More than a dozens states are considering bills to legalize sports betting if the U.S. Supreme Court overturns the Professional and Amateur Sports Protection Act of 1992, but if their proposed laws are anything like the one being considered in Indiana, the point may be moot.
A controversial provision of a bill introduced in the Indiana state legislature to legalize regulate sports betting (if the federal ban disappears) would impose a 1 percent “integrity fee” on sports-book operators that would go to the major sports leagues, ostensibly to monitor wagering lines and betting patterns to ensure the integrity of the games.
Technology is already being applied by legal sports bookmakers in Nevada and around the world that performs the same monitoring function, but funneling money for that purpose to sports leagues is unprecedented. Potential sports-book operators are criticizing the fact that the proposed fee would be applied to total handle—all wagers made—instead of to profit, or win, of sports books after all bets are settled. This would translate into a gift of billions annually to the sports leagues.
Indiana Rep. Alan Morrison introduced House Bill 1325 after fielding input from the NBA and Major League Baseball, conversations that apparently resulted in the inclusion of the fee. “We’ve certainly had some input and welcomed some advice and language that makes the leagues feel a little bit more comfortable,” Morrison told ESPN’s David Purdum.
The fee would be piled onto a 9.25 percent gross gaming revenue tax on sports books, plus the 0.25 percent federal excise tax already paid by Nevada sports books.
In an interview with website Sportshandle.com. gaming law expert I. Nelson Rose said the integrity fee plus the taxes would amount to a 39.3 percent tax on operators’ gross gaming revenue, attributing the majority of that, or 24.04 percent, to the integrity fee. Many feel such a tax would doom legal sports books before they started, and prevent them from being able to compete with illegal bookmakers operating with no taxes or fees at all. Nevada taxes race and sports book revenues at 6 percent.
The American Gaming Association, which has championed legalizing sports betting in the U.S., was quick to respond to Morrison’s bill. “While we applaud Rep. Morrison’s efforts to bring legal, transparent sports betting to Indiana, handing sports leagues 20 percent of what’s left over after winnings are paid out undercuts its economic viability,” the AGA said in a statement. “Doing so will ensure the illegal market continues to thrive in the state, and gut the tax revenues available to fund essential public services. We believe Indiana taxpayers deserve better.
“We encourage Indiana to reject this short-sighted, misinformed idea, which simply replaces a failed federal prohibition with bad state policy. Our goal is to eliminate the illegal market, protect consumers and strengthen the integrity of the game. We invite all stakeholders to join us in working together in a thoughtful and transparent fashion.”
Meanwhile, at least 18 states have passed or are considering legislation to legalize and regulate sports betting if the high court overturns the law.
Gaming expert Clyde Barrow, professor at the University of Texas Rio Grande Valley, said, “What’s happened is states have sort of maxed out their capacity to expand gaming. Sports betting is really one of the last frontiers of expanding gaming.”
He said many variables contribute to the amount of tax revenue states could receive from sports betting, but despite the federal ban on sports betting, the nationwide market right now “is in the billions of dollars.”
In West Virginia, identical legislation in the House and Senate would legalize betting on professional and collegiate sporting events. Both S 106, the bipartisan Senate proposal sponsored by state Senators Stephen Baldwin and Michael Maroney, and H 2751, introduced in March 2017, would: declare PASPA, the federal sports betting ban, unlawful; give authority over sports betting to the West Virginia Lottery Commission; exclude amateur sports except collegiate and Olympic events; and impose a 2 percent tax on handle.
H 2751 stalled last year but lead sponsor state Delegate Shawn Fluharty expects it to move forward this year. It’s based on recommendations from a comprehensive study commissioned by the Lottery Commission. Lottery Director Alan Larrick said, “If we’re given the power to go forward with sports gaming, we want to be ready to go forward with as much knowledge and information as we can possibly get.” The study estimated sports betting would generate at least $34 million in annual revenue for the state.
In South Dakota, a white paper prepared by the state Department of Revenue recommended steps South Dakota should to prepare for legalizing sports betting. State Revenue Secretary Andy Gerlach said the first step would be to amend South Dakota’s constitution. He noted the legislature may propose constitutional amendments for statewide referendums if majorities in both the Senate and the House of Representatives agree.
