Retroactive Integrity Fee Sales Pitch From Leagues Makes For Entertaining Political Theater

Juan Carlos Blanco April 30, 2018 775 Reads
Integrity Fee

It’s no secret the NBA and MLB have been doing some heavy lobbying around the country on the sports betting front in recent months. With the forthcoming decision in Murphy vs. NCAA likely to at least partly go against them, the leagues are scrambling to figure out how they’ll get compensated from the very activity they’ve publicly railed against for decades.

They’ve made headway pitching integrity and data licensing fees in areas still considering legislation. But where things get interesting is in the handful of states where bills have already passed without either of the leagues’ two pet provisions.

Handful of states have beat leagues to the punch

Each of those jurisdictions has its own set of circumstances.

For example, the leagues may have a malleable situation in West Virginia, where integrity fee-less sports betting legislation went into law March 9. Governor Jim Justice allowed the bill to become law by procedural means — as opposed to with his signature — and immediately began laying the groundwork for compromising with the leagues on their requests (demands?) in a press release shortly thereafter.

Unsurprisingly, the leagues are now slated to meet with representatives of the states’ five casinos (and potential sportsbook licensees) and angle for modifications to the new law that would include their desired stipulations.

They predictably received a much frostier welcome when attempting to do the same in New Jersey. Garden State representatives basically told the leagues to take a flying leap, by all accounts. The fact the leagues have already cost the state $8,6 million in legal bills over the last six years while fighting them tooth and nail played a large role in that.

Meanwhile, Pennsylvania and Mississippi both saw sports betting legislation pass in 2017 as well, as part of larger gaming bills. Neither has yet given any indication that they’d be willing to bend to the NBA and MLB’s demands, either.

Appeal to a higher power?

The quartet of potential outliers begs the question – how do the leagues deal with these jurisdictions if PASPA is fully struck down at some point over the next two months by the SCOTUS?

In the short term, they really don’t have any say in the matter, unless the states suddenly get into an acquiescing mood. For the moment, that possibility seems to range from virtually impossible (New Jersey) to relatively conceivable (West Virginia). At a minimum, it appears the leagues would be shut out of any sports betting revenue in at least a couple of those states for the foreseeable future.

Their best hope for countering these “rogue” elements may ultimately lie at the federal level.

That’s because Congressional intervention is the next logical and seemingly inevitable domino to fall if PASPA is fully repealed. The eradication of one federal law very likely begets a new one in this case. In fact, a model for one has been floating around for several months – Representative Frank Pallone’s GAME (Gaming Accountability and Modernization Enhancement) Act.

Pallone, who hails from New Jersey (where else?), introduced his first piece of sports betting-related legislation way back in 2015. However, the GAME Act in its most updated iteration was put forth in December, shortly after oral arguments in Murphy vs. NCAA. The proposed legislation repeals PASPA as one of its provisions, which would be a moot point if it’s already taken care of by the SCOTUS. It also decriminalizes sports betting under federal law for anyone offering it at a state level in accordance with that jurisdiction’s regulations.

What the text of the bill doesn’t include – yet – is any mention of a uniform rate of compensation to the sports leagues.

Post-Murphy vs. NCAA lobbying/legal battles looming?

That’s not surprising, considering the integrity fee didn’t make its first appearance in a piece of sports betting legislation until approximately a month after Pallone introduced the GAME Act. However, like any bill, the GAME Act naturally remains open to modifications and amendments. Therefore, a future push for inclusion of integrity and data licensing fees as a standard component of a federal legalized sports betting framework would appear to be a virtual certainty.

Subsequent pushback will be just as likely and could make for an interesting heavyweight battle on the lobbying front.

For example, in one corner, Sheldon Adelson, founder and CEO of the Sands Corporation and mega-Republican Party donor. He’d certainly figure to be a major opponent of any federally mandated fees if those were to be extended to the Nevada establishments that have never been required to pay them. In the other, the equally powerful pro sports leagues, which would undoubtedly make for a formidable foil.

And incidentally, granting Nevada-based sportsbooks an exemption under a grandfather clause doesn’t shape up as a tenable compromise by any stretch. Rather, it seems like a surefire recipe for a new round of court battles.

The one principal takeaway is the leagues’ whiplash-inducing flip on its sports betting position – from staunch opponent to supporter under circumstances favorable to their bottom line – is leading to some intriguing scenarios in the handful of states that were proactive enough to beat them to the punch with legislation.