Sports leagues can’t count on gambling for revenue

Any NFL coach will tell you defense wins championships.

The gaming industry seemingly agrees, having found a way to defend itself from sharing revenue generated by the expansion of sports wagering.

Whether it’s called an “integrity fee,” a “royalty,” “official data” or, now, a “processing fee,” the industry has managed to block professional sports leagues’ attempts to gain a share of revenue generated by gaming at a time when the industry is rapidly expanding outside Nevada.

The Supreme Court’s 6-3 ruling on May 14, 2018, in Murphy v. National Collegiate Athletic Association determined that the 1992 Professional and Amateur Sports Protection Act was unconstitutional. In essence, that meant states across the nation could join Nevada in allowing sports wagering.

Immediately after the decision was announced, several state legislatures went to work adopting sports betting regulations. This month Iowa became the 11th state to offer legalized sports wagering.

The leagues lobbied for a cut of the action — and failed.

Minimal revenue available

While gaming revenue is expected to add some money to leagues and teams, it isn’t likely to be enough to move the needle when it comes to drafting new collective bargaining agreements that could prevent work stoppages for the NFL after the 2020 season and the NHL after the 202122 campaign.

Teams saw gaming revenue as a potential financial savior, but they failed to understand the tight margins with which sportsbooks operate. Leagues expected they would be able to tap a pool of billions of dollars, apparently not realizing most of that money is generated as handle — the amount bet by gamblers — and most is returned to winning bettors, with small-percentage cuts going to taxes and the sportsbook itself.

Former Nevada Gaming Control Board Chairwoman Becky Harris, now an academic fellow with an emphasis on the study of sports wagering at UNLV’S International Center for Gaming Regulation, has written extensively on teams and leagues attempting to capitalize on sports gaming’s expansion. She explained the disconnect on the revenue and expenses of a typical sportsbook.

In a paper explaining sportsbook finances, Harris wrote, “Operating on thin margins (5 percent or less), navigating volatile revenues (the unpredictability of game outcomes) and a constant need to be competitive, race books and sports pools have almost as much on the line as the bettors do.”

Volatile revenue stream

As an example, Harris prepared a series of charts showing Super Bowl handle, how much bettors