As the NBA playoffs head toward an exciting climax and the baseball season kicks into high gear, both leagues are desperate to collect fees imposed on sportsbooks and anyone who places a wager using them.
Their failure to accomplish this quest has pushed them to employ a new hardball strategy. According to a report from Sports Handle, the NBA and MLB have given Las Vegas sportsbooks an ultimatum: Pay the leagues a 0.25% “royalty” on every wager or get cut off from their official betting data suppliers.
Since the Supreme Court struck down the federal gambling ban in May 2018, the NBA and MLB have lobbied state and federal legislators to include an “integrity fee” to provide pro leagues with a 1% cut on all bets. Simply put, this “integrity fee” would be a tax on each bet, transferring money from the sports book operators to the leagues. While the NFL and NHL have stayed away from the idea of an integrity fee, the MLB and NBA insist that it is necessary to pay for the increased cost of enforcement. NBA Commissioner Adam Silver said this quite clearly: “We think the integrity fee is something that we are entitled to.”
The process has worked well without these fees in other countries with legal sports betting and in states like Nevada. The gaming industry, leagues, law enforcement, and consumers work together to identify and interdict game-fixing and illegal gambling. In other words, an integrity fee is nothing more than a cash grab for the two multibillion dollar leagues.
Such a fee, on top of state taxes and a federal excise tax, would significantly affect the gaming industry and pass added costs on to consumers. More costs for gaming operators means worse odds and fewer perks for bettors, which would deter people from betting and result in less revenue for the books and the state. Fortunately, none of the eight legalized sports betting states have agreed to an integrity fee.
The books were given a deadline of April 13 (NBA) and May 1 (MLB) to agree to the terms or be cut off from the data. When the books did not flinch, the NBA’s data company pushed the deadline to the end of April and offered a discount. With both deadlines now over, none of the Vegas books have folded to the leagues’ demands.
Not only is this a blatant cash grab by the leagues, it is also a clear attempt to carve out their own monopoly over betting data. There is nothing that proves the data from the leagues (which outsource to analytics companies themselves) is better than alternative sources. Sportsbooks will logically choose the best supplier of data for their needs. While the sharing of data is beneficial, strong-arming books into using only the leagues’ data crushes open competition and harms the expansion of legal sports betting.
Government mandates requiring the gaming industry to purchase data from sports leagues is equally problematic. For example, Iowa State Sen. Rich Taylor, a Democrat who helped pass a sports betting bill, sees such requirements as a “hard sell,” since the leagues are already thriving financially without it. At the federal level, Sen. Chuck Schumer, D-N.Y., and former Sen. Orrin Hatch, R-Utah, introduced the Sports Wagering Integrity Act in December 2018. Among the many problems with Washington controlling sports betting decisions is the inclusion in the legislation of language that forces sportsbooks to only use official league data. That legislation has not been reintroduced in the 116th Congress and should remain dormant.
There have been cooperative agreements between the leagues and sportsbooks that can be used amid further threats or government mandates. In August 2018, the NBA and MGM Resorts agreed to a $25 million deal for MGM to use league highlights, logos, and data. The NBA should build on these types of agreements and abandon its threats of additional fees. Data sharing should be open to competition and decisions on what analytics are used should remain voluntary. Forcing private parties to do business with each other does not comport with the economic promises of legal sports betting.
While the sports betting industry is thriving, the NBA and MLB somehow feel they are losing. Instead of competition in an open market, the leagues have resorted to bullying tactics to ensure increased profits. Data mandates and integrity fees will push bettors back into illegal, offshore books, from which the NBA and MLB will get nothing.
Peter Klensch is government affairs manager for Citizens Against Government Waste.
