Maybe one day soon, sports betting will come to our Grande Vegas Casino, but until that happens....
Everyone agrees that sports betting is in America to stay. Some states might not legislate for sports betting but their residents will head over to neighboring states to place bets. Congress is also trying to provide direction from a federal level. How might sports betting fans expect to see sports wagering change in the coming years?
Since May of last year, sports wagering enthusiasts located in the seven states that have legal sports betting have been able to place legal bets on amateur and professional sporting events. The Supreme Court overturned a federal ban on sports betting in May 2018 and since then, Nevada, which was able to keep its sportsbooks when the ban was imposed, has been joined by other six states that legalized sports gambling.
The leagues fought tooth and nail against the change but once SCOTUS handed down their ruling they immediately recognized the new economic potential that sports betting could bring to their league pocketbooks. The NCAA is the only large sports body that formally opposes all forms of sports betting, both legal and illegal. Mark Emmet, NCAA president, said, regarding college sports, that sports betting “threaten[s] the integrity of college sports in many ways.”
The NFL, MLB, NHL, NBA and Major League Soccer leagues have begun to strike official partnerships with casino operators. However, such commercial agreements represent only a small segment of the larger sports betting pie. The leagues are also examining ways that they can use gambling as a vehicle to engage, interact and draw in new fans and maintain a relationship with old fans.
Keith Wachtel, the NHL’s chief revenue officer emphasized the league’s outlook. “We always saw, and we still see it, as a fan engagement opportunity. That’s the holy grail of sports betting; it’s not the short-term [gambling] revenue.”
Leagues Maximize Sports Betting Opportunities
For the leagues and the teams, betting on sports means more money flowing into the leagues’ coffers. The American Gaming Association (AGA) commissioned a study approximately half a year after the SCOTUS ruling that shows that legal sports betting could result in an additional $4.2 billion in annual revenues for the NFL, NBA, MLB and NHL. That increase will come due to increased fan engagement with the teams, the athletes and the games.
Scott Butera, MGM’s president of interactive gaming, is spearheading MGM’s sports betting strategy. He thinks that the leagues view sports betting as an opportunity to increase fan viewership and engagement. “They see this as a way of letting fans have some skin in the game, and more reasons to watch a game now.”
Legal Vs. Illegal
The AGA reports that Americans illegally wager more than $150 billion on sports every year. This includes both illegal bookmakers and offshore betting sites. Now, that money is up for grabs, and everyone wants a piece of the action. Interested parties include the leagues, the players (represented by the players’ unions), casino operators and various jurisdictions, as represented by state legislatures.
Casino operators hold significant influence at the state level where sports betting legislation is being written. Mobile betting operators such as FanDuel and DraftKings are also involved in creating and running digital platforms that will probably be the future of the industry. In addition to the leagues, the sports teams are also involved as they prepare to take advantage of the commercial and fan engagement opportunities that sports betting offers. All parties have a shared, mutual interest in seeing a successful legal sports betting industry develop in the United States.
Many of the big leagues are teaming up to lobby state legislatures across the United States regarding their views on how sports betting should be governed. Some, such as the NBA, MLB and PGA Tours, are promoting a stricter outlook while the NFL and NHL have taken a laxer approach towards the regulatory environment. Dan Spillane, NBA senior vice president and assistant general counsel, is leading the league’s lobbying effort alongside the PGA Tour and the MLB. He commented that “There’s no question that the world changed after the Supreme Court decision. We saw that there is an opportunity to engage with the [gaming] industry, not just from a commercial standpoint but an integrity aspect as well.”
The leagues support mobile betting. They say that they are also pleased with the opportunity to cooperate with the AGA and other casino industry groups to work on detecting irregular betting patterns that could signal issues of integrity. But some of the leagues’ other proposals, including an “integrity fee,” which would see the leagues get a cut of the revenue from each bet placed on one of their events, is of no interest to the gaming groups.
While the PGA Tour, MLB and NBA initially floated the idea of a 1% fee, they are now promoting the collection of 0.25% of every bet. Bryan Seeley, MLB senior Vice President and deputy general counsel, cites the costs that gambling oversight efforts cost the leagues. “If we have a scandal regarding the integrity of our game, that could cost us hundreds of millions of dollars,” he said. “Baseball has a long history of fighting against issues related to sports betting. Anyone who’s followed baseball knows about Pete Rose and the Black Sox scandal.”
In addition, Seeley noted that “There is no betting on Major League Baseball unless we put on the games and invest a lot of time and effort, as our players do, on putting on compelling contests. They should have to pay us something for that.”
The gaming industry, however, cites its own low-margin business model as it rules out any agreement that would see the leagues getting a cut of betting revenues. Sara Slane, AGA senior vice president of public affairs, explained the AGA’s position. “At the end of the day, this is a low-margin business. Taking that money off the top hurts our ability to compete with illegal operators.”
As part of the effort to protect the integrity of the games, the leagues would like to see restrictions on specific types of wagers. Seeley speaks for the leagues when he says “We want to make sure that, as we get into more granular bets, we don’t encounter integrity issues. It’s very difficult for an individual to fix a nine-inning baseball game. It’s a lot easier to fix the next at-bat; a batter is in complete control of when he strikes out.”
They will have their hands full on that battle since the casino lobby doesn’t want to see any type of mandate on where bookmakers can buy their data from or what kinds of bets they can take. According to Slane, restricting the types of wagers that operators would be able to offer would, she said, “drive [bettors] to offshore, illegal [gambling] websites” to find the kind of bet options that they want.”
According to Slane, the gaming industry has “just as much invested” as the leagues in ensuring that the integrity of the contests are not comprised. She noted that “When we’re paying out to winners who have insider info, that hurts us just as much. If there’s something suspicious happening, it’s bad for the leagues but it’s also bad for us.”
Carsten Koerl, the founder and CEO of Sportradar helps monitor potential integrity issues, including suspected betting irregularities that may indicate that a sporting event is fixed in some way. “I understand the leagues have an interest, but betting operators have the same interest that the sport stays clean and nobody is using these small side bets to influence it,” Koerl says.
The leagues’ efforts to restrict certain types of bets and mandate the use of official data will “not work in a free market,” Koerl says. But Sen. Charles Schumer and Sen. Orrin Hatch have proposed a bill to Congress that would give the leagues that data. The bill has been met with virtually unanimous approval among mobile betting operators, leagues, data providers and other industry participants.