NBA Betting: What’s at stake after landmark ruling?

Everyone is excited for legalized betting following the Supreme Court's landmark ruling. But it will be more important for states to get it right than simply being first.


(Photo Credit: USA Today Sports via Reuters/Trevor Ruszkowski)

Adam Silver saw it coming almost four years ago. 

Of the four major professional sports leagues in the United States, the NBA has usually been the one to tackle an issue head-on first. In 2014, the issue was gambling. The explosion of fantasy sports that started with Major League Baseball and sped up with the National Football League has now hit another gear with the growth of Daily Fantasy Sites.

What was once restricted to sports books in Las Vegas had spread, albeit slowly. Only three other states besides Nevada had a form of legalized sports gambling because they were exempted via grandfather clauses, but the internet made it equal parts more accessible and, perhaps more importantly, more acceptable to the public at large.

In an op-ed written by the NBA commissioner for The New York Times in November 2014, Silver put the league in the spotlight by being the first major U.S. sport to be in favor of legalizing gambling, albeit with federal oversight and regulations. He saw the winds of change that came with then-Governor Chris Christie’s lawsuit against the NCAA arguing the Professional Sports and Amateur Protection Act (known as PASPA going forward) was unconstitutional because it violated the anti-commandeering rule as part of the Tenth Amendment.

Without trying to sound too wonky with all the legalese that came out of the Supreme Court’s 49-page opinion handed down Monday, the decision by the plaintiffs, in this case the State of New Jersey, to argue the law was unconstitutional because it did not allow legislators to write any laws because PASPA had two interdependent clauses written to block such actions was a nifty bit of legal jujitsu.

But make no mistake, Monday’s 6-3 ruling in saying PASPA was unconstitutional has opened Pandora’s Box on a grand scale for legalized gambling in the United States. A handful of states, including New Jersey, are rushing to push bills through legislature they want to enact immediately with visions of rapidly filled coffers that can fund areas of need or otherwise throughout state budgets dancing in their head.

What of the sports though? After so many years of refusing to support legalized gambling in any place other than Las Vegas, there is now potentially billions of dollars that will flow in multiple directions through a framework of rules and regulations that at some point will have to be codified at the state level. 

While they will not say it aloud out of fear of looking greedy, the leagues want a piece of this newfound action. It will be a hard road for them to travel, though, since Las Vegas already has the framework most states will copy, one that does not include the “integrity fee” proposal championed by Silver and the NBA that the NFL and MLB have warmed to quickly. So let’s look at what is at stake for sports in America by being able to put a five down at your local sports book as opposed to your friend who knows a friend who has the parlay strips at the corner bar.

Provided everyone can play nice and have a local sports book.

 

NBA to carry the flag for professional sports leagues

In late January, the NBA rolled out it's framework concepts in which it argued it would have to spend more money on compliance and enforcement actions, which would be true across the board for every league. 

But what caught everyone's attention was the "one percent" asking price of all legal wagers placed on NBA games to defray those costs and compensate the league for the "commercial value" as the league calls it for what sportsbooks create for betting possibilities.

The response to the figure was met with eye rolls from both legislators and gaming industry executives. Some countered that one percent of a sports book's handle could amount to potentially as much as 20 percent of its total revenue given the novelty of legalized betting in the United States compared to more advanced countries England or Australia. Such a payout could force sports books to increase the vig and potentially alter betting lines.

While it likely will not matter to the casual bettor, the more experienced one who makes multiple bets and spends more money will watch the vig judiciously and comparison shop. On a standard Vegas casino line that offers -110 for a 100 dollar bet, a bettor has to win 52.38 percent of the time to break even. 

If that moves to -120, a bettor now has to win nearly 55 percent of the time. Even professional handicappers have a hard time maintaining a winning percentage above 55 percent.

Many states have balked at the integrity fee. Some have drafted legislation with the integrity fee at 0.25 percent. The angles of debate that come with the mere existence of an integrity fee are multiple, from the potential of a state arguing it should not have to pay an integrity fee because Las Vegas does not. 

There is also the states' view that laws on sports betting are public and therefore cannot be administered by a private league. The league, meanwhile, is of the belief it should not be forced to bear the costs of protecting the integrity of the game.

Regarding the impact on Collective Bargaining Agreements (CBA) between the league and its respective Players' Association, the NBA again likely will be the model for other leagues to follow. The PAs of all four major sports put out a joint statement in which they expected to be included in this discussion, and as many noted, the phrase "integrity of our games" was included in the statement.

