NJ lawmaker: There will be no “integrity fee”
With a decision from the U.S. Supreme Court expected possibly as early as this week (but as late as the end of June), states are trying to be prepared for any eventuality.
New Jersey started the ball rolling with the suit, Murphy (Christie) v. NCAA, so lawmakers are formally prepared for a decision that would strike down the federal ban on sports betting imposed by the 1992 Professional and Amateur Sports Protection Act (PASPA).
The case before the high court is the state of New Jersey’s final appeal of lower-court rulings that agreed with the plaintiffs, the major U.S. sports leagues, that the New Jersey law establishing self-regulated sports betting signed in 2014 by then-Governor Chris Christie violated PASPA, which bans sports betting in all but four states and full single-event sports betting everywhere in the U.S. outside of Nevada.
New Jersey’s lawyers have argued that PASPA itself is an unconstitutional overextension of federal authority. The American Gaming Association, one of several parties to file amicus briefs supporting New Jersey in the case, has predicted that PASPA will be repealed, if not by the high court then shortly thereafter via an act of Congress.
New Jersey lawmakers have already begun preparing for either eventuality, introducing a bill in the state General Assembly that would establish a regulatory framework for licensing and operation of sports betting at the state’s casinos and racetracks. The bill, A3911, would regulate wagering either in person or online on both professional and college sports.
The bill is on hold for formal introduction pending the outcome of the Supreme Court case.
Under the bill, no betting would be allowed on New Jersey college events or on high school athletics—with the exception of collegiate tournaments, notably the NCAA men’s basketball tournament, or March Madness, which generates tons of action every year for Nevada sports books.
Licensing and enforcement of regulations would fall to the New Jersey Division of Gaming Enforcement under the measure, along with some oversight by the state Racing Commission on racetrack sports books.
The bill sets a revenue tax of 8 percent—the same rate paid for land-based casino revenues—for on-site sports betting. Online sports betting revenue through the state’s iGaming network would be taxed at 12.5 percent.
The initial bill does include a so-called “integrity fee” that would funnel some income to the sports leagues as a royalty on their product. However, unlike the fees being proposed by the leagues in state lobbying efforts, it would not be a tax imposed on all wagers (handle), but an annual fee equal to the lesser of $7.5 million or 2.5 percent of revenue earned from sports wagers. The fee also would fund investigations into the integrity of sports games.
The integrity fee provision is likely to be hotly debated by lawmakers, many of whom believe any fee for the leagues could cripple profit margins of the sports books, which would not be able to offer odds to compete with illegal bookmakers.
One powerful opponent of any fee for the leagues is Deputy Assembly Speaker John Burzichelli, who promised in a press interview last week that there will be no fees for the leagues in any final sports betting bill.
“That’s not going to happen,” Burzichelli told the Associated Press. “We’re supposed to sit down and write a check to the same people who have fought us every step of the way in our effort to provide sports betting?”
“The same leagues that forced New Jersey to spend millions to overcome their opposition to sports betting are going to get millions from the New Jersey treasury when we beat them in court?” added former state Senator Raymond Lesniak, who sued the federal government in 2009 seeking to overturn PASPA. “I’m from New Jersey, and I have a problem with that.”
Assembly members Eric Houghtaling; Joann Downey and John Burzichelli are the bill’s primary sponsors.
Houghtaling said in a press statement that the bill is still a “work in progress,” and that legislators will work with casinos and racetracks to refine the bill. “We are open to feedback and look forward to bringing the New Jersey gambling industry forward,” Houghtaling said.
“Here in Monmouth County, the Monmouth Racetrack and Freehold Raceway would see a resurgence of attendance as a direct result of this bill, benefiting our local economy and producing more jobs,” Downey said in the same release.
Meanwhile, casinos in Atlantic City also are preparing for a possible SCOTUS decision in New Jersey’s favor. Bruce Deifik, owner of the new Ocean Resort Casino—opening June 28 in the structure formerly housing the Revel Casino—said last January he is planning a sports book should the high court decide for New Jersey. Last week, the new property’s CEO echoed that.
