Potential pitfalls be damned, major sports leagues will cash in big time
Imagine in a not too distant future this scene: Yankee slugger Aaron Judge strolls to the plate in a crucial spot during a game and works a 1-2 count. Sports fans and casual observers all around the country scramble to place an instantaneous bet on whether or not Judge will slug a home run on the next pitch. Regardless of the outcome of the at-bat, and whether cheers or groans erupt with a batter’s swing of the bat, the other sound that will be reverberating through sports circles in those moments will be professional teams’ cash registers ringing up a whole lot of green.
“Worst-case scenario, let’s say Major League Baseball gets a one percent cut in every state, that’s still hundreds of billions of dollars,” says one baseball insider.
The recent Supreme Court ruling which lifts the federal ban on legal sports betting in states elicited a cascade of reaction from all corners of competitive sports, and pro sports leagues weighing in on the decision were quick to underscore the importance of protecting the “integrity” of games going forward. But in the brave new world that awaits, those same sports leagues will be salivating over the possibility to cash in big-time on the very concept of integrity — as in “integrity fees.” “The position of leagues like Major League Baseball and the NBA is that if people are going to be betting on their product, they should receive a percentage of the revenue,” says prominent Pittsburgh sports attorney Jay Reisinger. “That way, the leagues can fund an investigative group to maintain the integrity.” Integrity fees will be one of many complicated layers in the landscape of legal sports betting. The Supreme Court has paved the way for state legislators to determine what the laws on sports wagering will be, and how the practice should be regulated. But those same lawmakers might not feel the revenue their states generate through legal sports gambling is money to be shared with sports leagues. “I don’t think states are obligated to pay integrity fees,” says Reisinger.
Apart from the legal wrangling over how money from sports wagering will be allocated and to whom, there is the broader challenge of keeping sports clean from the types of gambling scandals that have occurred in the past — from the 1919 Black Sox to the Boston College basketball point-shaving scandal in the late 1970s to baseball hit king Pete Rose’s lifetime ban handed down in 1989 after Charlie Hustle was found to have bet on baseball games, including ones involving the Reds when Rose was manager.
Marc Ganis, the president of Chicago-based Sportscorp, Ltd., a sports marketing firm, says a Pandora’s Box has potentially been opened with the Supreme Court ruling.
“As legalized sports gaming expands, there will be meaningful additional costs imposed on sports leagues to ensure the integrity of coaches, players, referees. There must be protection against the reality or the perception that coaches or players or others could alter the outcomes of games,” says Ganis.
“That is the dark side of legalized sports gaming. People may have to give up privacy rights to ensure that greater integrity. It will include scrutiny of the extended groups around a player, who the player associates with. More law enforcement could be involved to ensure that integrity.”
Fay Vincent, the former baseball commissioner who presided over America’s pastime in the aftermath of Rose receiving the lifetime ban for gambling on baseball, asks if there will be a special post created to prevent malfeasance from taking root in sports.
“Is there going to be a commissioner of gambling?” asks Vincent, 79. “How are we going to deal with a totally blank sheet?”
The estimates of the business of sports betting range from $150 billion to $400 billion, and there is little doubt that sports leagues would want a cut of that pie in states that will allow sports wagering. Reisinger says legal sports betting will “generate more interest (in sports),” and that television revenue will increase as a result, since even casual sports fans will have a reason to watch two basement-dwelling teams playing each other.
“They will watch if they have bet money on it,” says Reisinger.
And while Reisinger thinks MLB and other leagues are smart to seek integrity fees, he thinks the professional sports unions would be wise to seek a cut of that revenue too. A product like a professional sporting event doesn’t go off without players participating.
“I think the Players Association (for MLB) ought to be proactive in seeking a cut,” says Reisinger. “I think (wagering) will increase the value of each franchise. You’ve got money flowing from a number of different places — increased TV viewership which will lead to increased TV revenue. There will be sponsorship deals with casinos and other gambling outlets.”
Sports unions are not the only entities that will by vying for revenue generated from sports bets placed in states across the country.
“The government will want a cut,” says Ganis. “There will be more taxation. There will be regulatory activities by states.”
The people who most stand to lose, Vincent says, are the people who don’t have the financial means to bet, yet gamble away their life savings anyway. Vincent recalls how his baseball commissioner predecessor, the late Bart Giamatti, used to call sports gambling “the most innovative form of taxation of poor people ever invented.”
“Think about it,” says Vincent. “People line up to bet on sports events. That’s getting money from people who can’t afford to pay taxes by not calling it a tax. You call it gambling. Nobody with a real brain is going to be engaged in heavy gambling because you’re going to lose.”
But if sports leagues can find a way to get a slice of the money pie, they will be fully engaged in collecting from a new source of revenue. Especially one that is generating revenue in the 10 figures neighborhood. “Even if Major League Baseball gets integrity fees from 10 states, that’s money that they didn’t have before,” says Reisinger.
Mark Cuban, the Mavericks owner, said during a CNBC interview last week that his sports owner peers saw the value of their teams “double, at least” in the wake of the Supreme Court decision.
“I think there is a bit of exuberance in that statement,” says Ganis. “There should be an increase in the value of teams as the leagues find ways to monetize the results of (the SCOTUS) ruling. There will be an increase, no doubt. It will just take some time to figure out how to oversee sports betting. But yes, I think sports team owners were quietly applauding the ruling.”