The most recent CBA between the NBA and the NBAPA does not make a specific mention of an integrity fee or sports betting right fee. But many are confident the league and the players agree any such money falls under the catch-all of "basketball related income" (BRI). 

That total BRI figure is then split among the players and the teams, and it also factors into the salary cap figure. And with a higher BRI comes a higher salary cap, which had already jumped almost 35 percent to more than $94 million in 2016/17 when the new nine-year, $24 billion media rights contract took effect.

While the next opt-out of the NBA's CBA does not come until 2022-23 and does not expire until the following season, expect Silver and NBAPA Executive Director Michele Roberts to continue to work behind the scenes to continue to stay ahead of the curve and in the lead pack of professional sports organizations.

NFL could get the biggest financial windfall of legalized betting

Every year in the week leading up to the Super Bowl LII, Las Vegas sports books release the full list of "prop bets," or anything and everything that could be bet on in the Super Bowl. From the over/under on the length of the singing of the national anthem to the result of the coin flip to who scores the first touchdown, there were over 1,000 potential prop bets available.

While legalized betting will not, thankfully, turn every game into a Super Bowl-esque level of betting, the foundation for NFL betting with fantasy football has, however, put the league furthest along in terms of facile multiple bets on a game. As an example, say the New England Patriots are playing the New York Jets at Foxborough.

A bettor can readily make a wager on the game regarding the point spread or the money line. Now take it one step further. Say the bettor has Tom Brady on his fantasy team. If a bettor is making a bet and plays fantasy football, he likely would take at least a cursory glance on an over/under for Brady's total passing yards or touchdown passes. 

It is a straightforward bet and also one that can be parlayed into a potentially bigger winnings ticket. This will also appeal to the casual bettor because it does not involve reading a money line.

The NFL's about-face after Monday's ruling was not surprising, it was more like the cumulative result that started after the league OK'd the Raiders moving from Oakland to Las Vegas, where they will start play in 2019 in a new stadium. 

The framework of potential revenue distributions from sports betting will take place when the next CBA expires following the 2020 season and given the contentious nature that preceded the eventual signing of the one in place back in 2011, do not expect the NFLPA to go quietly into that good night.

While the league has ground to make up regarding what kind of framework it wants for betting in the United States, it also has the highest current upside in terms of potential financial windfall and benefit. 

Without breaking it out specifically to college and professional sports, Nevada sports books reported $1.8 billion bet on football and $1.5 billion in basketball in 2017 per an article in the Wall Street Journal. That spread could grow exponentially, especially with the continued push into the more mature betting market in England via the Jacksonville Jaguars.

MLB forced to address its tortured past with betting once more

No sport except for college basketball has seen its legacy tarnished more by gambling scandals than Major League Baseball. The 1919 Black Sox scandal, now drawing close to its centennial anniversary, and Pete Rose's tortured denials and eventual admission of gambling while manager and player for the Cincinnati Reds are part and parcel of the narrative of the sport. 

Those lifetime bans to the Hall of Fame have yet to be overturned, and in Rose's case, likely would only come posthumously. Everyone who's ever played catch knows who "Shoeless" Joe Jackson and "Charlie Hustle" are. Not everyone knows them for their baseball exploits.

Major League Baseball was the first league to embrace fantasy sports, with its team roster building the precursor to DFS. They were the second league after the NHL to sign with DraftKings while the NBA and NFL paired off as official sponsors of FanDuel.

Even with that move, perhaps MLB has the lowest ceiling of the financial windfall from legalized betting. It's most popular offering, aside from the sheer volume of games available to wager on over a six-month season, is its futures in the offseason when the casual bettor will find a casino in Las Vegas or the Caribbean and plunk down $20 on their favorite team to win the World Series.

MLB was also the first league to not hold a firm line on the one percent integrity fee, and while one-quarter of one percent does not sound like a large number, consider the conservative projected annual revenue of $150 billion in legalized sports gambling and $375 million does not sound like such a small number now, does it?

The collective bargaining agreement in MLB does not expire until 2021 after the two sides agreed on a five-year deal in November 2016 hours before that one was to expire. 

Revenue sharing and a luxury tax have always been points of contention between small and large-market teams in baseball, and it will be interesting to see how potential revenues from sports betting might level the field. 

NHL, MLS could see incremental spike in interest with legalized betting

Depending on which core group of fans you want to believe or yell louder, either the NHL or MLS is the fourth major sport in the United States. Both have passionate pockets of fan bases while often relegated to the second tier of sports networks (think ESPN2 for MLS, NBCSports for NHL and a host of assorted local FoxSports Networks and emerging media looking for ways to fill programming hours).

