House Committee Mulls Sports Betting Regulation

House Committee Mulls Sports Betting Regulation

The United States Supreme Court unleashed online sports betting. Now Congress seems interested in asserting some measure of control.

At least on Thursday morning.

Whether the federal government can muster the wherewithal to regulate an industry about to mushroom under state control remains a snarl of business and moral agendas, however, with billions of dollars in play.

That was clear after 90 minutes of hearings in which a disparate panel of gambling industry stakeholders, regulators and abolitionists attempted to convince members of the U.S. House Subcommittee on Crime, Terrorism, Homeland Security and Investigations that their vision of the future of sports betting in America would be the best not only for their respective interests, but the country.

That was clear even in an unclear summation by committee chairman Jim Sensenbrenner (R-Wis).

"The one thing that you all agree on is that for Congress to do is nothing is the worst possible alternative,” he said, suggesting long- and short-term actions were required. “So, this means we have some work to do.... I'm afraid if we don’t, some people will get hurt and hurt very badly."

Congressmen Bring Wary Attitude

Sensenbrenner’s remarks seemed to reflect the sentiment of much of his committee, particularly Virginia Republican Bob Goodlatte, who after asserting that he believes gambling is not “a victimless activity” used the forum to lament tepid enforcement of the Federal Wire Act of 1961 and the Unlawful Gaming Internet Enforcement Act, which he co-authored in 2006. They did not represent the view of Nevada Gaming Control Board chairman Becky Harris, who painstakingly described her state’s history in regulation, or American Gaming Association senior vice president of public affairs and panelist Sara Slane.

“Just as Congress has refrained from regulating lotteries, slot machines, table games and other gambling products, it should also leave sports betting oversight to the states and tribes that are closest to the market,” she said in her testimony. “And further, there is no need for the federal government to oversee the private contractual negotiations that are already occurring among the casino industry and the leagues and owners.

“The bottom line is: With such robust and rigorous regulatory oversight at both the state and federal levels, there is no need to overcomplicate or interfere with a system that is already working.”

John Holden, an associate professor in the Spears School of Business at Oklahoma State, doesn’t believe the hearing will lead to sweeping change anyway.

”I think there’s a possibility we see some federal legislation tied to integrity - and not integrity fees - some sort of modernization of match-fixing rules, sort of some clarifications,” Holden told "I think there’s room for that. I don’t think there would be a lot of objections for gambling operators along those lines.”

States were allowed to pass legislation regulating sports betting following a May Supreme Court decision that struck down the Professional and Amateur Sports Protection Act of 1992. Delaware, Mississippi, New Jersey and West Virginia have since joined Nevada in the business, with several other states in various stages of joining them.

Senator Orrin Hatch (R-Utah) said he would move to introduce federal regulatory legislation, and Senator Chuck Schumer (D-N.Y.) distributed a memo of his ideas – including protection of intellectual property and match-fixing security for sports leagues through “integrity” fees – on Aug. 29.

The Thursday hearing, however, entitled “Post-PASPA: An Examination of Sports Betting in America,” was the first by Congress since the Supreme Court decision.

And it was therefore the first opportunity to stake claims.

Integrity Fees, Data, Security of Interest

Jocelyn Moore, executive vice president of communications and public affairs for the National Football League, advocated for federal involvement, ostensibly to create one national policy – rather than multiple pacts with states - in which bookmakers would be forced to obtain the data on which bets are constructed from professional leagues.

Major League Baseball, the National Basketball Association, and the NCAA have supported the plank.

This, she claimed, would reduce corruption by protecting intellectual property, in keeping, she said with “re-training” of 10,000 employees concerning the perils of leaking information such as injuries or game plans.

Holden said writing single-source intellectual property legislation for sports data would be “untenable.”

That stance was buttressed on Tuesday in a letter to the committee from Rep. Dina Titus (D-Nev.) and Rep. Tom MacArthur (R-N.J.) in which they said “calls for integrity fees paid to leagues would chip away at state revenues and already slim margins for legal sportsbooks, hurting their ability to compete with offshore books and move more consumers into the regulated market.”

