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Proposed Missouri Sports Betting Bill That Would Pay Integrity Fees

Proposed Missouri Sports Betting Bill That Would Pay Integrity Fees

The Missouri House of Representatives conducted a hearing on three prospective sports betting bills yesterday, and each of the bills on the docket took a noticeably different slant on regulating the industry in the Show Me State.

Though it’s true all three bills differed from each other, one in particular is cut just about whole cloth from the so called “blueprint” supplied by the NBA and Major League Baseball, the pro sports leagues that are most heavily lobbying around the country for the passage of sports betting. The bill in question, H 2535, sponsored by Rep. Dean Plocher (R-St. Louis), cleaves as closely to the blueprint schema the leagues are peddling as is expedient, and time is in this case of the essence for Missouri, with just six weeks left before sine die ends its 2018 legislative session. Plocher’s bill proposes to pay the pro sports leagues a so called “integrity fee” - 1 percent skim off the top of all handle taken in by sportsbooks in every state is what they are asking for (an amount that equates to just about 20 percent of gross revenues), along with unrestricted bettor data rights.

That fee would be assessed on top of the 12 percent tax on sports betting the state of Missouri wants to place on gambling operators that get a license to offer the option of wagering on sports to their customers. After the conclusion of the preliminary hearing (no action was taken during the meeting), Plocher told the assemblage of local reporters that his plan for sports betting involves paying the leagues their Danegeld with the revenues generated from taxes on the sportsbooks going “toward education.” Plocher also said his main aim was to put Missouri and Missourians in the driver’s seat with regard to how sports betting is run.

“[Sports betting] stays in Missouri,” he said. “It would be regulated by Missouri. The algorithms that are used would be able to be monitored Missourians, so there’s a level of security here that I believe is a must, rather than send money overseas and let foreign countries make the money.”

That last bit is what really serves to unify the state legislatures looking to legalize and tax sports betting and the leagues themselves: the fact that other countries’ legally operating businesses are making money when what could be our own American sports betting industry is not allowed to exist for the most part. Basically, the leagues, it’s worth noting, were savage opponents of any form of legalized sports betting that was not for all intents and purposes contained to the Las Vegas Strip, and were also the main reason the disastrously ineffectual and overreaching Professional and Amateur Sports Protection Act of 1992 (PASPA) was passed in the first place. Though we are sue nobody needs to be reminded of the fact, that law is the same PASPA that could be struck down by the U.S. Supreme Court any day for being unconstitutional, a move that would open up sports betting for nationwide legalization.

The state of New Jersey’s congressional delegation is contending (and have for some time) that the law violates the Equal Sovereignty doctrine of the Constitution by basically telling 46 of 50 states they are prohibited from passing laws to legalize sports betting if they want to do so. The sports leagues know that 2018 is not like the early ‘90s, and not by a long shot: people don’t just have a desktop computer in their living room that may or may not be connected to dial up internet any more – now we’ve all got smartphones, tablets and laptops hooked up to blazing fast wireless internet. At the same time, the millions and millions of fans who watch televised sporting events are betting on those events with increasing regularity (due to the aforementioned ease of access to the internet), and legal overseas based website are swooping in to fill the gap left by unenforceable laws like PASPA.

That has the pro sports leagues, which increasingly depend on sports bettors for their viewership in the age of waning interest from “normie” fans (political controversies, nonstop social engineering projects and legitimate concern over player injuries will do that), running scared to a degree. Into this fray comes the combined lobbying arms of the NBA and MLB, which are partnering in nearly a dozen states to lobby for passage of sports betting laws that are most favorable to the leagues. And basically what they want in exchange for their support (for certain bill proposals in certain states) is a cut of the action and, truthfully, a vast amount of access to and control over users’ personal information, Facebook style.

It is also worth pointing out that representatives from the MLB head office as well as Kansas City Royals, St. Louis Cardinals and the NBA have all submitted written endorsements for Plocher’s proposed bill, while the Missouri Gaming Association (MGA), which represents the Show Me State’s casino industry, opposes it. And vociferously so. A rep from the MGA told House Budget Committee members yesterday that, while the leagues like to bring up the margins generated by sports betting are – in the eyes of the association members anyway – not going to be a “cash boom” like the leagues think they will.

“We take a little bit of a different approach,” he said. “We don’t see this as a cash boom for the [Missouri casino industry]. We see this as another amenity we can offer to patrons who come visit our facilities.”

