Board believes that teams and leagues/governing bodies should continue to engage with gaming regulators and the licensed sports betting operators,” Michael Lawton, senior research analyst at the Nevada Gaming Control Board, told Bloomberg Tax via email Feb. 15.

“It is good for sporting entities to be proactive with respect to sports integrity and sports betting concerns,” Lawton said. But regarding the league’s proposed 1 percent fee, Lawton noted that it could jeopardize sports betting operators’ profits.

“With respect to any proposed fees, sports books in Nevada operate on a thin margin and the action is unpredictable from week to week,” he said.

Missing Revenue

As states work to adopt legislation, it’s important for each legislature to enact a measure that’s right for them, Wilson said.

“If states feel like one way or another is the best way to go, then by all means that’s what the legislators in that state, the experts in that state, found is what’s best,” Wilson said.

He added that by including an integrity fee for the leagues, states are missing out on revenue for themselves. “I think what would be a concern for states moving forward is to look at and really understand what this integrity fee would do and how it could be potentially detrimental to revenues that could be raised and otherwise spent on law enforcement, mental health, and smart gambling awareness,” Wilson said.

“Money going somewhere else is not money going to the public coffers, and that I think is something for state legislators to be aware of,” he added.