Yet both sports could be served well with legalized sports gambling because of those local pockets of interest, with soccer potentially more ahead because a good portion of fan bases in large pockets of ethnic areas are also international soccer fans and will now have the option to bet on domestic and international games. 

You can put $10 down on Atlanta United to win and another $10 on Manchester United to draw at Chelsea any weekend.

Hockey also lends itself well to similar bets made in soccer, such as first goal scorer, but its quicker pace without an abundance of statistics to break down could put it at the forefront of in-game betting in the mid-term future. 

In their inaugural season in the NHL, the Las Vegas Golden Knights showed there is casual walk-up interest in betting on hockey, and that could be a trend replicated around the league in various U.S. cities such as Pittsburgh, Chicago, and Detroit with strong hockey followings.

College Sports - The wild card of legalized sports betting

One of the amusing ironies of sports gambling now legal in the United States is that the one sporting event besides the Super Bowl that gets the most illegal gambling activity across the nation, the NCAA Tournament, will probably see only a modest increase in revenue at sports books because the average bettor picks the entire bracket and then follows along.

The casual bettor will not take off from work Thursday and Friday and sit at the local sports book from noon Eastern time until 12:30 am watching college basketball and bet on all 16 games played each day. The bump may come in the second-round action when people have the free time to place those bets in person.

But the NCAA, which has been assailed on all fronts in recent years in terms of antiquated by-laws, a recruiting scandal in basketball and a high-profile sexual assault case in gymnastics at its member schools, now must contend with the fact it will technically be legal for a student-athlete to bet on a game while it is merely against the rules of the association. 

An organization that has done little in the way of being proactive in recent decades is again on the back foot when it comes to a sea change in sports. The recent commission one-time Secretary of State Condoleezza Rice chaired to fix what ails college basketball did not even scratch the surface of potential legalized gambling, that's how many problems the NCAA currently has to deal with.

The NCAA was the primary defendant in the Murphy case the Supreme Court decided, yet once the ruling came down against the organization, it also said it would consider Las Vegas as a potential championship venue for its high-profile (read as revenue-generating) sports such as football and basketball. 

And as anyone can attest, the money generated by the College Football Playoff is already ludicrous just on the media rights. Now add the specter of two rabid fan bases descending upon Las Vegas for a week leading up to a title game, and that money spirals exponentially higher.

The risk with legalized sports betting at the college level is having a sportsbook anywhere near a college campus between players running afoul of team and NCAA rules with hangers-on and also how heavy wagering on a team by bettors could cause a line to swing locally but not nationally. 

Again, the expectation for college sports would be the incremental bump based on fan interest but not some exponential factor like the NFL and NBA can potentially enjoy.

One thing you will not hear emanate from the NCAA, if it is smart (and that is always questionable with Mark Emmert as president), is anything about a sports integrity fee. 

Given the battering the organization has taken in recent years reaping a huge financial windfall from the media rights to the NCAA Tournament while not allowing its players to make supplemental income off their likeness beyond the cost of their scholarship, even the slightest bit of support of potentially collecting an integrity fee would leave them no moral high ground of whatever little is left in keeping the amateur model they so desperately cling to.

One area that could open for the NCAA is a potential betting market for the NCAA Women's Tournament. While it could not happen until 2021 at the earliest, moving the tournament to Las Vegas starting at the round of 16 through the title game could be a bold experiment that gages the interest of the casual bettor.

A lot of stake with a lot of money at stake

Remember, just because it is now legal to place bets on sports does not mean all 50 states will pass laws making it legal to place bets on sports. Utah is the odds-on favorite to be the outlier given its mores from the Mormon religion, but there may be another state or two that decides the aggravation of codifying laws and regulation is not worth the potential benefit.

The good news is the states have a proper framework to build on from Nevada, and nine states have approved some sort of sports betting legislation and/or have it fast-tracked. 

Those nine states are playing catch-up to New Jersey and to a lesser extent Delaware, and another group of states have legislation ready to move out of committee and towards hearing and votes.

But there is still a long road ahead in terms of regulations. Every state will have different requirements, and the pro sports leagues and the NCAA will continue to clamor to have these regulations bound together as part of a federal framework. 

No one is certain of the timeline of it but in terms of being able to bet on sports in the United States, it's a lead-pipe lock. 

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