The Way Forward is Murky

Sensenbrenner had stated in his opening remarks that three options for Congress were banning sports gambling outright, allowing the states to regulate it or passing minimal guidelines.

“All I kept hearing was a lot of stakeholders and complaining and those stakeholders are powerful, so they held a courtesy hearing for them,” Holden said. “I didn’t hear anything I think would move the needle very much, I don’t expect. I vehemently disagree that the idea of removing government regulation somehow creates a safer betting market and state authorization makes gambling worse. I refuse to believe that. I think the academic work does not support that. We cannot put this back in the bag. We cannot go back to the Supreme Court and say, ‘OK, let’s do a redo.’ I think people hoping for that are being unrealistic.”

Protecting athletes and their families from threats or invasions into their medical conditions became a focal point of the hearing after statements questioning future policy from the NHL, NBA, MLB and NFL player associations were entered in the record.

Rep. Martha Roby (R-Ala.) also asked the panel how to best insulate intercollegiate athletes. While Bernal asserted that their amateur status made athletes unprotectable, Slane insisted that legalized, regulated sports betting would have safeguards.

Harris, who became chair of the Nevada Gaming Control Board in January, said in testimony that the type of match-fixing that seemed a central concern of the committee is less prevalent in a market regulated like Nevada.

Titus and MacArthur, representatives of states with legalized sports betting, implored Congress in their open letter to “consult our states that have already legalized sports betting as you examine the post-PASPA landscape.”

In the letter, Titus and MacArthur made clear their belief that states should retain sovereignty over their individual gaming industries.

“Precedent for federal policy toward gambling has been to assist states in the enforcement of their own laws, prohibiting gaming activities only where it is illegal under state law, rather than to preempt state law,” the letter stated. “Most states already have some form of gaming regulatory structure which could be used to regulate sports books.”

The letter also cited Nevada’s long-standing regulatory history with gambling and that it already had in place several measures opponents cite when advocating for containment or abolition.

The letter continued: “Nevada, which has had legal and regulated sports betting since 1949, proves that sports wagering can be properly regulated at the state level to enshrine consumer protections, law enforcement, and wagering integrity. In Nevada, sports bettors must be 21. Operators must have self-exclusion progams for those with gambling addiction. … Operators, working with data companies, are required to monitor bets for instances of possible match fixing, and share evidence with the Nevada Gaming Control Board, which then investigates and determines the proper course of action. Nevada also requries oddsmakers, not just sportsbook operators, to obtain a full license to further protect wagering integrity.”

“Calls for integrity fees paid to leagues would chip away at state revenues and already slim margins for legal sportsbooks, hurting their ability to compete with offshore books and move more consumers into the regulated market.”

Speakers Form Coalition with Different Agendas

Les Bernal, national director of Stop Predatory Gambling and Jon Bruning of the Coalition to Stop Internet Gambling, formed a bloc with decidedly different rationale.

Bernal’s impassioned testimony cited numerous studies not entered into the record and anecdotes to advocate for the end to “state-sponsored” gambling he deemed a “big con gam” that drives players into poverty.

Bruning, a former Nebraska Attorney General who identified himself on Thursday not with CSIG but from Bruning Law Group, in written testimony stated he was “here to bring a law enforcement perspective to the sports betting discussion,” predicting that the nullification of PASPA will bring a “wild west” scenario of criminality that can only be curtailed by more rigid enforcement of the Wire Act.

Bruning emphasized what he believes is a lawless Internet not adherent to state borders and prime for exploiting minors not old enough to legally gamble.

He did not mention – and was not asked about by Congressmen - that CSIG is reportedly funded by Las Vegas Sands Corp. founder and chairman Sheldon Adelson, a deep-pocketed political donor whose business now faces competition from bookmakers in other states.

Many opinions. Many agendas. Perhaps not much action.

“I think this hearing is a tree falling in the woods,” Holden said.

Here's the House Committee Letter:

House Committee Letter

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