Paul's Blog Why Does the Other Line Always Move Faster?

The U.S. Supreme Court is considering whether to strike down the federal prohibition against sports-betting, clearing the way for individual states to legalize, regulate, and tax sports-betting.    Many of us thought the decision (expected in June ) would be somewhat straightforward, rescind PASPA prohibition or not, and are hoping that the U.S. Supreme Court would simply pass judgment that the authority to regulate and tax sports-betting should be left to the states. 

 Now it appears maybe not.  The professional sports leagues have been shifting their position in recent years, tacitly acknowledging the ineffectual folly of driving a $150 billion industry underground where it is not taxed and the guardians of integrity and consumer protection are by definition criminal enterprises.  Now that we may finally be getting close to a resolution that turns authority to regulate and tax the industry over to the states, NBA (National Basketball Association) is trying to throw a giant wrench into the dialogue.  It’s been three years since the commissioner of the NBA began voicing support for de-criminalizing sports-betting three years ago.  Now, three years later and for the first time, an attorney for the NBA testified in front of a New York State Senate committee to explain that the NBA thinks it should receive 1 percent of every bet made on its games in addition to other regulations in return for its support of removing the federal prohibition against sports-betting.  If Donald Trump hears about this, he’s going to want 10% of every bet on whether or not he’s going to be impeached.  If you are asking “Why the NBA's legalized sports betting proposal is preposterous”, you might read the article by that name or the one by the AGA (America Gaming Association) “NBA Proposal to Skim Money from American Taxpayers”.  It is unclear whether the NBA proposal could possibly end up playing a material role in the adjudication of the issue of sports-betting.  I can’t imagine how the U.S. Supreme Court could invite all interested parties to weigh in with their own particular profit-sharing proposals.  Makes no sense at all.  And if left up to the states, I can’t imagine why states would consider these proposals.  

 There are two other articles that have misguided theses.  One article justifies the NBA proposal by talking about the costs of ensuring security and integrity in sports but actually concludes with the observation “If sports gambling were legalized, and the NBA was able to make the 1 percent revenue that comes in from that, it could lead to massive changes in how the game is covered. The revenue increase alone would likely lead to another cap and salary jump for teams and players.”  In other words, the true effect of the 1% profit-share is to enrich already-rich players and teams.   A more logical allocation would be towards Good Causes supported by Lottery.

 Another article talks about why Canadians should be allowed to bet on U.S. football games, without referring to the regulatory structure that tasks each province with the authority to decide how games-of-chance (defined in Canada as any game that involves any degree of chance, regardless of the fact that skill may also be involved), should be regulated.   Gambling and Lottery generate out-sized profits.  Thoughtful consideration should be given to the regulatory model that serves the best interests of society by channeling maximum economic benefit to Good Causes and minimizing social costs.

 In the U.S. all betting, the legislature of each state has authority over whether and how games-of-chance should be regulated and taxed within the its own borders.  Many of us believe that the U.S. Supreme Court should decide that sports-betting should be treated like all other wagering games and be left to the states to regulate.  Most important, though, whether we’re talking about the jurisdiction we reside in or other jurisdictions like Canada, is respect for the rule of law.     

Government Lotteries authorized and licensed to sell lottery products have been loudly protesting the inequity and destructive impact that secondary lotteries like Lottoland have had on society.  These offshore betting companies are effectively re-distributing profits from Good Causes over to private shareholders. Jurisdictions like Ireland, UK, and territories in Australia which had licensed secondary lotteries like Lottoland are beginning to recognize the implications and push back or re-assess the wisdom of that decision.   Premier Lotteries Ireland, the lottery’s Irish operator, recently met with government ministers to lobby for a change in legislation to ban offshore betting on Irish games.  Camelot, which runs the UK lottery, has raised similar issues with its regulators and gaming commission. 

 Pennsylvania's Entry Into Online Gaming May Kill Federal Ban Effort:  As more states like Pennsylvania and others move to implement their own iGaming and iLottery regulatory frameworks, the ability of the federal government to unwind these initiatives gets harder.  Hopefully, with a couple more states like Pennsylvania regulating the industry, we will reach the tipping point where the Restore America’s Wire Act (RAWA) will die on the vine.