While there is a good deal of truth to that statement, and it is only fair for each interest group to stick up for, well, its particular interests, conservative estimates of the annual value of the American sports betting industry put yearly handle at somewhere between $150 billion and $250 billion. It is also true that most of the money wagered by American sports fans goes to offshore sportsbooks where it can’t be taxed and the businesses aren’t beholden to state law thanks to the undue and unwanted restrictions placed on what could be a thriving sports betting industry by anti-gambling laws like PASPA. The casino industry writ large (not the Missouri Gaming Association per se) is partially to blame for this, as the big players in that field were all too happy to side with the leagues – still just as greedy as now but apparently less desperate – 25-odd years ago to force PASPA’s passage in order to protect the gambling hegemony of Las Vegas.

All that is to say, there are many competing interests that sometimes overlap in any issue of sufficient magnitude, and Missouri’s sports betting question is no exception, but it ultimately isn’t the business owners nor the sports leagues that the people elected to decide who gets what and how much. The two other bills discussed in the Budget Committee hearing leaned more in the direction that the legislature probably ought to consider as more reasonable alternatives to the blueprint imposed by the NBA and MLB. One proposed bill in particular – H 2320, sponsored by Rep. Bart Korman (R-High Hill), is in many ways so milquetoast that it could qualify for the title of “easiest to pass sports betting bill in America” right now.

Korman’s bill would let pretty much any wagering business already set up in the state obtain a sports betting license – that goes for daily fantasy sports, riverboat casinos, lottery vending terminals and so on. The bill, which was the lead off point of discussion at the April 4 House Budget Committee hearing, accordingly gave a lot of leeway to the Missouri Gaming Commission in terms of setting the standards for sports betting in the state without getting into practically any specifics. That’s pretty much the definition of “please pass me” legislation, which is the whole idea, as Korman explained to reporters prior to the meeting yesterday.

“There’s less to argue about in my bill because it’s basically just setting up the framework,” he said, after talking at greater length about the time crunch being probably the biggest hurdle the Missouri Legislature will have to overcome if it wants to pass sports betting regulatory legislation during the 2018 session.

In defense of what could be seen as a vanilla bill proposal, Korman’s suggestion that the Commission take over for deciding what is and is not permissible for all other forms of gambling allowed in the state, is probably the best we can hope to see in terms of expediency. The Commission already does the same role for other allowable gambling activities, so the body has already established a solid track record for at the very least not being too offensive in terms of regulations. That said, any regs put in place by the Commission would probably lean toward the Missouri casino operators’ wishes, which is still a preferable outcome than paying the leagues what amounts to a tribute or a rent for the “use” of their games.

The final bill up for consideration at the meeting illustrates a swing in the other direction, as H 2406, sponsored by Justin Alferman (R-Herman), leans perhaps too far toward the interests of the state’s riverboat casinos. H 2406 doesn’t get into the particulars of how a legal Missouri sportsbook ought to be run, but instead explicitly limits the available of licensure to operators of casinos, while also setting up a tax on revenues of 6.25 percent. That is less than the amount asked for in Plocher’s proposed bill, but Herman’s bill includes additional fees like a $10,00 first time application fee and a recurring $5,000 annual administrative fee that the sportsbook operators would have to be liable for.

While Herman’s proposed piece of legislation is not as egregious in terms of its demands as the Plocher bill, it does illustrate a point that state lawmakers around the country – including in nearby Kansas – have already come to accept. If the states want a slice of multi-hundred billion dollar sports betting pie, then they are going to have to be warry of indulging too much after the federal government’s longstanding dietary privations. That’s because, if the Garden State is successful in its case to have PASPA repealed (a move that many industry experts feel could presage if not directly lead to the dismantling of most other onerous anti-gambling federal level laws in the US), sports betting is about the explode around the country.

State governments and the operators of their casinos, horse racing tracks, slot parlors, lotteries have all pretty much been howling for a quarter of a century for the right to have a regulated sports betting industry in the United States or at the very least the right to legalize that form of gambling in their state. If they get the chance to do it, they are going to have be very careful when toeing the line of how much cream to skim off the top or their newly minted sportsbooks will find themselves in the awkward position of passing along the tremendous extra cost of doing business along to their customers. And that means payouts or membership fees or whatever could be burdensome at worst or annoying at best to a fickly crowd of sports bettors accustomed to not having to deal with any of that rigmarole at legal offshore sports betting outlets.

If states like the Show Me State want to keep their people betting on sports inside their state lines and not patronizing foreign-run sites anymore, they are going to have to do their best to court those customers. If the ongoing fight in Missouri and other states around the country has shown anything it’s that the best way to do that is not to help out multi billion dollar businesses like the sports leagues which will continue to print money, legalized sports wagering or no. It’s also not to overburden gaming operators with taxes and fees and, frankly, scandalous payouts so that it drives customers into the arms of overseas businesses.

The Show Me State is going to have to show its work, and soon. LegalGamblingUSA knows the clock is ticking on that May 18 deadline, and competitors in other states close at hand are already way ahead of the game.