Hedge Your Bets

December 15, 2018  • Institute Staff

This year, the Supreme Court ruled in favor of expanded sports betting. Now, it’s projected that sports betting will be legalized in most states by 2023. As part of its Future of Sports series, the Institute’s Sports & Society Program decided to take a closer look. Gambling Compliance’s James Kilsby moderated a discussion with three industry experts: Major League Baseball’s Morgan Sword, the National Council on Problem Gambling’s Keith Whyte, and Sportsradar’s Dr. Laila Mintas.

JAMES KILSBY: The major pro-sports leagues have traditionally been opposed to lawful wagering. But there has been a significant shift in how Major League Baseball considers sports betting. How have you evolved on this position?

MORGAN SWORD: At Major League Baseball, we are custodians of this sport that means so much to our country and citizens. That obligation informs a lot of the decisions about the way the league operates. There are legitimate arguments on both sides of the sports-betting question. But what we realized is that it no longer matters what our position is, because betting is here. Rather than hand-wringing about whether we are for it or against it, we decided that we would do everything we could to study the countries around the world that offer sports betting and find the absolute best way to do it.

JK: Much has been written about the MLB’s and the NBA’s desire for a so-called “integrity fee” or a “royalty fee” from sports betting, where, for every dollar bet on a game, a small percentage would go to the sports league. That’s not exactly a popular proposal within the gaming industry.

MS: Each state is going to make a decision about whether to create this new industry and whether to award a casino a monopoly on sports betting and all of the millions of dollars of revenue associated with it. And that industry will be 100 percent reliant on the sports leagues to create the events on which the bets are taken. So it’s reasonable that the league, which is spending all this money to create the events on which the bets are made, receive some small compensation from the casino that’s offering the bet. It doesn’t cost the state a dime. It comes from the casino. Most importantly, it’s good policy. It creates a partnership with the league, the operator, and the government to create a vibrant, healthy, safe sports-betting environment.

Almost all of the betting activity on baseball right now happens illegally, either offshore or with your corner guy at the bodega. As a result, Major League Baseball has no visibility into the betting going on in baseball.
— Morgan Sword

JK: What benefit does regulation bring, particularly when it comes to monitoring the integrity of sporting events?

LAILA MINTAS: In past decades, people inside the United States have placed bets offshore. Billions have been spent by Americans outside of the United States. Not only does that mean no tax revenue for the states or other stakeholders; there’s no consumer protection or transparency. So, from an integrity standpoint, offshore betting is very hard to monitor. Sportsradar, our company, provides integrity services to the industry, and what’s really needed is to convert the whole illegal market and illegal betting. Overseas, the regulator sees an account-level monitoring of every bet that comes through the system: who placed the bet, what kind of bet is it, what’s the stake, what’s the outcome? This information is very important for regulators and stakeholders to have in real time, so they can protect us from potential match fixing. Meanwhile, the bookmakers need that information, too, so they can suspend the betting markets and not accept any illegal bets. And law enforcement needs that information to stop game manipulation and match fixing—which are very difficult to prove. Match fixing is so interesting to criminals because it’s high-profit and very low-risk.

MS: Almost all of the betting activity on baseball right now happens illegally, either offshore or with your corner guy at the bodega. As a result, MLB has no visibility into the betting activity going on in baseball. If we start getting a lot of good data coming back to us about the bets that are occurring, hopefully we’re going to be able to set up a system to track betting patterns, identify suspicious bets, and try to act on things before they happen. Every country around the world says you have to do that if you’re serious about protecting the integrity of your sport and the culture around it.

JK: The National Council on Problem Gambling adopted best practices for sports-betting legislation.

KEITH WHYTE: We advanced five principles for sports-betting legislation. First, money. We are looking for a cut of the net revenue to go to prevention and treatment-education programs for problem gambling. Second is regulatory authority: many states, for example, legalized fantasy sports with little or no regulatory agency. Third is putting responsible principles into the legislation itself. Fourth is that there be a minimum age for sports betting and daily fantasy. And fifth, a baseline study of gambling participation and problems put in place prior to the expansion of sports betting, so there can be a good public-policy discussion about this. If those five principles seem very common sense, they are. Yet not a single state that has legalized sports betting has put every one of those five principles in place so far. We’ve had very good discussions with the leagues, with the casinos, with government. We’re not there yet, but the potential is there. America is going to break the mold; we’re not going to do it like it’s been done in the United Kingdom. During the World Cup, 70 percent of the ads in the United Kingdom were for betting shops. There are ads on the youth club websites, even though the kids on the youth clubs are by definition not of legal age. The United States is going to have sports bidding on steroids, but that also offers an opportunity to get out ahead of it and try and think about better ways to do harm minimization.

MS: There was a small group of states that rushed to have sports betting available as soon as humanly possible—with no input from problem-gambling groups and sports leagues. Some of the larger states who have been more thoughtful about this are going slower and are taking meetings with us and listening to valid concerns. That’s reason for optimism.

In the most macro sense possible, the casino has an interest in games being on the level, too. However, they have a much larger and often conflicting incentive to make money. Unless regulators step in and keep the interest of the public in mind.