The NFL and American Gaming Association (AGA) both had the opportunity to present their views on the future of sports betting regulation in the United States in front of a House subcommittee on Thursday.
While both organizations presented some ideas in which it should be easy to find common ground, but both sides also have some points of contention that are fundamentally incompatible. Thursday’s hearing set the stage for what may become a prolonged debate over the future of sports betting regulation in the United States.
NFL Presents Its Views to Congress
The NFL stands to make a lot of money with legal sports betting in the United States and has taken actions to assure the league gets a piece of the pie as well. Two of its strategies to capture some of the money that will be flowing as additional states legalize sports betting have been to demand integrity fees and the use of official league data by sports betting operators.
With the NFL having little success convincing state legislatures to grant it compulsory integrity fees paid by betting operators and government-mandated monopolies over data rights, the league is now pinning its hopes on Congress passing federal legislation that more closely aligns with its goals.
Jocelyn Moore, NFL executive vice president for communications and public affairs, spoke before the House subcommittee on Thursday and laid out a list of priorities for the league should federal legislation governing sports betting be enacted by Congress.
“We are asking for core standards to protect the integrity of our games,” she said during the hearing Thursday.
“We are very concerned leagues and states alone cannot fully guard against the harms Congress has long associated with sports betting,” she added at one point during the hearing.
Moore also submitted written testimony ahead of the hearing that details the NFL’s wishes and explains its justifications for those demands.
Interestingly, the NFL seems to have dropped its demands for integrity fees. That idea has proven wildly unpopular at the state level and the NFL may have decided to back off on forcing operators to give the leagues a portion of their betting handle.
However, the NFL does still have a list of other demands. The majority of the demands are fairly tame and have already been addressed by legislation introduced at the state level in states that have legalized sports betting.
Those demands include:
- Establish key criteria for state regulatory entities
- Establish a minimum age of 21 for sports betting
- Require the use of official league data
- Give leagues the power to prohibit in-play betting
- Prohibit insider and “high-risk” sports betting
- Provide responsible gambling resources for players
- Require operators to be licensed and undergo audits
- Facilitate data sharing between leagues, regulators and law enforcement to detect and combat corruption
- Establish federal laws to combat money laundering, tax evasion, corruption and unlicensed operators
The two items on that list with the most potential to cause controversy are the request that sports betting operators rely exclusively on league data and that leagues be given the authority to prohibit in-play wagers on their games.
NFL Wants Official Data Clause in Federal Sports Betting Regulation
The NFL wants any sports betting bill passed by Congress to require the use of official league data for sportsbooks to use in settling bets. The story behind this demand has to do with in-play wagering, which has proven extremely popular in regulated European sports betting markets.
Accurate, timely data takes on greater importance when it comes to in-play wagers such as the outcome of the next drive in an NFL game, the distance of Tiger Woods’ next tee-off and so on. Data is not as important for standard bets on who will win a game, for example, because that information is publicly available and isn’t nearly as time-sensitive for settling wagers.
In regulated European markets, specialized data companies have formed to provide sports betting operators with timely data in order to manage short-term betting markets. Those data providers derive significant income by tracking all manner of statistics and providing them to the bookmakers who take wagers on those in-game events.
The NFL seeks exclusive data rights to provide that information to regulated sportsbooks in the United States. In other words, the NFL does not want the private market to determine how betting operators get their data; the NFL wants to be the sole provider of that data.
The NFL statement submitted yesterday ahead of the hearing justified the need for exclusive data rights as follows (paragraph breaks mine):
“Requiring the use of official league data is necessary to protect consumers and to ensure integrity in a legal, regulated sports betting marketplace. Betting outcomes are increasingly determined on granular details like yardage gained, or the number of sacks by a defense, or strikes by a pitcher in baseball.
“Therefore, an essential component of consumer protection is a requirement that the information used to settle these wagers is correct and timely, something that can only come from official data provided by the sports leagues themselves.
“Sports leagues already produce this data for broadcast and statistical purposes. Our data should be the standard in a legal, regulated market. For these reasons, requiring the use of official league data is vital to establishing and maintaining marketplace integrity, which is in the public interest.”
The NFL’s statement further explains that official data would protect against “ghost games,” which are games that never take place. Ghost games are a phenomenon that occur when corrupt officials or scouts just make up data out of thin air and submit it to bookmakers, which in turn allows bettors who are in on the con to make guaranteed-win bets. Legal Sports Report has a nice write-up and explanation of the ghost games concern here.
One thing the NFL’s statement does not mention is that being the official data provider for US sports betting would be highly profitable for the league. Of course, the NFL would not provide all that data for free.
With the NFL apparently giving up on its widely-criticized bid for integrity fees, it seems data has become the league’s fallback option for earning an easy, guaranteed profit free of all those pesky things like competition and free markets.
NFL Wants Leagues to Have the Authority to Prohibit In-Play Betting
If Congress passes a federal sports betting bill, the NFL wants the legislation to give sports leagues the ability to prohibit licensed sportsbooks from taking in-play wagers. The justification for this demand is that in-play wagers that depend on just one player or official (such as the outcomes of free throws in an NBA game or how many flags a ref will throw) are susceptible to manipulation.
From the NFL’s written testimony (paragraph breaks mine):
“To address concerns regarding risky betting fixtures, we encourage Congress to allow professional and amateur sports organizations to identify which types of bets simply pose too significant a risk to the integrity of sports and to work with regulators not to authorize them.
