Will Congress really get involved in a new sports betting law?

When the Supreme Court struck down PASPA in the U.S., they effectively ruled the 1992 law was unconstitutional, since the federal government didn’t have the right to require states to enforce a law that they didn’t agree with. The possibility still existed for Congress to pass a new law to replace PASPA, but almost everyone in the industry agreed that was very unlikely to happen and it was up to states to decide how to proceed with sports betting in their own jurisdictions. Just last week, Delaware became the first state to offer a full array of sports betting at its racetracks and New Jersey will follow shortly. Most states that put bills on the table plan to address if and how to offer sports betting, likely in the fall, and states that passed sports betting laws just need to finish writing the rules before implementing it.

The ruling, however, hasn’t stopped some entities from asking Congress to look at creating a new federal law. A few of the leagues, headed by NBA commissioner Adam Silver (who was the first to endorse legal sports betting), called on Congress to pass federal legislation with set regulations for every state. They have suggested that state-by-state laws would be confusing and dangerous and with federal legislation they would have a say in the drafting of rules. Silver’s request seemed like a Hail Mary, but the reason for it was obvious, even if it was only inferred - the leagues wanted to make sure that every state put in rules that addressed game fixing in they way they believed it needed to be addressed. And, more importantly to them, that each state agreed to a 1% integrity fee that they have been asking for as compensation for what they deem will be more work on their part. As well, the NCAA wants each state to put in a rule prohibiting betting on college games that take place in the state.

Looking at all the individual state bills that have been introduced, only two have mentioned the integrity fee and only a couple have said that amateur sports are off the table. It isn’t certain how the racetracks and casino operators that will be offering sport betting feel on the issue, but in the past casino operators MGM and Caesars have called for federal legislation for online gambling, so no doubt they would support federal legislation on sports betting too.  But the idea that Congress and the Senate would even get involved in drafting new legislation seems almost absurd.

There was great disagreement regarding PASPA when it was first introduced in 1992, to the point that most Attorney Generals believed PASPA was unconstitutional and more recently the UIGEA, which was passed federally, turned into a big snafu. To get the UIGEA passed, Congress had to enact that law by attaching it to an unrelated bill (since all earlier bills were voted down), and when it came time to drafting legislation for the new law they didn’t write anything meaningful and basically told the banks and states to figure it out themselves. Banks were so confused and frustrated at being dictated to that many banks have decided to block all gambling transactions, including ones which are perfectly legal, such as online gambling in New Jersey or online horse racing, while other banks permit it. Moreover, because they failed to write meaningful regulations and only indicated that horse racing, lotteries and fantasy sports were legal, this allowed for DFS sites to be created, since the rules that allowed for fantasy sports didn’t rule out daily fantasy sports. And that confusion has led to frustration in states as to whether DFS is truly allowed under the UIGEA or whether it’s just a form of gambling that was not intended to be legalized.  States were left cleaning up the mess the feds left behind and have had to decide for themselves whether to license DFS or not. So, it’s very hard to see Congress actually wanting to mess around with a decision on sports betting that should be completely left up to the states.

Neil D. Braslow, a first amendment attorney agreed:

“Orrin Hatch from Utah is supposed to be introducing some new federal sports betting legislation in the near future, but I do not anticipate that it will have enough support. He is retiring after this Congress, so he will be one less gambling opponent to deal with from a federal standpoint. Fortunately, this is pretty much a bipartisan issue, so if a policy was to be implemented on the federal level, hopefully it would set a standard that remains favorable to states that decide to move forward with sports betting.”

But when it comes to gambling, nothing is ever clear and as Braslow suggested Orrin Hatch has decided to set up a Senate Judicial Committee hearing to discuss sports betting and “educate” others on the issue. It seems Hatch has accepted that states will have the right to legalize and regulate any sports betting, but he believes that the feds should get involved to set minimum standards.

“As the multi-billion dollar gambling industry grows, so too does the likelihood that players will be exposed to bribes, exploitation, and other forms of corruption endemic to an environment where sports betting is poorly regulated. Containing this corruption is difficult, not least because a borderless internet makes it all but impossible to enforce state laws across state lines.” Hatch wrote in an article for Sports Illustrated.

