Golden State Warriors head coach Steve Kerr opened a game-day press conference earlier this week by broaching a topic that’s traditionally been taboo in North American pro sports.
“I’m taking the Warriors plus one and a half,” a smiling Kerr said, referencing the point spread on that night’s game against the Houston Rockets. “I just read a whole story about gambling this morning. I guess now I’m allowed to announce my picks. Oh, and stay away from the Celtics.”
Kerr’s lighthearted comments came hours after the United States Supreme Court issued a decision that could potentially make sports gambling legal in all 50 states.
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Previously, Nevada was the only state where a person could legally wager on the results of a single game. Monday’s court decision doesn’t mean a betting frenzy will begin immediately, but each state is now free to decide whether it wants to allow sports betting. More than 20 states are already openly considering it, with New Jersey expected to be the first to make it official.
It’s estimated that hundreds of billions of dollars are bet on sports every year by American gamblers — the vast majority of it illegally. Now, with the sports gambling landscape set to change drastically over the next few years, leagues, owners and players all want a slice of this lucrative pie.
“I think everyone who owns a top-four professional sports team just basically saw the value of their team double,” Mark Cuban, the owner of the NBA’s Dallas Mavericks told CNBC.
The 1 per cent
Cuban may be getting ahead of himself, but legalized gambling could open several new revenue streams.
One of the immediate benefits could be expanded sponsorship opportunities. In the very competitive European betting industry, some of the biggest bookmakers are estimated to spend about a quarter of their revenue on advertising. In the case of a global giant like bet365, that can mean an annual advertising budget of hundreds of millions of dollars — that’s for a single company. Here in North America, sports leagues are already doing business with so-called “daily fantasy sports” companies like DraftKings and FanDuel, which are popular with younger fans.
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“Leagues have found partnerships with sites like DraftKings and FanDuel to be quite financially lucrative and it has increased engagement among viewers,” says Daniel Wallach, a Florida-based attorney who specializes in sports gambling law. “I think the NFL in particular may view legal sports betting across the U.S as a something that can turn the tide and increase fan engagement as well as viewership.”
But the leagues and their players will surely be looking for more. In the months leading up to the Supreme Court decision, executives from the NBA and Major League Baseball pitched the idea of a 1 per cent “integrity fee” to various state legislatures. Essentially a tax on sports betting, the integrity fee as proposed by the NBA and MLB would see the leagues take a one per cent cut from bookmakers on all the wagers associated with their respective games. The money would ostensibly go toward defraying the cost of monitoring betting activity for suspicious activity like match-fixing.
Leagues are arguing that sports bettors would have nothing to wager on if not for their product – and they should be compensated for providing it.(Leon Neal/AFP/Getty Images)
Daniel Wallach says other jurisdictions with legalized sports betting, like the United Kingdom, France and Australia, have integrity fees in place.
“The NBA has looked at the [England-based soccer] Premiership and seen how it has been able to maintain the integrity of its games through third-party bet-monitoring technologies,” says Wallach.
“Leagues will have to expend resources monitoring the betting in the U.S., things like line movements. Protecting the integrity of their games will of course come at a cost. Staffing league offices with former regulators and experts to help guide them in that process… this is not going to be an inexpensive undertaking.”
The NBA, NHL and Major League Soccer currently pay Sportradar, a European gambling services company, to oversee the integrity of their games. Sportradar monitors more than 550 international sports books and flags any betting irregularities.
“We can monitor in real time what bookmakers around the globe, including grey and black markets, are offering and look into the data in a deeper way,” says Sportradar executive Laila Mintas. “If an irregularity occurs, the system is able to send out an alert. For example, if odds are developing in a way other than we predicted, we can suspend betting. We also inform the leagues.”
Sportradar is also the official data supplier for the NHL, NBA and NFL. There has been talk of compelling sports books to purchase official league data as part of a legalized betting landscape — another potential revenue stream for the leagues.
And if the idea of an integrity fee doesn’t fly — a one per cent cut of all bets made could be worth hundreds of millions annually to the more popular leagues, far outstripping the cost of monitoring betting activity — the leagues may try to recast it simply as a royalty they’re entitled to.
“From the NBA’s standpoint, we will spend this year roughly $7.5 billion [US] creating this content, creating these games,” NBA commissioner Adam Silver said earlier this year. “This notion that, as the intellectual property creators, that we should receive a one per cent fee seems very fair to me.”
Wallach says the leagues’ basic argument is that, without their games, there would be nothing to wager on.
“Nobody wants to give away their content for free,” he says. “The leagues have invested billions of dollars creating a unique entertainment product that can’t be replicated anywhere else in the United States and they want to be compensated for what they’ve created.
“There is nothing unconventional about this except it hasn’t been done in Nevada, so the leagues will start from square one in all of these different states.”
Wallach says that, in the early days after the Supreme Court’s landmark decision, there are still many more questions than answers. But the topic is being normalized (NBA coaches are talking about it) and a multi-billion dollar industry is being pushed out from the shadows into the light of day.
And with all this money at stake, the leagues will be sure to be at the front of the line asking for their piece of the pie.