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Battle Lines are Being Drawn in Delaware and New Jersey...By Hartley Henderson
For years it has been clear that Jon Kyl, Robert Goodlatte, Spencer Bachus and other Republicans have an issue with online gambling. They have used the argument that online gambling can't be regulated and hence must be banned. While many writers and those in the gambling industry disagreed with the stance, they acknowledged that the politicians' concerns were with internet gambling and not with brick and mortar betting.
Recently, as a result of the recession, Delaware announced that they would be offering sports betting (likely in the way of a lottery) to help boost interest at the casinos and to raise money for the state. New Jersey followed suit, suggesting it would be offering sports wagering also. Delaware stated they had the right to offer sports betting by virtue of a law passed in the early 1990s. The Professional and Amateur Sports Protection Act of 1992 (PASPA) was aimed at defining the legal state of sports betting in the United States and concluded that sports gambling was illegal in all states with the exception of Nevada and Montana which already offered sports wagering, and Oregon and Delaware which were grandfathered in as the result of a sports lottery they once offered. The law also provided a one year window for states which had casinos to get an exemption to the law as well. That exemption was clearly designed for New Jersey, but New Jersey let the one year lapse without indicating it wanted the exemption.
The law really had little effect because no states other than Nevada offered land based sports betting, but that all changed this year. In May, Delaware Governor Jack Markell suggested that Delaware would offer sports betting to bolster its economy during this recession, and to ensure the legality of doing so his government went to the state Supreme Court to get a ruling on whether they could offer sports betting. And furthermore whether or not they were limited to a multi game lottery or if they could allow single game betting. The court ruled that Delaware could indeed offer sports betting and were not limited to the amount of games they had to offer on a ticket.
While the Delaware issue was developing, New Jersey also stated it was planning to offer sports wagering to help boost its casinos and racetracks. State Senator Raymond Lesniak argued that New Jersey's oversight at not getting an exemption in PASPA in 1992 is irrelevant because the U.S. constitution prevails, and New Jersey believes that PASPA violates 5 amendments to the constitution, including the Commerce Clause. To allow Nevada, Montana, Delaware and Oregon the ability to offer something while denying other states that same opportunity, they argue, is unconstitutional under the commerce clause. But Lesniak was most concerned with the financial impact. "This federal law deprives the State of New Jersey of over $100 million of yearly revenues, as well as depriving our casinos, racetracks and Internet operators of over $500 million in gross income," Lesniak said in a statement to the press. Consequently, New Jersey and iMEGA are suing to have the law overturned. Recently, New Jersey Governor Jon Corzine stated his approval of the lawsuit to overturn the law and indicated he may join in the suit.
Not surprisingly the 4 main U.S. based sports leagues challenged both states and are now suing Delaware because they suggested the state Supreme Court was wrong in its ruling since sports handicapping relies on skill and the State's constitution doesn't allow betting on lotteries that involve mostly skill. They also challenge the legality for the state to offer single game wagering. According to Markell, the state offered to meet with the leagues to discuss their concerns, but instead the leagues just filed a lawsuit. This shouldn't be shocking to anyone who has followed the sports leagues attempts to block betting on their games. The NFL unsuccessfully filed a suit against Delaware when they offered the sports lottery in the 1970s and they have unsuccessfully tried to sue Nevada. Furthermore, the NBA threatened to stop teams from operating in Toronto and Vancouver unless the Provinces of Ontario and British Columbia withdrew the NBA from their sports lotteries. The leagues' reasoning as to why they believe gambling threatens integrity is unclear. They will only say that betting on sports raises concerns that "the fix is in," but will not address arguments to the contrary. I've contacted the leagues in the past to ask them why exactly they believe sports betting will hurt the integrity of their games, and I received only one reply from a league spokesman who essentially told me that they don't have to answer to anyone. I've also been told by sportsbooks and politicians that they've received the same type of reaction when they questioned the leagues' motives. In fact when Barney Frank introduced his latest bill aimed at overturning the UIGEA he stated, "The expression by the professional leagues of shock at the notion that people would actually bet on games was one of the least persuasive emotional outbursts I have encountered, but we acknowledged the reality of it." It seems that even to Congress the leagues prefer to holler and cry rather than to present valid arguments. Mind you, the leagues have to take this stance because they don't have a valid argument. In Europe sports betting is helping improve the integrity of games; and Nevada has demonstrated on numerous occasions that transparency with sports betting could help improve game integrity in the United States by identifying suspicious betting and keeping track of individuals who shouldn't be wagering. Realizing they can't possibly win an argument that relies on facts, the leagues instead have chosen to simply sue and essentially say to anyone who questions their motives on why sports betting shouldn't be allowed: "because we said so, that's why!"
