Federal Sports Betting Legislation to be Introduced by Senator Orrin Hatch

Utah Senator Orrin Hatch is close to introducing federal legislation to regulate sports betting in the United States. Speaking on the Senate floor yesterday, Senator Hatch provided an update on his plan to introduce sports betting legislation.

Senator Hatch first announced his plan to introduce sports betting legislation within days of May’s Supreme Court ruling. Yesterday, he provided an update on that effort and further explained his motivations.

Senator Hatch, who was one of the original authors of the Professional and Amateur Sports Protection Act (PASPA), outlined his basic motivations while speaking yesterday.

In short, he said he is no fan of gambling or sports betting, but believes it is necessary to accept the reality that sports betting is widespread. Between Las Vegas and illegal sports betting, Senator Hatch believes the best path forward is to regulate the activity and bring it out of the shadows.

Interestingly, Senator Hatch minimized states’ ability to regulate sports betting themselves when he said this:

“Prohibition is not a possibility or prudent path forward. Instead now that states are free to legalize sports betting, our goal should be to bring that illegal wagering activity into well-regulated legal markets that better protect consumers and the integrity of sports.”

Followed by this:

“Sports betting is inevitable. Let’s make sure it’s done right. To do it right, we need to make sure that state regulatory frameworks are not a race to the bottom. I firmly believe that we need a set of fundamental federal standards that will integrity the integrity of the games, that will protect consumers and the sports wagering market.”

You can see the speech in full here:

 

This is Probably About Integrity Fees

Senator Hatch’s speech leaned heavily on themes of protecting the integrity of sports in the United States. He did throw a few mentions in there about protecting consumers and markets, but as Legal Sports Report noted earlier today, he mentioned protecting the integrity of sports 17 times in the 12-minute speech.

It’s probably no coincidence that the same justification, using almost exactly the same phrasing, has also been used by the professional major sports leagues who have been lobbying state lawmakers to give them integrity fees.

The pro sports leagues have attempted (and failed) to convince state legislators that any sports betting law should include an integrity fee of 1% of total betting volume, paid by operators to professional sports leagues.

Sports betting operators and most state-level legislators have resisted the idea of integrity fees due to the expense involved. A mere 1% doesn’t seem so bad at first glance, but the fact that it’s taken off the top of total betting handle makes it the equivalent of taxing operators as much as 20% of their gross revenue.

The NBA and MLB have been particularly insistent on getting an integrity fee added to sports betting legislation around the country. League officials have been spotted at various statehouses trying to convince legislators to write integrity fees into law, but to no avail so far.

Most of the leagues’ arguments in favor of the integrity fee have centered around the need to protect the integrity of the game. The leagues have also compared it to a royalty fee due to the leagues being the ones to host the games that operators take wagers on, but generally the emphasis has been on recompensing the leagues for the additional risk they will supposedly be taking on now that sports betting is being legalized state-by-state.

Why the leagues would need additional money to protect the integrity of sports now when Vegas has had sports betting for decades is unclear. That’s not to mention, as Senator Hatch estimated yesterday, the $150 billion illegal sports betting market that existed under prohibition.

If anything, the leagues should find it easier to protect the integrity of their games now that operators will be located in the USA and subject to government oversight for the first time ever. This may be why the leagues have at times framed the argument as being about royalty fees.

Despite the leagues’ arguments, pushback has come from just about every direction. Journalists have criticized the idea, sports betting operators don’t like it and numerous legislators have sounded off on the idea as well.

The sports leagues have convinced a handful of state lawmakers to fall in line, but progress on that front has been minimal for the leagues. So far, none of the states with legal sports betting have included an integrity fee in their laws.

We also know the NBA has been lobbying Congress for a federal sports betting law since before the Supreme Court even issued its decision. In fact, the NBA began lobbying Congress even as it was still fighting New Jersey in court over the state’s plans to legalize sports betting.

Taking a big picture look at the situation, it seems likely that someone from at least one of the major sports leagues has Senator Orrin Hatch’s ear.

That he would come out now in support of federal legislation despite being one of the original authors of PASPA is suspect.

That he would also use almost exactly the same language as the leagues in his speech yesterday talking about the need to “protect the integrity of sports” is also suspect.

None of this is hard proof that Senator Hatch is doing the bidding of the sports leagues, but I find it highly unlikely that Senator Hatch of all people would suddenly decide now is a great time to pass federal legislation. If there was a sports betting market for this type of thing, I’d bet money that this is all about those sweet, sweet integrity fees.