Betting notes: DeLeo wants floor vote on sports bill
Should you be able to bet on Brad Marchand licking an opponent?
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THERE ARE SCORES of variables for lawmakers to consider as they put together a regulatory scheme to legalize sports betting, but Speaker Robert DeLeo has already made up his mind on one important aspect of the pending legislation: there should be a bill brought to the House floor.
The speaker telegraphed his hope for a big standalone bill by keeping sports-betting language out of the House budget and a spokeswoman this week confirmed that his goal is to bring a bill to the floor for debate this session. That bill could open up a whole new way to gamble and a new revenue stream for the state. To see it become law, DeLeo will need cooperation from Senate President Karen Spilka, who has said little about where she stands.
Rep. Ann-Margaret Ferrante, the House chair of the Committee on Economic Development and Emerging Technologies, said that if the committee can find a way to surmount the often interlocking issues presented over two days of hearings on the topic, it will advance a bill.
“It’s something that we’re very open-minded about,” Ferrante said during a break in testimony on Tuesday. “If we can figure out how best to resolve those issues, and if we can resolve them in a way that makes sense, then we’ll see a bill.”
“To a certain extent I think this is a foregone conclusion,” said Mark Gottlieb, executive director of the Public Health Advocacy Institute at Northeastern University, after his committee testimony. “My concern is really that we try to mitigate the public health impact as much as possible.”
Sen. Eric Lesser, the co-chair of the committee, said he is still making up his mind about whether the state should allow sports betting and, if it does, how it should be done.
“We have basically two decisions to make. The first and the threshold decision is whether we want sports betting in Massachusetts legal. That’s a threshold question that has to be answered and has not yet been answered,” Lesser said after the hearing. “The second question is if we do decide that this is something we want to move forward with legalizing, what does it look like? How do we regulate it?”
Recent history
Long the exclusive domain of Nevada, legalized sports betting has spread to other states since New Jersey won a split decision by the US Supreme Court in May 2018. Since the ruling, about a half-dozen other states, including Rhode Island, have legalized betting on sports, according to ESPN.
With four major sports teams, an avid fan base, and a recent receptivity toward legal gambling, Massachusetts presents a potentially lucrative market for sports betting purveyors.
The ascent of DeLeo to the speakership more than a decade ago paved the way for the Bay State’s 2011 casino law. A heated debate surrounded that law as many voiced concern about societal impacts of casinos, including the financial duress that stems from gambling addiction. Voters helped settle those concerns and cement casino gambling’s place within the state when in 2014, by a 60-40 margin, they defeated a ballot question seeking to outlaw the as-yet unopened casinos. When Boston-based DraftKings rolled out an online platform for wagering on individual players through daily fantasy sports, Attorney General Maura Healey, who had supported outlawing casinos, sanctioned the novel form of gambling, which was then codified by lawmakers. A former professional basketball player, Healey has not taken a stand on the sports betting proposals.
Stakes
There is less money at stake for the state with sports betting than with casinos, and the ramifications extend beyond the craps tables and slot machines to some of the area’s most treasured institutions – its sports teams and players. A study conducted by Oxford Economics for the American Gaming Association estimated that Massachusetts could expect between $8.6 million and $61.3 million a year from legalized sports betting depending on the tax rate and the availability. By contrast, the state budget anticipates $249 million in gaming revenue in fiscal 2020 without any sports betting receipts. Gov. Charlie Baker has proposed a bill legalizing two forms of sports gambling – online taxed at 12.5 percent, and in-person casino wagering taxed at 10 percent. The annual tax haul from that proposal is projected at $35 million.
Amateur and college
One of the goals of Baker’s bill, according to Housing and Economic Development Secretary Mike Kennealy, is to move sports betting from the black market – often operated by Illegal, unregulated, offshore outfits – to a more secure market that state authorities would have more control over. But even though the NCAA basketball tournament is one of the biggest betting events, the governor’s bill would continue to prohibit wagering on collegiate or amateur sports, which Kennealy said is consistent with how Healey handled daily fantasy sports.