“Specifically, professional and amateur sports organizations should be able to restrict, limit, or exclude wagers that are not determined solely by the final score or outcome of the event, if the sports organization reasonably determines that such restriction would significantly decrease the risk to contest integrity.
“Examples of such wagers would include those based on performances of a single athlete or the actions of match officials and referees.”
Given the popularity of in-play betting in overseas markets, this will not be a popular demand among the country’s sports betting operators.
AGA Opposes Federal Regulation and Lays Out Its Own Priorities
In written testimony submitted to the subcommittee Thursday, AGA Senior Vice President Sarah Slane outlined the AGA’s views on regulation and provided an argument against Congressional involvement.
Her testimony begins with a quick education on the economics of sports betting, in which it is explained that legal sportsbooks tend to pay back about 95% of all wagers made. This means that, on average, sportsbooks keep about $0.05 out of every dollar wagered.
From that remaining five cents, sportsbooks must pay state and federal taxes, employee salaries, property taxes, software suppliers and so on. In the end, sports betting is a low-margin business.
Slane’s testimony then explains that illegal, offshore betting sites do not have to deal with as much overhead, regulatory compliance or taxes and therefore have a competitive advantage in terms of pricing the odds and courting potential customers.
It is in that context, Slane’s testimony explains, that lawmakers and regulators must work to ensure legal sportsbooks can be competitive and capable of channeling customers away from offshore sportsbooks to legal options at home.
From there, the testimony goes on to lay out the AGA’s priorities for regulating the legal sports betting industry. Many of the points are in line with the NFL’s views, but there are also two major points of divergence. Here’s a quick rundown of the AGA’s demands for regulation in the United States:
- Promote responsible gaming and advertising
- Protect the integrity of sports
- Discourage enacting legislative preferences for specific business interests
- Empower state and tribal regulation
- Place consumers first
The AGA’s desires to promote responsible gaming and advertising, protect the integrity of sports and to place consumers first are all ideas the AGA, NFL, regulators and other stakeholders can probably find points of common interest and work out compromises when it comes to hammering out the details.
Where the AGA and NFL views clash are in discouraging legislative preferences for specific business interests and empowering state and tribal regulation.
Those two points bring the AGA in direct conflict with the NFL and will be the biggest sticking points in ongoing discussions.
AGA Opposes Legislative Preferences for Specific Business Interests
The AGA “vigorously opposes efforts to use federal or state legislation to establish commercial terms that are routinely left to private business contracts.” On this point, the AGA is referring to granting the leagues the exclusive right to sell data to sports betting operators for the purposes of settling wagers and to allow the leagues to prohibit in-play betting.
The testimony argues this point by explaining that sports data is vital to betting operators wishing to offer accurate and timely in-play betting markets. As such, sportsbooks will “seek out the services that are the best for them.”
The AGA explained in its testimony that a market for sports data already exists and that operators already contract with data providers in other regions. Furthermore, forcing operators to only purchase data services from the leagues would allow the leagues “to set inflated, non-competitive monopoly prices for their services.”
As far as allowing the leagues to restrict certain types of wagers, the AGA believes this is a “counterproductive and unnecessary” proposal. Sportsbooks already have financial and economic incentives to avoid taking wagers that pose a significant risk of corruption. Additionally, the AGA believes such restrictions would give an advantage to offshore sports betting sites that do not operate under US regulations.
AGA Supports State and Tribal Regulation over Federal Regulation
The AGA opposes federal regulation and believes that states and tribal groups have a proven track record of successful regulation. With 48 states already having some form of gaming or lottery in place, regulators already have decades’ worth of experience in regulating gaming.
Additionally, the AGA recognizes that state and tribal regulations already have controls in place to support responsible gaming, prevent underage gambling, ensuring financial suitability of operators and more. To bring the federal government in the mix is unnecessary in light of that experience and proven capability.
Some in Congress Indicated They Are Ready to Act
ESPN published a recap of the hearing Thursday and noted that the NFL does have some sympathetic ears in Congress. Present at the hearing were Representatives Jim Sensenbrenner and Bob Goodlatte. Both indicated they are ready to act on federal sports betting regulation.
As ESPN reported, Rep. Sensenbrenner said at the conclusion of the hearing, “I think the one thing you all can agree on is for Congress to do nothing is the worst possible alternative. So this means we have some work to do.”
Representative Goodlatte seemed to echo that sentiment when he said the issue is “ripe for consideration.”
Representatives Sensenbrenner and Goodlatte are not the only members of Congress to have expressed support for federal sports betting regulation. Since May’s Supreme Court ruling, Senators Orrin Hatch and Chuck Schumer have also said they believe it is time for Congress to act.
Sara Slane of the AGA was also in attendance and spoke out against the need for federal regulation. In her testimony, she pointed to the fact that state and tribal regulators have successfully regulated gambling for decades without federal involvement.
“The bottom line is, with such robust and rigorous regulatory oversight at both the state and federal levels, there is no need to overcomplicate or interfere with a system that is already working,” she said in front of the committee.
Becky Harris, chairwoman of the Nevada Gaming Control Board, testified to that effect as well. She told the committee that her state has “been in this business for decades and not had any problems. What we have here is a regulatory process specifically to monitor what happens on both sites of the counter. This is all we do, and we’re good at it.”