It’s been a minute since we’ve talked about legalized sports gambling here. We should remedy that, because legalized sports gambling is going to be the next gigantic cash cow for professional sports leagues, Major League Baseball included.
First, to get everyone up to speed:
- Currently, sports gambling is illegal in every state except Nevada. The statute which outlaws it is the Professional and Amateur Sports Protection Act of 1992 (PASPA). Since Nevada had legal sports gambling before its passage, it was grandfathered in. They have sports books. No one else does;
- Several years ago the State of New Jersey sued, claiming the law was unconstitutional. That case was argued in front of the Supreme Court late last year and a decision will come out no later than June. For reasons too boring to go into here, my gut is that the law will be overturned, opening the door for legalized sports gambling;
- A lot of states’ guts feel the same way, so a lot of states are drafting laws to implement and regulate sports gambling so that they can be ready to go soon after PASPA is overturned.
This is where it gets interesting.
For obvious reasons, including but not limited to the Black Sox Scandal and NBA referees throwing games, professional sports have an historic aversion to sports gambling. Indeed, when New Jersey began this push, back in 2012, Bud Selig came out strong against it, filing a lawsuit to oppose the effort.
It recently dawned on sports leagues, however, that there is a lot of money to be made in a legalized sports gambling world. Led by Adam Silver and the NBA, but followed with the fervor of a new convert by Rob Manfred and Major League Baseball, the leagues have done a 180 on this and are now actively lobbying states in an effort to help craft the sports gambling laws.
Specifically, they are trying to get something called an “integrity fee” built in to these new state laws. They want 1% of the action — not just sports book revenues after payouts, but 1% of all the action, which would represent about 20% of sports book revenues. The leagues claim they need that money to protect themselves from the horrible externalities of sports gambling and to police its own personnel — coaches, players, officials, etc. — from falling prey to gambling and gambling interests.
This is a super dubious claim for two big reasons.
First, leagues already have rules against players and officials gambling and they already have internal security units to deal with such matters when conducted illegally, as most sports betting is. It’s therefore hard to imagine what, exactly, they’d need to do differently with legalized sports betting. Sure, it’d be more widespread, but it’d also be far more easy to observe and detect athletes and officials gambling in, say, an Atlantic City sports book than it would be to observe them placing bets with a bookie via a text message or with an offshore gambling site from their laptop.
Second, the amount of money it is estimated these fees would bring in — billions of dollars annually, as the legalized sports gambling laws are aimed at taking back an estimated $200 billion annual illegal sports betting economy — far outstrips what any reasonable “integrity” measures would cost. Again, if Mike Trout were to walk into an Atlantic City casino and place $50K on the Yankees to win the day before an Angels-Yankees series in the Bronx, it would not take a crack team of investigators to suss it all out and thus would not require billions of bucks to police.
The leagues can say what they want, but these “integrity fees” are aimed at giving the NBA, Major League Baseball and the other sports leagues a cut of the action. Sports leagues have become massively efficient at exploiting new sources of revenue such as cable television rights, digital media and sponsorships, and sports gambling is just the latest source of revenue. In a world where Rob Manfred has made seemingly everything the official something of Major League Baseball, it’s not at all unreasonable to assume that the primary motivation when it comes to gambling is for the league to wet its beak a little bit.
Which brings us to West Virginia. At the moment its legislature has its hands full with a massive teacher’s strike, but late last week they handled some other legislative business, passing the state’s legalized gambling bill, S-415. The bill does not include the “integrity fee” sought by the sports leagues. Its supporters say that there’s no reason to give Major League Baseball or the NBA a cut because, you know, it’s not their money and they think revenues, which will be taxed, should benefit West Virginia. Obviously the gaming industry doesn’t want to give up money to the leagues for selfish reasons too.
Rob Manfred, on a conference call with the West Virginia media on Friday, had what could accurately be described as a hissy fit about that. From my hometown Beckley Register-Herald, quoting The Commissioner of Baseball:
“Unfortunately in West Virginia, there’s only one interested group that has dominated the substance of this bill, and that’s the gaming industry – the people seeking to make money from sports betting. It contains literally no protections toward the integrity of the sport. There’s no recognition of that risk. It does not protect young people in West Virginia, by limiting their access to sports betting. It does not protect people with gambling problems. All it does is maximize the opportunity for the gaming industry to make money.
“The structure of the bill is so fundamentally flawed, bettors will seek other states with better regulatory frameworks. As a result, the expected financial windfall (for West Virginia) will be much lower . . . We will continue to urge the Governor to veto the bill . . .
I will grant Manfred that the gaming industry has an interest. Sure, MLB has a lobbying operation, but the gaming industry has forgotten more about how to get what it wants from pliant legislators than sports lobbyists have ever known. If I have any sympathy for Manfred here its that, when it came to the lobbying showdown, he brought a pocket knife to a gun fight. The casinos, as per usual, brought a pocket full of ICBMs.
That said, Manfred’s stated concerns here are hard to take seriously.
I don’t believe Rob Manfred has lost a second of sleep worrying about the youth of West Virginia being corrupted by legalized sports books, and not just because every sports book I’ve ever been in has been populated almost exclusively by 50-something-year-old men smoking cigars and popping Pepcid.
I don’t believe that Manfred is concerned with a regulatory race to the bottom that will leave West Virginia’s sports books worse off than, say, Indiana’s. For one thing, why should it care? For another, Major League Baseball is an expert at playing state and local governments off of one another in order to get public perks and for them to claim now that that’s a bad thing is every bit as laughable as it is hypocritical. If nothing else, this should be a matter of game recognizing game.
I likewise don’t believe that the integrity of sports is Major League Baseball’s primary motivation in all of this. Might MLB be uneasy with legalized sports gambling? Sure. Heck, I’m not a big fan of expanded gambling myself. But I do not believe that MLB’s uneasiness is such that it requires a 20% cut of casino revenues or 1% of all casino action to make right. I believe that it’s a cash grab because that’s the most obvious and straightforward explanation.
Is there anything wrong with that? Not for its own sake. Again, we’re talking about casinos and gaming companies here. I won’t lose much sleep if they lose a little money and if MLB gets in on some of that action, particularly if the MLBPA makes a point to ensure that a good chunk of that action gets to the players upon whose exploits are being bet. When everyone involved is kinda slimy, I’m gonna side with the slimy side with which I am most familiar and with whom I have preexisting loyalties.
But Manfred sure does look disingenuous here. He’s reaching for a moral justification to get a cut of gambling revenues, he’s failing, and it’s making him look foolish and desperate. For his own sake, I hope he has better luck with other states because he’s coming out of West Virginia looking bad.