While the leagues have made their views known, what is somewhat confusing is the actions of some politicians. Senator Jon Kyl of Arizona, Senator Orrin Hatch of Utah, Representative Greg Weeks of New York, Representative Spencer Bachus of Alabama and Representative Heath Shuler of North Carolina all sent a letter to Attorney General Eric Holder asking him to look into the Delaware issue and also to prevent iMEGA from successfully challenging the constitutionality of PASPA. Shuler is an ex-football player likely still with strong ties to the NFL which could explain his feelings. But why Greg Weeks, a Democrat, has taken a stance is anyone's guess. More importantly, the question that needs to be asked is why Jon Kyl, Spencer Bachus and Orrin Hatch care? This isn't an issue involving online or offshore gambling; it's an issue that involves legal land based gaming in the confines of a state. The fact that Jon Kyl and Spencer Bachus put their names behind the complaint makes it clear that their previous arguments against online gambling were not what they made them out to be. They don't have an issue with online gambling, but rather with gambling, period. Jon Kyl was the first person to issue a bill trying to prevent online gambling, and in doing so stated, "I am no fan of gambling." Nevertheless, he made it crystal clear that his only concern was with online gambling, which he opposed because he was worried it couldn't be regulated, thus allowing unscrupulous operators, compulsive gamblers and underage people to wager, which he claimed was different than land based casinos. His famous line to the media was, "Click the mouse, lose the house." Spencer Bachus co-sponsored the Goodlatte-Leach Internet Gambling Prohibition Act and was shown to be an uneducated fool on the issue of gambling at a House Services Sub Committee meeting last April when the American Banking Association, Barney Frank and others grilled him on why gambling was such a big issue and he reacted like a neophyte. Furthermore, in a famous interview with CNN in 2006 Bachus stated, "There have been studies by Harvard University, University of Pennsylvania, McGill University in Canada, American Psychiatric Association - all of these say the younger someone starts gambling, the more likelihood that they become a compulsive gambler. Addicted to gambling, just like addicted to drugs. So there is a correlation between drug dealers and gambling sites." But again, like Kyl, he made it clear his concern was with online gambling. However in both Delaware and New Jersey what is being discussed is land based betting (likely in casinos and racetracks). So why are these politicians sticking their noses in? There can only be two possible conclusions: 1) Either the politicians are in bed with the leagues and rely on them for political purposes or 2) the politicians like Kyl, Bachus and others are trying to instill their puritan and religious ideals (which opposes gambling in all forms) on the general population, and they only took up the issue of online gambling before because it was the puritan cause du jour. Now sports betting has popped up in the news, so the two anti-gambling zealots have thrown their 2 cents in hoping to deter others from enjoying an activity they deplore. Again, Greg Weeks obviously has his own motives, but no doubt they are similar in nature. And as for Orrin Hatch, Utah doesn't allow any gambling due to the large Mormon population, but he shouldn't care whether Delaware or new Jersey allow their residents to gamble, any more than Corzine or Markell should care whether Utah allows polygamy.