Next, the Commission on Gaming would have to be given the authority to regulate sports betting. The department recommends sports betting be allowed only at establishments licensed by the gaming commission. Under federal law, tribal governments can conduct any gambling authorized by state law if a gaming compact exists, but the compact would need to be amended to accommodate sports betting at tribal casinos.
The white paper also recommends that the legislature determine how to tax the amount charged by an establishment for taking a bet from a gambler. It states any South Dakota establishment that accepts sports bets should be part of a large bet pool, most likely through a multistate organization similar to the one that oversees Powerball.
“While South Dakota does not have a position on sports betting, the items listed above need to be considered by policy makers,” the document said.
In Illinois, state Rep. Lou Lang said the legislature likely will hold committee hearings on sports betting in the upcoming session. In a recent report, Eilers & Krejcik Gaming, a research firm that tracks the gambling sector, said Illinois is one of 11 states that could pass sports betting legislation this year.
“It would be wrong to not study this and see if it would be beneficial for the state should sports betting be legalized in the United States. If this is going to be a viable legal business, we don’t want to be behind 30 other states who have legalized it,” Lang said.
In South Carolina, state Rep. Russell Ott said it’s unlikely any sort of gambling bill will pass this year.
“Realistically speaking, it’s an election year. In a majority Republican body, the chances of a legitimate shot at it this year are not very high. What I’m hoping is to continue to be able to talk about it,” Ott said.
Last year, Ott and House Minority Leader Todd Rutherford sponsored House Bill 3102 that would legalize bets on horse racing, professional sports and games of chance on electronic and gaming tables, as well as skill-based card and dice games. However, legalizing sports betting would require a constitutional amendment.
Ott said responsible gaming could help the state “do amazing things. We are somewhat hypocritical in South Carolina, where we have state-sponsored gambling like the lottery but don’t allow people to engage on their own accord. The benefits are there certainly, if done in a responsible and thoughtful way. I hope to continue to show the will is there.”
One stumbling block to legalizing sports betting, however, is the opposition of Governor Henry McMaster. His spokesman Brian Symmes said, “It’s a loser and it’s inconsistent with the core beliefs of South Carolinians.”
Sports betting will not be taken up in Florida or Mississippi. In Florida, the Senate began work on SB 840, its omnibus gambling bill, which addresses several issues from the past few years, including allowing race tracks to offer card games but stop running live races and lowering slot machine taxes. But legalizing sports betting has been left out to avoid conflict with the Seminole Tribe of Florida and House members who oppose gambling, said state Senator Travis Hutson, chair of the Regulated Industries Committee.
Hutson said the Seminole Tribe most likely would consider legalizing sports betting a violation of its compact, which grants the tribe exclusive rights to offer Las Vegas-style gambling in the state. The Seminoles already cautioned lawmakers against approving any fantasy sports bills, threatening to end their multimillion revenue sharing arrangement.
Hutson noted, “We’re very aware of the pending Supreme Court decision. We’ll look at the issue as we go forward with the House and in regard to the compact. It’s certainly something that shouldn’t be taken off the table yet. Sports betting is something we all need to sit down and have a discussion about but we have kept our bill very narrowly defined to stuff that the House and Senate have previously agreed to.” He added, in regard to House opposition to expanded gambling, “I would love to see where the Florida House thinks I am too expansive in the bill.”
Meanwhile, in Mississippi, H1113 would ban single-game sports betting while H 1154 would establish a panel to review tax rates for sports wagering if it is legalized and regulated.
H 1113 amends current state law, stating, “No wagering shall be allowed on the outcome of any athletic event, nor any matter to be determined during an athletic event, nor on the outcome of any event, which does not take place on the premises.”
The measure would exempt fantasy contests covered by a 2017 law. But some of the lawmakers who voted for the fantasy sports bill were unaware of the legislation’s effect on sports betting, which is illegal in Mississippi. The proposed legislation would clarify any confusion.
H 1154 establishes a panel to review sports betting. It states, “There is created a study committee to recommend best practice taxation policies for the State of Mississippi regarding casino sports gambling. The committee shall report its findings and recommendations to the House Committee on Gaming and Senate Committee on Finance prior to the 2019 Legislative Regular Session.”
Observers said lawmakers wrote the fantasy law with the possibility of regulating sports betting in the future. MGM Resorts International, with a stake in the state’s casinos, has begun the process of offering sports wagering should it become legal in Mississippi.