“We’re trying to take a prudent approach that’s still going to realize meaningful revenue. We feel like limiting it to professional-only sports is the way to go,” Kennealy said after his committee testimony. “I’ll give you one reason. There’s an age limit of 21 on placing a wager. You have college athletes that are under the age of 21. A little bit of a mismatch there.”
Even though they are huge draws for fans, NCAA athletes are unpaid, which could make them more susceptible to corruption through game-fixing.
Gayle Cameron, a member of the Gaming Commission, which would be tasked with regulating sports betting under the governor’s proposal, disagreed with excluding college sports from the legal betting market.
“Law enforcement professionals will tell you that you just keep the black market alive and well by not allowing college betting,” Cameron said. “I also believe that you have a better chance to protect college athletes by bringing some sunshine.”
In-game bets
Beyond what types of contests could be gambled on, lawmakers could also consider limits on what types of bets would be allowed, and whether they could include in-game (sometimes called prop) bets that hinge on a single variable not necessarily tied to the final score.
Real-time technology enables gamblers to bet on whether a basketball player hits the next free throw or whether an upcoming pitch crosses the plate, but both the players’ associations and the sports leagues have concerns about that type of wagering.
Mike Ouellet, counsel to the NHL Players Association, said certain prop bets should be banned, and he used a notorious Bruin to illustrate his point.
“A bet about whether Brad Marchand’s going to lick somebody in the third period should be off sides for more reasons than one,” Ouellet told lawmakers.
In addition to posing health and safety concerns, some in-game prop bets could be more conducive to corruption, Bryan Seeley, deputy general counsel for Major League Baseball told the lawmakers.
“Bets on the outcome of a single, controllable act – a bet on who commits the first foul in a basketball game or if the first pitch of an inning is a ball or a strike – are more susceptible to outside influence,” Seeley said.
But MGM Springfield CEO Michael Mathis, who hopes to offer sports betting in Massachusetts, said any limits on the types of wagers would just cede ground to the illegal operations.
“Anything that is a constraint on the free market is just going to create a situation where we’re not as competitive as the off-shore sports betting sites,” Mathis said after his testimony.
Online versus brick and mortar
Gottlieb, the Northeastern public health advocate who worries about the ill effects of more gambling, said lawmakers should restrict sports betting to physical locations, calling legalized online betting the “most pernicious element” of the sports betting bills before the committee. Gottlieb also favors a ban on credit card payments by sports gamblers.
But DraftKings, which was the first mobile sports betting operator in New Jersey, where mobile wagering accounts for 80 percent of the market, wants to be on the same regulatory footing as brick and mortar facilities like casinos.
“To fully realize the potential for mobile sports wagering, the legislation should allow mobile operators to receive licenses directly from the regulator rather than requiring partnership with land-based facilities, like casinos or racetracks,” said DraftKings CEO Jason Robins.
Mathis said that lawmakers should ensure that online gambling operators have a physical footprint or other assets in the state, saying major assets in-state represent the “ultimate enforcement tool.”
Lottery
Treasurer Deborah Goldberg, who has fruitlessly pushed to put State Lottery products online for years, said that she doesn’t have a position one way or the other on whether the state should legalize sports betting, but if it does, the Lottery must be given authority to make sales online or else it will end up in financial trouble.
Goldberg also said she “would not be opposed” to offering sports bets through the Lottery, which is how Rhode Island introduced sports betting. But the Ocean State’s lottery’s sports betting operation has been a mixed bag so far. The state lost money on the New England Patriot’s Super Bowl win, and it has underperformed on revenue projections.
Multistate organizations such as MGM have the ability to spread risk across different properties, and DraftKings, which also lost money on the Super Bowl, can make use of bet-hedging facilities for sports books if needed, Robins said.