As upsetting as this stance is by politicians who have no business interfering with land based gambling issues in a different state, what is most upsetting is the position of the current Department of Justice. Under the Bush administration it was understood that the DoJ was a puppet of the administration that followed a very neo-conservative stance. But things were supposed to be different under Obama. When Eric Holder was appointed as Attorney General there was hope that the DoJ would take a more liberal stance (as would be expected under a Democratic regime), or at least would be more impartial. But that hasn't been the case (at least in this regard). When Governor Corzine suggested he may become involved in the New Jersey issue to have PASPA ruled unconstitutional, the DoJ tried to have his involvement dismissed - a very curious tactic for a Democratic DoJ against a Democratic governor. The DoJ issued a brief stating that Corzine should not be involved because 1) he has no cognizable interest in the litigation 2) he has no interest that might be impaired by the litigation and 3) any interests Corzine has are already protected by the plaintiffs (Lesniak and iMEGA). Mind you the DoJ also has indicated it was going to try to convince the courts to dismiss any arguments by the plaintiffs. This is a curious tactic by the Justice Department to ward off this suit," Joe Brennan Jr., chairman of iMEGA told the press. "The governor is the duly elected chief executive of his state, and New Jersey obviously has an interest in overturning a law which confers a huge competitive advantage to the only four states that the law (PASPA) protects for sports betting."
"The DoJ is trying to have everyone dismissed from this challenge," Brennan said. "I guess if I didn't want to have to defend this unconstitutional law - which the DoJ actually opposed when it was passed, on the same grounds we do - I'd try to keep this from ever getting into a court room. The DoJ cannot deny, though, that this law grants special status on this issue to only four states, and the other 46 states are deprived the opportunity to decide the issue for themselves."
Mind you, while Eric Holder is trying to have Corzine dismissed from the action because he has no interest in the case, one has to wonder whether Eric Holder should be dismissed as well on the grounds he is not unbiased. In an article on ESPN last Christmas Eve, Lester Munson indicated that Holder worked for the NFL. In the article he wrote the following:
"Holder was a natural choice to lead the effort. He served as deputy attorney general in the Clinton administration and then became a partner in Covington & Burling, a powerful Washington law firm that has long represented the NFL. For seven years, Holder helped the NFL through a number of difficulties, including an investigation of the dog-fighting charges against Michael Vick, the implementation of the Rooney Rule that requires owners to interview minority candidates for head coach vacancies, and the league's personal conduct crackdown." The article added: "Holder is still being paid for his NFL work, with $2.5 million in deferred compensation and separation payments coming to him in 2009, according to a financial disclosure statement he filed with the Judiciary Committee in mid-December." Considering the NFL is the main complainant against sports betting, it only seems logical that someone being paid by the league shouldn't be involved in what should be an unbiased position.
But politics aside, one still needs to ask why the DoJ is involved in this issue at all. This should be a simple decision of the Supreme Court on whether PASPA is constitutional. The court should examine the law, look at the arguments presented by New Jersey, Delaware and any other states that are interested in the outcome and weigh those against the arguments of the leagues and others that want the law to stay. The only real question is whether PASPA is unconstitutional. The fact that it hasn't really been challenged until now is irrelevant. The issue is on the table so the courts need to address it. Why the DoJ cares how the courts rule is a mystery. It's not the DoJ's job to try and influence court decisions, it's their job to enforce the laws passed in Congress and affirmed by the courts. If the courts rule PASPA is constitutional, then by all means the DoJ should enforce the decision. But they shouldn't be taking sides on the constitutional challenge.
Nevertheless the battle lines have been drawn. In one corner you have Barney Frank, Ron Paul and other politicians who don't want the courts infringing on rights (Barney Frank even stated at the World Series of Poker that he believed it was an American's right to gamble), along with the states of Delaware and New Jersey that want land based sports betting legalized to help raise state revenue and level what they believe is an uneven playing field. On the other side you have the sports leagues who believe they are "too important" to ever have their games questioned due to suspicious gambling, as well as neo-conservative politicians, the DoJ and other politicians that appear to be bowing to the leagues. Hopefully the court will look at all the arguments and come to a decision based on fact rather than unwarranted hysterics.
Realizing they can't possibly win an argument that relies on facts, the leagues instead have chosen to simply sue and essentially say to anyone who questions their motives on why sports betting shouldn't be allowed: "because we said so, that's why!"
Thats about all they got
Thx for the read Hartley.
The purpose of life is not to be happy. It is to be useful, to be honorable, to be compassionate, to have it make some difference that you have lived and lived well.
