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Leagues are Fighting a Losing Battle over Sports Betting...By Hartley Henderson

It is common knowledge that legalized sports betting is being fought tooth and nail by the DOJ in the United States, partly as a result of the wishes of the American sports leagues. In particular, the NFL, NBA and NCAA have done everything in their power to ensure that the acceptance of sports betting outside of Nevada does not take place. In fact the leagues with their lobbying efforts have even gone to great lengths to try and repeal the law which gives Nevada the right to offer betting on games, particularly on amateur sports. The reasoning for the leagues' stance is not certain, but it is a safe bet that they are fighting a battle that cannot be won.

Wagering on sporting events has always had a shady undertone. The mob had virtual control of all sports betting worldwide prior to 1960, and most countries could do nothing to stop it. Consequently, the United States passed federal laws in 1961 to try and control the activity that was done across borders and by telephone. Those laws included the Interstate Wire Act, the Travel Act and the Interstate Transportation of Wagering Paraphernalia Act. Each of those anti-racketeering laws applied only to those in the business of sports betting (bookmakers), and only to those who tried to use a wire or similar means to accept bets.

Britain, on the other hand, took a totally different route and introduced the Betting and Gaming Act the same year, which actually legalized bookmaking by licensed establishments. In introducing the law the British government stated it's hope that "legalising betting shops will take gambling off the streets and end the practice of bookmakers sending 'runners' to collect from punters." In better words, Britain realized that the best way to stop the mob was to legalize and regulate the activity, thereby bringing the activity to the forefront and flushing out the crooks. Once they were out in the open, the British government could then revoke licenses of unsavoury characters. It worked well, and by 1970 many mob figures were gone from the UK. In Britain, bookmaking usually involved horseracing, but even at the time of the passage of the Betting and Gaming Act, betting on sports was common practice with underground bookies - particularly on soccer. It's uncertain how sports leagues in the UK felt about the idea of legalizing bookmaking, but according to one bookie I spoke to (who was the child of a bookmaker that was operating at the time of the passing of the act), the leagues were not opposed to the law, provided they could benefit from it and provided they had some input into the rules. In fact, Britain, it appears, always has had a conciliatory relationship with its sports leagues.

Upon the recent passage of a law to regulate online betting, it was reported that the government sought advice from the various British leagues on rules that it wanted to see. It wasn't just in Britain, however, that sports betting became an accepted activity. In Germany and Austria, betting on sporting events has been legal for quite a while, and the countries use taxation from sports betting to help fund amateur sports. And in Australia sports betting has always been accepted. In fact in 2001 the Australian government passed a law to try and restrict betting by Australians, as Prime Minister Howard stated that Australians were spending too much of their income on the activity, but at the same time they offered an exception for sports betting since the government felt sports betting had many other benefits to Australia.

As well, each of the aforementioned countries have tried to devise a plan to combat match fixing in sports by having the bookmakers monitor and report unusual betting patterns to the government and leagues. It was this cooperation that allowed the leagues to spot questionable activity in soccer, tennis and rugby matches. While U.S. sports leagues seem abhorred at the thought of working with sportsbooks, leagues overseas see it as a way to help ensure the integrity of the sports, as well as an opportunity to generate advertising revenue. More importantly, leagues overseas realize that sports betting will occur regardless of whether they approve of it or not, so they may as well get it out in the open where they can monitor the activity. It's also noteworthy that religious groups overseas seem to embrace gambling far more than religious groups in the United States do. Of course this could be a result of the difference in philosophy between the Protestant religions and those of Catholicism and Anglicanism. In fact when Britain decided to introduce the Gambling Act in 1961, the Archbishop of Canterbury did not oppose it, stating that it is better to bring the activity out in the open. In the United States, however, protestant, and particularly evangelical groups, view gambling as a sin that must be stopped at all costs.

