100-year-old case cited
The quest by the major sports leagues for a cut of the action on legal sports betting—whether it be called an “integrity fee,” a “royalty fee” or, as the National Football League contends, a fee for providing proprietary data that is the core of sports betting, can trace its roots to the stock market of the early 20th century.
That’s one conclusion of the second “case study” on sports betting published last week by the online Legal Sports Report.
The publication trace the roots of the leagues’ effort to generate fees in connection with wagers on their games, which the National Basketball Association originally proposed as an unworkable 1 percent of all wagers on a sport, but more recently has settled at .25 percent or wagers or, in some cases, .25 percent of revenues. The study led to a 1905 U.S. Supreme Court case in Chicago, Board of Trade of the City of Chicago v. Christie Grain and Stock Company. L.A. Kinsey Company.
In the case, the Chicago Board of Trade claimed that information on stock tickers printing continuous price quotes for grain and other items was proprietary information, and subject to a usage fee.
In holding for the Board of Trade in the court’s opinion, Justice Oliver Wendell Holmes stated:
“In the first place, apart from special objections, the plaintiff’s collection of quotations is entitled to the protection of the law. It stands like a trade secret. The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them to steal the plaintiff’s.”
The court further held that the Chicago Board of Trade “does not lose its rights by communicating the result to persons, even if many, in confidential relations to itself, under a contract not to make it public, and strangers to the trust will be restrained from getting at the knowledge by inducing a breach of trust and using knowledge obtained by such a breach.”
In relation to sports betting today, Legal Sports Report pointed out the court “prophetically discussed the issue of time-sensitive data more than a hundred years before a similar analysis will likely be applied to sports betting, in saying: ‘Time is of the essence in matters like this, and it fairly may be said that, if the contracts with the plaintiff are kept, the information will not become public property until the plaintiff has gained its reward. A priority of a few minutes probably is enough.’”
The study, though, points out a major difference between the stock case and the leagues’ current quest for integrity fees:
“In stark contrast to the more than 100-year-old case, Major League Baseball, the National Hockey League, the National Football League, and the National Basketball Association do not possess an exclusive right to distribute data,” the study said. “They make very little effort to keep most game statistics secret. In fact, go to any ballpark in the country and take a look around; you do not need to look more than a couple of rows in any direction to see someone collecting data on their own in a scorebook. Sports data is abundant: sports leagues broadcast it through data partnerships, but those partnerships do not foreclose on the near simultaneous independent collection of data by competitors.
“The professional sports leagues likely lack the data monopoly that the Chicago Board of Trade possessed. Even sports, like tennis, which has had a problem with ‘courtsiding,’ will struggle to control the dissemination of data from inside stadiums. The practicality of restricting real-time transmission of data from a stadium that holds upwards of 50,000 people is something that even the most sophisticated security agencies would struggle with, let alone moderately paid event security staffers who work game days.
“The precedential value of Chicago Board of Trade for advancing the sports leagues’ argument is likely questionable given that the sports leagues do not seek to maintain secrecy over much of their data.”