Ralph Waldo Emerson
Hopefully the court does get to rule on this and toss PASPA. Last I checked outlawing alcohol didn't work out too well. With regard to politician motives, the anti-gambling stance could be a driver for some, with a "follow the money" stance for others. Whose money? Perhaps the horse racing lobby? They spent a lot to get the Interstate Horse Racing Act modified to allow online gambling on horse races and the carve-out in UIGEA. The University of Arizona (Kyl's and McCain's state) is one of the leading academic programs for the horse racing industry. McCain, as you may recall, was a driving force behind PASPA back in 1992.
What if the leagues knew that if they did nothing, the train would leave the station and sports betting would become above-board and regulated? Really no different than now, except it's being regulated and taxed...if the leagues truly were against sports betting. What if a part of this was just an act, and the real beef was that the leagues weren't getting any money from sports betting?
Here's an article that tells about Australian professional leagues linking with online gambling firms:
Tuesday, September 30, 2008
Australian Professional Sports Linking to Online Gambling Firms
As opposed to the stance of professional sports in the US (see related post), in Australia, teams are actively working partnerships with gambling firms -- and earning extra cash. They do have limits on the scope of wagers offered, such as limits on whether the teams can profit or loss from a single match, and limits on wagers on political or other non-sporting propositions.
The cash isn't large, but $2 to $3 million (Australian dollars) per year isn't insignificant. Professional sports leagues' salary structures in other countries are generally not as large as their U.S. counterparts. For 2008, the Australian National Rugby League has a salary cap of $4.1 million (Australian dollars), which is approximately $3.25 million U.S. dollars. So, adding $2 to $3 million in easy revenue when you're only paying out $4 million in salaries (hopefully getting revenues in excess of costs), just adds to the profit picture. The Canberra Times article has information on the gambling deal just struck with the Gold Coast Titans of the NRL. For the Australian Football League, their 2008 salary cap is $8.5 million (AUD) / $6.75 million (USD). So, $2 to $3 million would be a material boost to that league as well. The Australian Football League has the highest salary cap of the professional sports leagues in that country.
Two excerpts from the article are very informative and show the different (and rational in my opinion) perspective of sports leagues in other countries and the leagues here in the U.S.
The Gold Coast Titans CEO was quoted that he anticipated criticism of the club's move into gambling but argued that bookmaking organizations were making money from betting on sport, including the NRL, so they might as well profit.
The best quote is, "while we accept that sports betting is a reality and that clubs are looking to build revenue streams, we will retain the right to examine each proposal on a case-by-case basis," NRL chief executive David Gallop said.
Huge. The chief executive (i.e. commissioner) of a professional sports league accepts sports betting as a reality and accepts the desire by clubs to tie into that to build revenue, but reserves the right to intelligently review and regulate such activity. Seems to make sense to me.
The gambling entity has agreed as part of the deal to implement safeguards to protect the integrity of the game and players and in addition the team signed a betting integrity agreement.
When will the U.S. sports leagues figure this out?
So, what if this push now is an attempt to get a "piece of the action?" How would this work? Here are my thoughts:
1. Right now, the leagues (incl NCAA) get zip from gambling (except for those logo licenses to lottery companies) -- so we know the leagues aren't THAT opposed to gambling.
2. The leagues have zero chance of getting anything out of Nevada, but race/sports books there only generate about $2.5 billion in handle.
3. Delaware is geographically much better. What is the population within 150 miles of a Delaware border? 30 million? 40 million? More? Very lucrative population centers. Nevada is nice, but Las Vegas and Reno aren't as close to San Francisco, Los Angeles and Phoenix as Dover is to Washington, Baltimore, Philadelphia and New York City.
4. New Jersey is legally challenging PASPA, so their leagues' legal leverage could go away. They have to move fast.
5. They cut a deal with Delaware getting a piece of the action with regard to sports wagers. PASPA isn't challenged - this is a way to keep PASPA as the leverage for every state (except for Nevada, Oregon and Montana, but the latter two are insignificant). The leagues then state they are now in favor of this "new strong, high-integrity regulatory structure." Every state that wants sports betting can have it - keeping for now the prohibition of ONLINE sports betting - you have to go to a brick and mortar facility.
6. Nevada will have their handle drop dramatically as the feeder states (i.e. California) have legal sports betting in their states, so the leagues get royalties on 95%+ of the now legal sports betting in the US.
My 2 cents!
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