It may be early in the game, but the first official look from members of Congress into sports betting in America in the post-PASPA era indicated a clear tilt toward some form of federal oversight.
Five witnesses were invited to testify last Thursday before the House Judiciary Committee’s Subcommittee on Crime, Terrorism and Homeland Security. Before a one had spoken, however, Chairman Jim Sensenbrenner of Wisconsin, after professing himself a diehard Green Bay Packers-Milwaukee Brewers fan, set the tone of the hearing with his “personal view” that gambling, by virtue of the large amounts of money involved, poses a direct threat to the integrity of sports.
As he put it, “We’re going to be in for huge amounts of trouble in the future.”
He then went on to broadly outline the legislative landscape as he sees it in the aftermath of the Supreme Court’s May ruling in Murphy v. NCAA striking down the 1992 Professional and Amateur Sports Protection Act𑁋PASPA, as it’s known, which effectively imposed a federal ban on state regulation of sports betting and which, a majority of the court ruled, violated the 10th Amendment, the provision in the Bill of Rights that reserves to the states or the people those powers not specifically granted the federal government under the Constitution.
Since the ruling, four states—New Jersey, Delaware, Mississippi and West Virginia—have legalized Nevada-style betting. Pennsylvania and Rhode Island are expected to do the same before the year is out. Upwards of 20 other states are considering it.
“We are witnessing a race to the bottom,” said Jocelyn Moore, an executive with the National Football League who testified in favor of the position of the major sports organizations that only federal intervention can safeguard the integrity of what happens on the field of play: in part, by prohibiting certain “risky” in-play betting fixtures; in part by requiring that betting operators use only official league data in settling wagers; and not least by recognizing that the borderless nature of the internet presents challenges that are beyond the powers of individual states to control.
“Which is why there needs to be some federal guardrails regulating online gambling,” said Jon Bruning, a former Nebraska attorney general who testified on behalf of the Coalition to Stop Internet Gambling, an organization bankrolled by Las Vegas Sands Chairman and Republican mega-donor Sheldon Adelson.
Bruning continued, “Our system of government reserves intrastate matters, including the regulation of gambling at brick-and-mortar facilities and intrastate lotteries, for the states. But, internet gambling is inherently interstate in nature. States are ill-equipped to enforce gambling laws against interstate and international companies, particularly given the technological vulnerabilities of the Internet and age and location verification mechanisms that are subject to compromise.”
Most of the members of the subcommittee appeared to take up his view in their questions, and it came to dominate the 90-minute hearing, leaving the two states’ rights advocates who testified—Nevada Gaming Control Board Chairwoman Becky Harris and the American Gaming Association’s Sara Slane—struggling to make their case.
“Online gambling is a whole different animal, completely different,” said House Judiciary Committee Chairman Robert Goodlatte, a co-sponsor of the 1996 Unlawful Internet Gambling Enforcement Act and a vocal opponent of web gaming.
In light of which Sensenbrenner said he believes that Murphy presents Congress with three options:
1) step aside and let the states regulate the industry on their own terms in a more or less free market environment;
2) re-impose a federal ban crafted to pass constitutional muster by targeting private companies rather than state governments; or
3) adopt uniform standards for governing regulation at the state level.
“I think one thing all of you agree on is that for Congress to do nothing is not an option,” he said.
It was not what Harris and Slane wanted to hear.
“While the stated intent of prohibiting legal sports betting throughout most of the nation was to preserve sports integrity, PASPA had the opposite effect by creating an enormous and largely unobserved black market,” said Slane.
“We must instead draw upon effective regulatory models,” she added, citing the “robust, rigorous” policing in place at the state and tribal gaming levels.
She, along with Harris, who submitted a detailed analysis of the fragile dynamics of profit and loss in sports betting, took specific issue with Moore’s argument for treating game data as a kind of intellectual property for which betting operators should have to pay.
“Too often, governments and private-sector stakeholders have a misperception of sports betting as a cash cow,” said Slane. “In reality, sports betting is a low-margin business, which is not viable without the proper policy environment.”
Harris added, “Any new jurisdictions that engage in legalized sports wagering won’t simply be competing against other states with legalized sports betting. They will also be competing with offshore illegal operators and illegal operators within their own and other jurisdictions. Reasonable tax rates are essential for legal sports betting products to be competitive with illegal providers. Any additional fees, to the extent they are implemented, only serve to facilitate offshore illegal gambling operations by making legal betting products that much more expensive.”
Nonetheless, recent events on Capitol Hill point to a growing sense that federal oversight, if it occurs, will be heavily influenced by the sports leagues on issues such as data control and so-called “integrity fees.” Senate Finance Committee Chairman Orrin Hatch of Utah said last month he plans to introduce a federal regulatory bill, the substance of which may have already been tipped by Senate Minority Leader Charles Schumer of New York in the form of a legislative outline that includes a provision restricting betting operators to official league data.
The concern among proponents of state primacy was voiced last week in a letter addressed to Sensenbrenner and the subcommittee’s ranking Democrat Sheila Jackson Lee by House members Dina Titus of Nevada and Tom McArthur of New Jersey.
“Calls for integrity fees paid to leagues would chip away at state revenues and already slim margins for legal sports books, hurting their ability to compete with offshore books and move more consumers into the regulated market,” they wrote.
“Nevada, which has had legal and regulated sports betting since 1949, proves that sports wagering can be properly regulated at the state level to enshrine consumer protections, law enforcement and wagering integrity.
“A heavy-handed federal framework could repress innovation and competition, sending more people back to the illegal market.”
Despite the seeming interest in federal legislation, the likelihood of passage is growing slimmer as more states pass measures that would legalize sports betting within their borders. Moore wants to force states to buy data from the professional leagues, even if they do not pay the so-called “integrity fees” that have been demanded by the NBA, the PGA and Major League Baseball. But none of the states that have already legalized sports betting or are considering it seriously have included any such options in their laws or proposals.
But Moore, Bruning and Les Bernal, who represents an anti-gambling organization, couldn’t come up with a cohesive plan to outline federal oversight of sports betting. About the only thing all sides could agree upon was the need to choke off access to illegal off-shore sports betting sites.
“We have some work to do,” Sensenbrenner said, “and I’m looking forward to working with you to try to come up with something both short term and something more permanent to deal with this issue. I’m afraid if we don’t, there are going to be people who get hurt and get hurt badly.”