“Ocean Resort Casino intends to offer a ‘best in class’ sports-betting experience in a remarkable high energy and highly engaging venue in partnership with what is widely considered to be the top names in the global sports betting space,” said Ocean CEO Frank Leone in an interview with the Press of Atlantic City. “Ocean Resort Casino will be positioned to immediately offer both on-property and online sports betting pending licensing and regulatory approval.”
“Atlantic City is coming back with a vengeance,” Deifik said in a January statement accompanying the purchase of the former Revel property, “and with the groundwork for the legalization of sports betting, we foresee a great opportunity to bring a state-of-the-art sports book to a city which caters to a large and diverse sports market.”
“We believe PASPA should be repealed by the Supreme Court although no one knows how the court will rule, or what regulatory landscape will emerge as a result,” Noel Stevenson, regional public relations director for Caesars Entertainment, told the Press. “Our response will be based on the opportunity and rules which result if the law changes.”
In West Virginia, Governor Jim Justice issued a news release Thursday stating, “a tentative agreement was reached between the Lottery commission, the state’s licensed casino operators and the sports consortium that will enhance sports betting in West Virginia.”
However, officials from the state’s casino industry and professional sports leagues, who participated in a 7-hour, closed-door meeting about sports betting, were taken by surprise. In fact, chaos and shouting were reported to have occurred.
As reported in Sports Handle, sources said most legislators were not happy about the meeting and that key senators were unaware of it. Previously, lawmakers passed the West Virginia Lottery Sports Wagering Act by a veto-proof majority, in anticipation of the U.S. Supreme Court lifting the federal ban. It became law without Justice’s signature, since his family owns the Greenbrier Resort which operates a casino.
Upon hearing that casinos would pay sports leagues an integrity fee, which was not included in the new law, West Virginia Gaming and Racing Association President John Cavacini said, “I was shocked. I was shocked.” Penn National Gaming Senior Vice President, Public Affairs & Government Relations Eric Schippers said, “We were surprised. It looks like the governor’s office jumped the gun. There is no agreement. There are the bones of an agreement. There are concepts that both sides are discussing further, but it’s still at the conceptual phase. There is no agreement in place.”
Cavacini added all sides are reviewing a “concept on the table” through which casinos possibly would purchase data and stats from major league sports.
“What we said is we will look at contractual agreements between each property and major league sports and do it from a contractual standpoint. You have two private entities/profit makers that are in contractual arrangements with each other. And that’s how it should be handled. The state shouldn’t even be involved with it. I don’t know where the governor is coming from,” Cavacini stated.
Also in attendance was MLB and NBA lobbyist Larry Puccio, who led Justice’s transition team and also lobbies for the Greenbrier Resort. He said, “I thought it was a positive day, a great day. I thought good things happened. If the governor has interpreted it’s worked out, I never speak for the governor. I just speak for me.”
Justice said he may still call a special legislative session to discuss an integrity fee for major league sports. The leagues have promoted a 1 percent cut of wagering. Justice recently said the amount under consideration was less than that. “They wanted a percent, we negotiated to a quarter of a percent and if we can get them to sign on for that and bring them under the umbrella, I think that’s very minimal cost to the casinos and I think it would be a good thing.”
The measure passed by lawmakers included no integrity fee, so media covering the situation were left wondering how that could be true. For example, Legal Sports Report stated, “And the idea that he negotiated the leagues down to a smaller percentage is bizarre, seeing as the state already has a law that gives them no fees whatsoever.”
In his statement, Justice said, “I insisted from day one that no part of an integrity fee for sports betting would be paid by the state. I demanded that the entire fee be paid by the casinos.” Cavacini responded, “How can the governor turn his back on an industry that provides $350 million a year and employs 4,000 people in the state of West Virginia and side with New York billionaires? It’s just to give them money. It’s incredible.”
Justice was not at the meeting but spoke to participants by phone. It was led by Bray Cary, who is considered an unpaid “public servant volunteer” within the Justice administration. At one point he located the casino contingent in one room and the sports leagues in another and engaged in “shuttle diplomacy” Justice frequently uses.
Schippers said casinos consider the recently passed legislation perfectly fine. “The law that has been approved in West Virginia is a great law from our perspective, serves as a model for other states and doesn’t need to be changed,” he said. He noted the “concept” now under discussion should not even be described as an integrity fee. However, Schippers said, “We could end up being partners with the leagues as opposed to being adversaries. It is beyond West Virginia, but WV has the benefit of being the first mover in this space. So it does make sense that we are speaking locally but this would have global implications if we can come to an agreement with the leagues.”
