If you’re like me, then you’re excited at the prospect of losing money on sports betting in the near future when your state legalizes it.
The Supreme Court struck down a federal ban on sports gambling on May 14, ruling in essence that the law overreached and violated states’ sovereignty as outlined in the 10th Amendment. The decision paved the way for states to pass laws as they see fit.
Five states have already passed laws in anticipation of the Supreme Court’s decision. They are: Pennsylvania, Connecticut, West Virginia, Mississippi, and New Jersey. Jersey was the victor in the Supreme Court ruling, and is the state leading the charge here. Fourteen states have bills on the way to legalize sports gambling, and more will likely follow suit. These bills are nuanced from state to state similar to the way alcohol is legal everywhere, but some states go dry on Sundays.
I live in a state, New York, that hasn’t passed its bill into law, but is expected to in the coming months. From the moment the Supreme Court first heard the case in December, Sen. John Bonacic, who is the chair of the New York Senate racing, gaming, and wagering committee, put the wheels in motion.
“I saw that the judges looked favorably on removing the ban, and from then on we went to work,” Bonacic said in an interview with SB Nation. “I had a public hearing in January with all of the concerned people. I had workshop meetings with professional sports and my casinos to try to address all concerns.”
Bonacic expects a slightly amended version of his initial March bill to pass in the senate within two weeks. New York’s assembly house, however, has not yet introduced its own bill. He believes both the assembly’s chairman, Gary Pretlow, and Governor Andrew Cuomo are in favor of legalizing sports gambling.
Here’s what the senate bill looks like in not-legalese (if you prefer legalese, have at it here). It wouldn’t be a totally new law if passed, but an amendment to an existing law on pari-mutuel gaming. Pari-mutuel betting is the framework that saved the horse racing industry in the early 1900s when bookkeepers were outlawed.
Who can’t gamble on sports?
Beyond the obvious (minors, casino employees, etc.) it would be against the law in New York for athletes, both amateur and pro, to gamble on a sport that is overseen by their governing body. This criminalizes a Pete Rose situation. Agents, owners, team employees, referees, and union personnel are also out.
High school events are out. Under this bill, you would be able to bet on college sports in the state of New York, however, unless the NCAA excludes itself.
Types of bets?
The proposed bill breaks down bets into three “tiers.”
- Tier one: A wager determined by the final score. A typical over/under or point spread play.
- Tier two: A wager made while a game is going on, referred to as “in-play” sports betting. It’s a nod to the future of sports betting, which may include microtransactions — for example, which player will foul out in the second half, which relief pitcher will take the mound in the seventh inning, etc. Bonacic said that in Las Vegas, 25 percent of bets are now in-play, and in Europe the percentage is closer to 50.
- Tier three: A wager that doesn’t fall into either of those two categories. It would include prop bets, such as who will be the Super Bowl MVP.
Data on gamblers?
The New York State Gaming Commission will publish on its website an annual report developed from data given to them by all casinos within the state. It will be published 180 days after the end of February. Casinos must provide for the report the total amount of wagers in the year, the amount of prizes, the amount of gross revenue from sports wagering, and the amount provided to the integrity fund.
What’s the integrity fund?
Well, I’m glad you asked. The “integrity fee” is something also written into Indiana’s bill, and it’s a due to a lobbying push spearheaded by the NBA.
Under the guise of making sure everything is on the up and up, sports leagues will collect a fee “of up to one-quarter of one percent of the amount wagered on sports events” with the caveat that “in no case shall the integrity fee be greater than two percent of the casino’s sports wagering gross revenue.” Bonacic estimated the integrity fee will produce “single digit millions” for the leagues in aggregate.
Whether integrity fees really accomplish anything is a matter of some debate, however. There’s likely going to be a reckoning about those fees sooner rather than later.
But it’s not clear why legal betting would force sports leagues to do more to protect against cheating, because they’ve presumably had safeguards to that effect in place all along. Black-market gambling already exists, and the leagues already have policies in place designed to ensure the integrity of their games.
“Hopefully, the enforcement’s gonna be the same as it is right now,” McGowan says. “What difference would it make [for] the enforcement? That’s a lot of nonsense.”
The American Gaming Association, casinos’ biggest lobbying group, is staunchly opposed to integrity fees. The AGA commissioned a report that says integrity fees would hobble both casinos and state efforts to collect tax revenue on legal sports betting.
Which brings us to how much casinos will have to pay in taxes?
A lot. Bonacic conservatively estimates the state will get between $10-$30 million in revenue from taxes collected. The bill says casinos will pay a tax equivalent to 8.5 percent of gross wagering revenue to the commission. This, uhh, didn’t work out so well in Nevada back in the day. In the 1950s, the federal government was taking a 10 percent cut from sports books. Congress later rolled back its take to two percent because books were being bled dry.
Bonacic said that the 8.5 number was workshopped with the casinos during the writing process, and that they objected more to the integrity fee than the tax.
Do leagues have a voice in the bill?
They do. A sports governing body can tell New York’s gaming commission if it wishes to restrict, limit, or exclude wagering on its sport. If any sports governing body will do so, it’s the NCAA, which oversees amateur athletes. That said, the organization has already hinted its sensibilities are changing toward gambling in the wake of the Supreme Court’s decision.
Who’s in charge of enforcement here?
New York’s state police will have a division designated to investigate abnormal betting activity, match fixing, and corruption.
The state police or a sport’s governing bodies can request information including account level betting info, audio and video related to people placing wagers, and any other personally identifiable information. For leagues to obtain this information it will take a court order, commission order, or law enforcement order. This may bring up privacy issues in the future.
What happens if you break the rules?
If any rule in the bill as written is broken, it will result in a civil penalty up to $5,000 per violation.
This is big because New York knows that mobile betting is coming and is writing it into the amendment. A clause requires any casinos that partner with third parties operating mobile betting platforms put appropriate safeguards in place to make sure that bettors are located within New York state. This part of the law also allows for a future in which kiosks are set up at sports venues where fans can place bets in person at sporting events, according to Bonacic. There are also things like parental controls and other barriers to prevent minors from betting on their parents’ phones.
What about other forms of cheating?
Mobile game operators will be forced to prohibit third party scripts and other software programs that submit wagers. Scripts are the things that proficient daily fantasy players used to rocket to lucrative paydays by attrition.
D.F.S. high rollers similarly come with demands, and because there’s no powerful regulatory body involved, DraftKings and FanDuel have been mostly free to set the parameters of play, which, as it turns out, is near anarchy, especially for the D.F.S. elite. High rollers want to be able to use third-party computer scripts that will allow them to enter thousands of lineups at once, something that your average player cannot do. High rollers can gain access into D.F.S.’s inner circle, in which they get to be on first-name, texting basis with executives and employees at DraftKings and FanDuel.
New York is still a ways away from legal sports betting.
But progress is at least being made in one half of New York’s bicameral legislature.