Federal Sports Betting Bill Introduced by Senators Schumer and Hatch

Democratic Senator Chuck Schumer and Republican Senator Orrin Hatch are following through on promises both made earlier this year to file legislation to regulate sports betting at the federal level.

On Wednesday, the pair introduced the Sports Wagering Integrity Act of 2018 in a bid to bring in-person and online sports betting under the purview of the federal government. An early draft version of the bill was released earlier this month.

In a statement, Senators Hatch and Schumer explain the legislation will “put in place world-class safety measures to protect consumers, preserve the integrity of sporting events, and ensure the propriety of the sports wagering market.”

Senator Hatch said the new legislation “is the first step toward ensuring that sports betting is done right in the states that choose to legalize it. Just as importantly, it provides protections for states that choose not to go down that path.”

Senator Schumer added, “the time is now to establish a strong national integrity standard for sport betting that will protect consumers and the games themselves from corruption.”

Federal Bill Includes Data Purchase Mandate but Not an Integrity Fee

A copy of the bill has not yet been uploaded to the Congress website, but ESPN reports the bill includes provisions requiring sports betting operators to rely on official data purchased from the leagues and makes no mention of integrity fees.

The data mandate would require sports betting operators to purchase data directly from the leagues for the purposes of settling wagers and providing in-play betting markets. Not surprisingly, the nation’s major sports leagues strongly favor the mandate as it would provide them with a long-term and predictable source of revenue. This mandate would be in effect until 2024.

Multiple sports leagues have managed to strike advertising and data rights deals with operators on the free market in recent months, but a legislative mandate would give operators no choice but to agree to league demands in the future.

Integrity fees are not mention in the bill, but ESPN also notes the bill does not prohibit them should states choose to enact integrity fees. The sports leagues have also pushed for integrity fees ranging from 0.25% to 1% of total betting handle that operators must pay to the leagues.

The leagues originally called for a 1% integrity fee and portrayed it as necessary to fund anti-corruption efforts, but received considerable pushback from lawmakers and media outlets. More recently, the leagues have rebranded the integrity fees as “royalty fees” that leagues deserve for hosting the games upon which sportsbooks take wagers and have reduced the demand to a fee of 0.25% of betting handle.

The bill also seeks to establish a national clearinghouse through which all wagers placed anywhere in the nation must pass. The purpose of the clearinghouse would be to monitor wagering activity across the action for signs of suspicious betting patterns indicative of corruption.

The statement posted on Hatch’s Senate website revealed a few additional provisions to be included in the bill:

• Prohibit sates from enacting sports betting legislation that does not meet certain minimum standards
• Allow wagers on the Olympics and college sports but not on other amateur sports
• Allow leagues to request certain types of bets to be prohibited out of integrity concerns (an example might be betting on the first pitch to be thrown in an MLB game)
• Establish a minimum age of 21 to wager on sports
• Establish a national self-exclusion list
• Put in place certain consumer protections such as advertising standards and reserve requirements
• Establish record-keeping and suspicious transactions reporting requirements
• Create new anti-money laundering requirements for the sports betting industry
• Establish a process allowing states to form compacts with one another for interstate sports betting
• Direct revenue from the current federal sport betting excise tax (currently 0.25% of sports betting handle) to law enforcement and for gambling addiction treatment efforts
• Upgrade the existing Sports Bribery Act to cover extortion, blackmail, wagers based on nonpublic information and to strengthen whistleblower protections
• Grant the Department of Health and Human Services additional powers to monitor, prevent and treat gambling addiction

The American Gaming Association issued a response on Wednesday strongly opposing the bill and specifically named the data mandate and national clearinghouse as unnecessary intrusions on an already-functioning sports betting market.

In part, the statement reads as follows:

“Additional areas this bill seeks to address – including the mandatory use of official league data and the creation of a national sports wagering clearinghouse – can, and should, be decided by marketplace negotiations between private businesses and cooperative agreements among jurisdictions. In the mere six months since the U.S. Supreme Court paved the way for legal, regulated sports betting, significant developments on both of these fronts have already occurred without any federal involvement.”

You can see the full AGA statement here.