Also in attendance were representatives from West Virginia University and Marshall University, who said the schools could support an integrity fee to fund safeguards. WVU Vice President Rob Alsop said, “We’ve been looking at it from a compliance perspective—what we need to do to make sure we’re educating and monitoring and working with our student athletes to put them in the best position going forward. Today was really just a discussion about our concerns and making sure we do the best we can for the university.”
Mississippi
Sports betting—in Mississippi and the U.S.– was one of the main topics at the recent Southern Gaming Summit at the Beau Rivage Resort & Casino in Biloxi two weeks ago. American Gaming Association President and Chief Executive Officer Geoff Freeman said the U.S. Supreme Court could rule on lifting the federal ban as soon as May 14 or by June 30 at the latest.
Freeman, a leader in the recent push for legalized sports betting, said, “This is an issue where that group of stakeholders is enormous,” including the players, casino industry, sports leagues, broadcasters, law enforcement and mayors. The profits are equally huge. Freeman said the AGA estimates Americans wager $150 billion annually on sports, and only $4.5 billion of that amount is wagered legally in Nevada. “So you see the size of the market that’s out there,” he said.
Mississippi was the third state to get casinos and it could become one of the first to offer sports betting, thanks to a law that allow sports betting if it’s legal in the U.S. However, Freeman said, that law requires sports bettors to go to a casino to make a bet—unlike in Nevada, where fans can wager via their phones after they’ve established an account inside a casino. “Having mobile gaming only here inside the brick and mortar casinos will ensure the future success of the illegal market,” Freeman stated.
Sports betting will not necessarily be a major source of revenue for Mississippi casinos, Freeman said, but big games like the Super Bowl will bring new customers to the casinos. They’re not playing table games and slots, he noted. The average fantasy sports player is 32, a college graduate and makes more than $75,000 a year—an attractive customer for casinos, Freeman noted.
Caesars Entertainment Regional President-South Dan Real said, “When there’s a great game going on, you hear it throughout the entire building, and whether you have a bet on it or not, it makes you feel like you’re in a pretty cool place. That’s what’s missing from casinos, and sports betting provides this excitement, almost every day.”
Thomas Shepherd III, a partner in the Jackson law firm Jones Walker, noted when the Supreme Court, as expected, lifts the federal ban, “things will move at lightning speed in Mississippi.” He predicted a sports betting framework could be in place in Mississippi by Labor Day. The state will benefit from being the only state in the region that allows it, and that will attract customers from Louisiana, Alabama, Arkansas, Tennessee and Florida, Shepherd said. “It will drive a whole new kind of customer to the area, and we estimate it will bring in an additional $50 to $150 million in gaming revenue,” he noted.
Plus, Shepherd added, “Plain and simple, sports betting could save Tunica, which has experienced a significant decrease in revenue over the last decade.
Hard Rock Casino Biloxi General Manager Todd Raziano said, “We will absolutely take advantage of the opportunity if it’s given to us. We don’t want to be left behind.”
Illinois
Several sports betting bills were introduced in the Illinois legislature, but none are expected to pass before the current session ends May 31.
SB 3432, sponsored by state Senator Napoleon Harris, a former NFL running back, it includes the 1 percent integrity fee sought by Major League Baseball and the National Basketball League. It did not get a third reading in the Senate Gaming Committee. Harris said he will continue to work on the bill and resubmit it in 2019.
SB 2478 also did not get a third reading. It’s sponsored by Gaming Committee Chairman state Senator Steve Stadelman, who is seeking an extension to move the bill forward. Named the Sports Consumer Protection Act, it would designate a state agency to enforce sports betting laws for in-person and mobile sports wagering.
SB 3125, sponsored by state Senator William Brady, would amend the Illinois Horse Racing Act of 1975 to allow sports betting at racetracks. It was sent back to the Assignments Committee last month.
In the House, HB 5186, state Rep. Tim Butler’s Sports Wagering Act, has not moved since it was referred to the House Rules Committee in February.
Among the key issues, Illinois legislators have debated whether sports betting would take place only in its 10 casinos or also at its 10 horseracing tracks.