What to tax
Throughout the two-day hearing, Lesser and other members of the committee kept coming back to questions over whether the state should tax gambling operators’ revenues minus winnings – as the governor proposed and as has been enacted in other states – or whether it should impose a tax on the handle, which is all of the money wagered.
DraftKings and MGM both said they would prefer being taxed on the revenue. Mathis said taxes on the handle could mean that MGM owes taxes on what was a losing bet for the gambling operation.
Part of the appeal to Lesser on taxing the handle is that it would keep the state totally disinterested in the outcome of games. Bay State gambling outfits would presumably receive lots of bets on home-town teams, which means the state would not collect on home team wins under the model where the revenue is taxed.
Because the handle is a much larger figure than the revenue, Lesser concedes that the tax rate would need to be smaller than a similar tax on revenue.
Integrity fees
Sports leagues have tried – so far unsuccessfully – to convince states to impose a 0.25 percent tax on the handle, which they call integrity fees and which would then be paid to those leagues “as consideration for the leagues’ investment to create a compelling product, the risk to reputation and integrity that accompanies sports betting, and the increased expenses the leagues will incur to rigorously protect and police integrity,” as Seeley of Major League Baseball put it. The NBA Players Association supports this approach and would share in that revenue stream, according to Dave Foster, deputy general counsel to the association.
Bills filed by Rep. Dan Cullinane and Sen. Michael Rush include provisions for collecting and remitting to the leagues that tax on sports wagers.
“I can’t think of another place in our economy where one industry is able to profit to the tune of hundreds of millions of dollars on someone else’s product and pay them nothing, and put increased risk and cost on that, and that’s what sports betting is,” said Seeley. “They take our product; they create massive increased risk to us in the hundreds of millions of dollars; they create increased costs; and they pay us nothing. So we think it makes sense that a small percentage of casino revenue be paid to us.”
Data
One key piece of leverage that sports leagues hold over the betting operations that profit off of them is control over the official data.
Alex Roth, associate counsel for the NBA, said major sports betting operations will make use of official league data, which she called the “life-blood of sports betting.”
At DraftKings, Robins said, the company uses an “amalgamation” of data from different sources.
Roth said regulators could ensure that league data is priced at “commercially reasonable terms” but declined to give even a rough idea of what those prices are.
“We’re not discussing it in an open hearing,” Roth said.
Conflicts of interest
During the testimony Wednesday of top officials at the company that owns TD Garden – where the Celtics and Bruins play – lawmakers honed in on the potential for conflicts of interest where one person has a stake in a team and a gambling outfit.
Bruins owner Jeremy Jacobs is the chairman of the board of Delaware North, which owns the Garden, and chairman of the NHL Board of Governors. Delaware North representatives said they are interested in offering online sports wagering products.
“I’m seeing a conflict of interest,” said Rep. Ken Gordon, vice chairman of the committee and a former sports writer.
“We don’t think that Jeremy Jacobs should be able to bet on the Bruins. We do think, however, that arenas should have the ability to have a platform – whether that be something that’s operated therein or a third-party provider – have that ability to engage with their customers,” said McNeil, who said MGM owns an arena in Las Vegas as well as a WNBA team.
“I don’t see the guarantees. I don’t see the safeguards,” Gordon responded after Delaware North officials sought to downplay his concerns.
State House News Service reported that hours after the hearing ended on Wednesday afternoon, TD Garden President Amy Latimer said, “We do not want to operate the sports book, but we do want to partner with a mobile operator that will enhance the fan experience.”
Opposition
Les Bernal, the national director of Stop Predatory Gambling and the former chief of staff to casino opponent and former state senator Sue Tucker, provided the most outspoken opposition to legalization.
Legalized sports betting normalizes gambling and changes the way children view sports, Bernal told the committee, warning that bets would be made not just on traditional sports, but also on video games and television shows.
“This is a form of financial fraud that rips people off. You are designed to lose your money on these games whether it’s state lotteries, whether it’s casinos, and now potentially online sports gambling,” Bernal said after his testimony. “These games are rigged against you.”