Nevertheless, despite the clear benefits of cooperation, sports leagues in the U.S. have gone to great lengths to guarantee that under no circumstances would they partner with sports gambling establishments in any way. In fact, in 1992 Bill Bradley introduced the Professional and Amateur Sports Protection Act, which made it illegal for any state that did not already offer sports betting from ever doing so. The act, by all accounts, was asked for by the sports leagues, particularly the NCAA and NFL, and the leagues were upset when the government wasn't prepared to try and prevent betting, even in states where sports betting was allowed. Nevada was given an exemption under the act, and Delaware, Montana and Oregon, which ran sports lotteries, were grandfathered in, thereby allowing them to continue their sports lotteries. New Jersey casinos asked for and received permission to take a referendum on legalizing sports betting prior to the act being initiated, but Senator Bradley (from New Jersey) used his influence to stop the question from ever being allowed to be put on the ballot. The NFL lobby was also influential in convincing the Treasury to release UIGEA regulations prior to Bush leaving office. And the NBA has been on record stating that it will never again set up shop in a city that allows wagering on NBA basketball, and the Toronto Raptors are still paying the Ontario government for agreeing to take NBA games off the sports lottery ticket in exchange for the NBA allowing a franchise in Toronto.

Despite the efforts of the sports leagues in North America, it appears that sports betting will happen in Canada and beyond. In Ontario, the government is planning on offering single game sports betting in addition to the various lotteries, and if successful it is almost certain that other provinces will follow suit. Whether NBA basketball is included is uncertain, but the Ontario government clearly isn't concerned if it offends the NFL, NHL or NCAA. And other provinces would certainly allow NBA wagering since they don't have NBA teams nor any desire to host one. To allow single game sports betting, the Canadian federal law which restricts it would have to be lifted, although the federal government has stated that it isn't opposed to any motion on gambling that the provinces want. After all, there was a law on the books in Canada for centuries which made it illegal to offer dice games, but in 1999 it was repealed when provinces asked for it to be readdressed so that they could compete with U.S. casinos which offered craps.

In the United States, it appears momentum of the states is shifting towards legalized sports gambling. Land based casino gambling and betting on horse racing is down due to the recession, so states are looking for new revenue sources. California, along with some other states, are considering an intrastate poker network (drawing the ire of the DOJ), and Delaware has now stated that it is seriously considering offering sports betting at its casinos and race tracks. The hope is that sports betting will bring back the casino players and horse bettors who will come to the venues to bet on sports, but will bet on other games while there. Delaware's plan is to offer Las Vegas style sports betting parlours at the tracks and casinos, but will require that players bet on a parlay of at least 2 games. Oregon is considering something similar. New Jersey, on the other hand, is looking at simply legalizing sports betting and running it at its race tracks and Atlantic City casinos in a manner similar to the way it is being done in Nevada. The state wants to maximize revenues and believes it is best done with single game betting in sports books. New Jersey estimates that if it legalized sports wagering it would generate at least $800 million in annual revenue, and it could be much higher given that up to $380 billion is being wagered illegally in the United States with local bookies, as well as on the internet at licensed offshore sportsbooks. It is also certain that residents of New York, Pennsylvania and Maryland would make the short trek to New Jersey towager on games. New Jersey is also interested in legalizing sports betting to try and weed out the mob and to avoid situations like that which happened with the Rick Tocchet and Janet Gretzky mess.

As mentioned, New Jersey would have to overcome the federal law which prohibits sports betting, but it seems prepared to fight the ban all the way to the Supreme Court if necessary, and many lawyers seem to believe New Jersey would win. Gambling attorney I. Nelson Rose wrote an opinion that the Sports Betting Protection Act is unconstitutional since it prohibits betting that is conducted within one state. Rose suggested that gambling is not a federal issue if it does not cross borders, and contrary to what the President and his cronies may think, they do not have powers to restrict a state from raising revenues for bets that take place solely within the confines of that state. As well, the fact that the law does not apply uniformly across the nation also makes it unconstitutional. If the Sports Betting Protection Act was equal in all 50 states then there may be some basis to argue the merits of the law, but the fact that it allows some states to offer sports betting while restricting other states from doing the same thing makes it unconstitutional under the commerce clause.

