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Congressional Hearing on Sports Betting: What Can We Expect?

Published: September 25th, 2018, 17:00pm CEST

Sports betting finally appears ready for its time in the spotlight on Capitol Hill this week. A hearing in the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigation is set to take place on Thursday, September 27th.

Following the Supreme Court decision in Murphy v. NCAA in May, it appeared that Congress was ready to grab the sports betting bull by the horns and act swiftly to pass responsive federal legislation. But these early efforts stalled almost immediately, and in the meantime, six states have created their own state sports betting regimes and dozens more have indicated intent to pass state-level legislation soon. So the question now turns to whether there is any place for federal legislation, or whether Congress should leave this as an issue for the states to decide. In my opinion, Congress should either make a strong effort to pass comprehensive federal laws now, or forever hold their peace. State legislatures are moving, the industry is moving, and nobody is willing to sit on the sidelines and wait for federal law to catch up.

What Role Should the Federal Government Play in Sports Betting?

As a matter of interstate commerce, Congress is within their bounds, constitutionally speaking, to regulate sports betting on a national level. In fact, the Supreme Court, in Justice Alito’s majority opinion, extended a very candid invitation for Congress to do exactly that, “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.”

But will there be an appetite for national sports betting legislation? It would certainly result in a much clearer and consistent policy for sports betting operators, professional sports leagues, and other industry players. Playing by one set of rules as opposed to 50 distinct and highly varied sets of rules is highly preferable from a business standpoint, but will it be politically viable?

Congress has been at a virtual standstill, and the overwhelming partisan divide is unlikely to be bridged by the issue of sports betting. Although sports betting is now fully legal under federal law, there are multiple factors working against the likelihood of Congress passing sports betting legislation any time soon: 1) it is an election year and this is a potentially controversial issue; 2) issues like this are likely to be overshadowed by the continuing nomination process for Judge Brett Kavanaugh to the Supreme Court; and 3) states are already taking the lead on sports betting policy. Many champions of states’ rights have been celebrating the Murphy ruling, so it would be especially galling to many in the conservative spectrum, of which there are many on the Judiciary Committee, to see Congress turn to trample those states rights all over again. Combine these elements, and the prospects of federal legislation going anywhere in 2018 look very dim.

Have Federal Lawmakers Weighed in on Sports Betting?

Orrin Hatch, an outgoing Senator from the gaming-averse state of Utah, has voiced support for federal sports betting regulation to keep states from entering into a regulatory “race to the bottom” resulting in laws that won’t protect the integrity of pro and college sports. Senator Hatch, in a thorough and slightly melodramatic op-ed, expressed his concerns about how sports betting will open a Pandora’s box of problems including corruption of athletes. Still, he hasn’t introduced any sort of concrete proposal to accomplish this goal.

On the other side of the aisle, Senate Minority Leader Chuck Schumer has pushed for federal legislation that gives pro sports leagues more of a say in the way sports betting on their games can be offered. He has not proposed specific legislation either, and has been suspected of grandstanding on behalf of the pro sports leagues, all of which call New York City home.

New Jersey Representative Frank Pallone, a long-time leading voice in favor of sports betting regulation, had introduced legislation 2017 but just recently retracted his proposal, citing doubts about the future of federal sports betting legislation. In the absence of a federal law, New Jersey remains far and away the leader in terms of States with online gambling laws and regulations.

Who Will Appear at a Hearing?

Scheduled to testify are representatives from the American Gaming Association, the NFL, the Nevada Gaming Control Board, a University of Illinois Professor, and the Coalition to Stop Online Gambling. Suffice it to say there will be a diversity of viewpoints. The NFL in particular has been staunch in advocating for a federal, as opposed to a state-by-state, solution, but more and more they appear to be on an island. The AGA, the casino industry’s advocacy group, has been a strong advocate for a states’ rights approach to sports betting expansion, adopting Vegas-style regulation as a model for new states that enter the sports betting realm. The Coalition to Stop Online Gambling, headed by former Nebraska Attorney General Jon Bruning and funded by Sands gaming magnate Sheldon Adelson, is sure to throw cold water on any federal or state law solution that allows the adoption of online sports betting.

Will this Hearing Lead to Anything?

Sports betting is a fairly new frontier for most legislators not hailing from Nevada, so expecting them to be well-versed on the issue is probably asking too much. The title of the hearing, “Post-PASPA: An Examination of Sports Betting in America,” bolsters the notion that this hearing will be an introductory sports betting 101-type overview, not a substantive debate on the nuances of gaming policy. If the fantasy sports hearing of 2016 is any indication, legislators will come in with only partial understanding of why they are there and leave with something less than clarity on the issue or how to proceed. In 2016, the fantasy sports hearing turned into a sounding board for the fury of Rep. Frank Pallone of New Jersey, who wanted to call out the professional sports leagues for their support of fantasy sports while simultaneously litigating against New Jersey’s attempts to legalize sports betting. For everyone else involved, they left either scratching their heads or shrugging, and predictably, nothing further ever came of it. I would expect a hearing on sports betting to be equally non-productive.

Will They Discuss the Wire Act?

With PASPA out of the way, the biggest challenge to a coherent sports betting regulatory structure is the Wire Act, which makes it illegal for people to conduct sports betting-related activities across state lines. Because of the Wire Act, states will have to implement their own self-contained sports betting regimes, resulting in a patchwork of sports betting rules that vary from state to state. This is highly impractical for state regulators, but also industry participants who cannot do basic things like share liquidity or conduct routine business operations across state lines. Without PASPA, the Wire Act is nothing more than an unnecessary stumbling block, and many in the industry would love to see it amended or repealed. It will be interesting to see whether this issue gets examined at this hearing.

If Congress Doesn’t Act, Who Will?

States are already well underway in adopting their own sports betting laws, which makes the idea of a federal one-size-fits-all solution even less palatable. Sports betting is already up and running in New Jersey, West Virginia, Mississippi, and Delaware, and Rhode Island and Pennsylvania will join the ranks sometime in the next few months. New York laws already authorize sports betting but lack the regulations necessary for casinos to start offering it. With the PASPA floodgates open and states seeing dollar signs, dozens more state legislatures will soon follow suit. With every passing week that Congress fails to get a grip on this issue, states have the opening to pass their own sports betting laws. If states are willing and able to take the lead, federal government should step aside and play a minimal role or no role at all in sports betting regulation. It would be patently unproductive and unfair if federal government were to intervene once states have implemented their own sports betting structures.

While it’s good to see Congress finally start to wake to the importance of consistent sports betting regulations, this hearing will be just the first wobbly step towards a policy objective that still remains unclear and could be many years in the making. In the meantime, state legislatures will be the hotbed of sports betting activity for the foreseeable months to come.

Charles Gillespie
Chief Executive Group Plc