Federal Sports Betting Laws Remain Dormant, Congressman Says

Federal Sports Betting Laws Remain Dormant, Congressman Says

Federal sports betting legislation remains a long shot in Congress, according to Rep. Frank Pallone, giving more emphasis than ever to state-level implantation of the multi-billion dollar U.S. market. The chair of the House Commerce and Energy Committee, which would have oversight over such a bill, Pallone said Congress is more than content with legislative action at the state level.

“We’re not interested in any federal regulation,” Pallone said during a gaming conference Tuesday morning.

Speaking at Monmouth Park Racetrack in his home state of New Jersey, Pallone said state governments had assuaged federal fears of regulatory and integrity concerns. Eight jurisdictions take bets now, and up to a dozen more are set to do so before the end of the year. Without federal guidelines, these governments have created a patchwork of different approaches, with varying tax rates, oversight bodies and operation limitations.

That system is working successfully by Congress’ standards, Pallone told attendees at the All American Sports Betting Summit. Pallone said Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer had both shown interest in a federal framework, with Schumer even co-sponsoring a bill last year , but for now neither has made a serious push to advance the measure forward.

This laissez-faire mindset is also sitting well with state-level elected officials, as well as gaming operators, many of whom fear an overreaching federal bill could stifle the industry. Conversely, Pallone acknowledged in his address Tuesday that the nation’s leading sports leagues have not been so supportive of the state-by-state approach.

Sports Leagues Continue Pressing for Fees

For decades, America’s major professional sports leagues as well as the NCAA fought against legal sports betting. Now that states can choose to legalize betting, the leagues argue they deserve part of the revenue.

This juxtaposition was not lost on Pallone, who was the latest public official to dismiss the leagues' requests. With limited success finding laws at the state level that reallocate a cut of gaming revenues back to the leagues, these groups have hoped for a federal regulation that could supersede the state law.

That demand will fall on death ears in his committee, Pallone said.

"They want federal standards, and want operators to pay for data. That’s totally bogus, in my opinion,” Pallone said to a round of applause from conference attendees. “That data is in the public domain. Nobody should be paying for that data."

After New Jersey passed a sports betting bill earlier this decade, the NCAA as well as the NFL, NBA, NHL and MLB all fought the law in court from coming into effect. But when the Supreme Court ruled in New Jersey’s favor in May 2018, allowing states to legalize wagering if they chose to do so, the leagues began to change their tunes.

The leagues heavily lobbied states to include what they called “integrity fees,” or a slice of gaming revenues to go back to the sporting groups to protect from corruption. This pitch was widely decried by elected officials across the country, many of whom argued they were unnecessary to protect the sanctity of competitions and were just ways to squeeze money from gaming operators (and, by extension, gaming taxes collected for state treasuries).

With little success for integrity fees in statehouses, the leagues instead argued for data mandate requirements: To take a bet, purveyors would have to use official league sanctioned data. Leagues would then be able to charge for the right to use that data, indirectly creating a new revenue source.

This appeal didn’t work on betting involving scores or totals, where the information is widely available, but instead was directed toward individual player prop bets. This has been better received at the state level, but Pallone made it clear Tuesday there is no appetite for these “data fees” in Congress.

State Legislation Still Faces Challenges

Though the leagues will, not surprisingly, continue to find ways to profit off of the newly legalized $150 billion U.S. sports betting market, it once again seems there is little hope for a federal framework to do so.

This also applies to those who seek a federal pathway to help states approve sports betting bills. While gaming industry leaders by and large support the current state-by-state system, it doesn’t come without hiccups. Only eight states take bets now, one year after the Supreme Court struck down the federal ban, and the majority of those states already had some sort of sports betting legislation on the books.

Meanwhile the legislative process has rarely proceeded smoothly, even in those states with widespread support for legislation.

Speaking at the All American Sports Betting Summit, Michigan state Rep. Brandt Iden said education on gambling is still a major challenge in his state, and in legislatures across the country. Michigan lawmakers seemed to have passed a sweeping gaming expansion bill late last year, only to have it vetoed by outgoing Gov. Rick Snyder in one of his last few days in office.

Now Iden and other gaming backers in Lansing are starting over, working to educate newly elected lawmakers and galvanize support among a diverse swath of lawmakers. The uphill climb facing Michigan is more common than not in the other 49 states, and it appears any state looking to approve betting on sporting events will have to do so on their own.

New Jersey has been the shining example of the do-it-yourself approach and is a point of pride among the state’s elected officials after generating more than $3 billion in total handle in the year since it took its first bet. But other states -- thanks to exorbitant tax rates, limited access or myriad other self-inflicted handicaps -- have fallen short of revenue expectations.

In a best-case scenario, the federal government would enact the groundwork that would provide the infrastructure for states interested in betting. But that too could prove problematic, should an increasingly polarized Congress pass mandates that ultimately restrained the industry.

Regardless, this federal option hasn’t seemed viable in the 13 months since the Supreme Court decision. Tuesday’s conference hammered another nail in the federal sports betting coffin.

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