Sports leagues will likely argue that using their trademarks is illegal also, but Bradley's bill allowed Nevada to continue to offer bets under the trademarks of the various sports leagues, so they cannot use that as an excuse to prevent New Jersey from offering bets under the same trademarks. Regardless, if protecting league trademarks does become a sticking point to legalized sports wagering, it's almost certain New Jersey would simply follow the lead of Delaware and Ontario and offer NFL games between say Chicago and New Jersey to signify games between the Bears and the Giants, which of course does not violate any trademarks. After all, team names are trademarked, not cities.

Other states apparently are watching the New Jersey situation, and will start making some noise if New Jersey is successful. Most states have race tracks and casinos that are struggling, and the multi billion dollars available to them via sports betting cannot be overlooked. As well, many states, like New Jersey, believe the federal government overstepped its boundaries by passing a law which clearly should have been a state decision. There is concern that leagues will try to threaten cities with sports teams with revoking their licenses if their state allows sports betting, but doing so would shoot the leagues in the foot, particularly in cities where teams do well. What benefit would there be to the NFL or NBA, for instance, by revoking the licenses of the New York Giants or New Jersey Nets? Most likely states would simply prohibit betting on games that occur within their respective states.

So the leagues, despite their lobby power and perceived importance, seem to be fighting an uphill battle. Gambling, including sports betting, is a state decision and the federal law which prohibits it is likely unconstitutional. The revenues from sports betting are just too great to pass up, particularly in a down economy (which could continue for years). Casinos and race tracks need ancillary revenue and sports betting is the logical option to recover a great deal of money that is being bet by local residents offshore or with local bookies. Delaware's plan is to offer bets which require parlays, but that likely won't work. Ontario tried that at its casinos by offering its sports lottery games in a Vegas type sportsbook atmosphere, but it failed. People who bet with local bookies want to wager on single games and with Vegas type odds, not with the usurious hold that sports lotteries tend to have.

What options do the leagues have? The logical answer seems to be to get into the current century and follow the leads of the Europeans and Australians. The CFL, seeing its revenues decline, welcomed advertising and promotions from offshore sportsbooks, and the result has seen a turnaround in interest from Canadians on the games. Leagues already offer advertising from local casinos, so one could imagine the potential revenues and interest if it partnered with local sports betting. In Britain, for example, the decision to allow advertising from places like Ladbrokes, William Hill and Bet365 has benefited everyone. The teams get revenues and the bookmakers get exposure. Furthermore, the cooperation between the sportsbooks and the leagues has helped identify suspected cheating, and underground bookies have been weeded out dramatically. If the U.S. leagues had a similar cooperation with bookmakers it is almost certain that Ted Donaghy would have thought twice about cheating, given the high probability he would be caught. The leagues could also help draft rules that would be acceptable to all. For example they could insist that no referees or other officials could wager on any game in which they are officiating, and if caught could be fired immediately and jailed. And they could either create laws which make it illegal for players and coaches to bet on games they are involved in, or better yet follow the lead of horse racing with laws that currently applies to jockeys, owners and trainers which makes it legal to bet only on your own horse to win.

As well, they could insist that a percentage of all revenues go to fund amateur sports. Under this scenario the Pete Rose issue would be long settled. If Rose was betting on other sports or on games that did not involve the Reds as he claimed, he would be cleared. If he was betting against the Reds then he would be rightly suspended and jailed. The technology exists that would allow sportsbooks to clearly identify who is betting and on which teams. Unfortunately the distrust by the leagues of its own teams and players, combined with the self importance of the leagues, will never allow the above to happen. To admit that gambling could help benefit the leagues and government would mean admitting they were wrong all these years. The U.S. sports leagues are clearly fighting an uphill battle to keep sports betting illegal outside of Nevada, but it seems to be a battle they deem worth fighting, even if all common sense dictates that it isn't.

Hartley Henderson

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