“For the sake of the athletes, for the sake of the fans and for the sake of the game, Congress must act to protect the integrity of sports and guide states as they consider whether to embrace sports betting. To be clear, it will be up to each state to decide whether to legalize sports gambling and how to regulate it. To this end, I am working on legislation that will establish clear-cut, minimum standards for sports betting—standards that protect consumers, deter illegal bookmaking, and empower states that opt against the legalization of sports gambling. The ultimate aim of my legislation is to uphold transparency, honesty and principle in the athletic arena.”

“Through balanced legislation, I believe we can create federal standards that not only align with constitutional principles but also uphold the integrity of the sports we love. Such standards would be straightforward and noncontroversial, including measures to prevent underage gambling and assurances that players, referees and coaches will not participate in sports betting.” Hatch suggested

Having talked with analysts who were involved in the industry in 1992, they assure me that this is almost identical to the arguments made by leagues and Congress, of which Hatch was a part of, prior to PASPA being passed in that year. Analysts tell me the arguments were all about protecting the integrity of sports, preventing vulnerable players, especially college athletes from being trapped into game fixing as a way to prosperity, since most will likely never make it to the big leagues, and to protect states from themselves, since they will see the dollar signs only and not potential problems.  Analysts also tell me that the discussion on PASPA didn’t start out as a full ban on betting, but rather was supposed to be a means to set strict minimum standards that all states must adhere to. But in the end Congress decided that a full ban was the only way that was possible. As a writer for a major online sports publication told me “you know full well with politicians that if you give them an inch they’ll take a mile. We can’t go down that route again.”

One would naturally assume that most legislators will want nothing to do with a new federal law, given the SCOTUS ruling, but I am told that Hatch has gotten a great deal of support from many Senators and Congressmen for creating a new law, particularly from Republicans who are opposed to all forms of gambling and from friends of Sheldon Adelson who want to ensure that online sports betting is prohibited as part of any new federal rules.

The questions now, as they were in 1992, are the same. Why exactly do players have to be protected from themselves and why should states have to buy in to any federal rules?

We know about issues surrounding Pete Rose, Tim Donaghy and Rick Tocchet (who was a a part of the 2007 New Jersey betting scandal) to name just a few but those were exceptions to the rule and more importantly with the case of Donaghy, Tocchet and the myriads of game fixing scandals that occurred with college players in the early years, they were done with illegal bookmakers. Only Pete Rose bet legally in Vegas. And the truth is that every state will certainly put in rules regarding minimum age standards, rules to combat compulsive gambling and location identification to ensure bets are being placed in state, if the bets are made online. As far as ensuring players, coaches and referees don’t bet on games, that can be accomplished in two ways as has been done with bookmakers in the UK and Australia. First, the leagues need to make it clear that anyone who bets on games will be charged and banned from league play forever and the leagues need to ensure that a memorandum of understanding (MOU) is made with all legal sportsbooks whereby everyone with an account must provide detailed information about themselves (known as KYC requirements) and any suspicious betting is immediately given to the leagues to investigate. The states don’t need to reinvent the wheel, they simply need to look at legislators elsewhere and adopt those regulations.  

The leagues will argue that is why they need the 1% integrity fee since investigations cost money, but the truth is that the bulk of costs are absorbed by the sportsbooks themselves and if the concerns of the leagues are really about combatting game fixing they should welcome the opportunity and not put a monetary figure for doing so. An argument that was made in 1992 by some opponents to PASPA was that if the leagues trust their own personnel so little, then they should be proactive and suspend or even ban any players they believe will be susceptible to game fixing, if those personnel are found out to be heavy gamblers. Of course, that will never happen since it would have meant that players like Michael Jordan and Phil Mickelson would have been banned given their openness about betting on sports.

So, it appears it may be déjà vu all over again. Many in Congress are not prepared to take no for an answer from SCOTUS and are going to once again try and force federal legislation down the throats of states because they simply don’t trust states to be able to pass legislation that will address the main issues. And the leagues are going to use Congress to take up their bidding, albeit this time it’s to get a piece of the sports betting action rather than trying to implement a full ban, as was the case in 1992, since they know full well that most states will never approve the 1% integrity fee on their own.

The success or failure of Hatch’s legislative hearing will tell whether the U.S. truly believes in the 10th amendment and allows states to determine for themselves what regulations to write for their own laws or whether in the area of gambling the U.S. is still a nanny state, whereby Uncle Sam dictates to every state how they must act. Let’s hope for the sake of state’s rights and for the sake of gamblers the hearing goes nowhere.

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