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How Legal Sports Betting Could Benefit the Pro Leagues

Last week, the United States Supreme Court finally handed down its long-awaited decision in Murphy v. National Collegiate Athletic Association (NCAA) (formerly Christie v. NCAA). The case, which has been winding its way through the federal courts since 2012, involved the state of New Jersey’s attempt to overturn the federal ban on single-game sports wagering outside of Nevada. In ruling that the federal law known as the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional under the 10th Amendment, the Supreme Court has paved the way for sports gambling to be legal around the United States.

So the big question facing professional sports leagues now is: What will be the impact of Murphy v. NCAA on their business?

First, any concern that the leagues have expressed (most recently NFL Commissioner Roger Goodell) that increased legal sports betting will have a negative impact on the integrity of their games and turn fans away from their sports over fears of fixed games is misguided. While professional sports leagues might not want to admit it, people are already legally betting on professional sports in Nevada, and there’s no known evidence that it has had an impact on the games.

According to the Nevada Gaming Control Board, in 2017, over $4.8 billion was wagered on sports with Nevada Sports Books. In addition, it has been estimated that over $150 billion is bet illegally each year on sports. The Supreme Court’s decision, therefore, should benefit professional sports leagues by taking the billions in sports betting out of the hands of organized crime that operates free from state regulation or league oversight and bring it out into the open so that it can be better monitored. Think about it this way: When bettors use illegal bookies, the leagues have no means to monitor which teams or games the money is being wagered on. As a result, if a game is being fixed by betters, it would be impossible for the leagues or the sports books to quickly identify which games may be fixed and which players they need to keep an eye on.

Second, with the Supreme Court’s decision coming so late in the Court’s calendar, most state legislatures around the country will already be on recess for the summer. Therefore, the leagues are in an ideal position to work with the individual state legislation when they return for the 2018-2019 session to develop new sports wagering laws.

In fact, even before the Supreme Court’s decision in Murphy v. NCAA, the NBA and MLB seemed to have read the tea leaves and started working with states in trying to negotiate a piece of the market for themselves. For example, NBA Commissioner Adam Silver has argued that in exchange for the NBA’s support on legalized gambling, he believes that the league should receive a 1% integrity fee for every bet made on its games. The leagues argue that they need this additional revenue to help pay for the additional monitoring and to ensure that their games remain scandal-free. However, since Nevada currently does not pay the leagues an integrity fee, most state legislatures have balked at the league’s request of fees. It should be noted that West Virginia and other states are actually debating the issue of fees, and if the leagues are able to convince lawmakers that they deserve such a fee, it could potentially generate hundreds of millions of dollars in additional revenue for their owners.

Interestingly, neither the NFL nor the NHL seems to have been prepared for the Supreme Court’s decision in Murphy v. NCAA. While after the decision both leagues have expressed an interest in the federal government stepping in and passing uniform federal legislation—something that the Supreme Court in Murphy made very clear that the federal government had the right to do—it is difficult to believe that the current Congress in an election year would want to take up any such legislation, especially since New Jersey and a handful of other states should have their own laws regulating sports gambling before the NFL season kicks off. That being said, it is doubtful that either league will stay on the sidelines for long, especially the NFL. More money is bet on NFL games every year than all of the other professional sports combined. It’s not that far off to assume that within a couple of years, your first stop after entering an NFL stadium is the betting window so that you can bet a few dollars on that day’s game.

 

Third, beside a potential integrity fee, professional sports should also expect to see increased revenue in other areas as well. For example, people who have bet money on games watch more games on television. If more people are watching, TV ratings increase and the networks are able to charge more money for ad rates. This additional money is then passed on to the leagues via increased broadcasting rights, which is the single most important revenue source for all of the leagues, especially with dwindling TV sports viewership in recent years. Besides TV revenue, the leagues should also see an influx of casino ad revenue.

Finally, there has always been a relationship between professional sports and gambling. While the leagues may not have wanted to openly embrace sports gambling, over the past 20 years, professional sports teams have willingly accepted money from state lotteries for the use of logos, accepted money for in-stadium casino signage, invested in Daily Fantasy Sports companies like FanDuel and DraftKings, played games in casinos, and have even allowed franchises to move to Las Vegas. Step by step, the leagues have gradually knocked down any taboos they once had about getting and keeping gambling out of their games. Therefore, at a time when television ratings and fan interest in attending live games seems to be sinking, the leagues should embrace sports gambling as a way to reengage their fans and help create a new fan experience.

John Wolohan is a professor of sports law at Syracuse University.