Since the U.S. Supreme Court ruled in May that the Professional and Amateur Sports Protection Act (PASPA)—a federal law that prohibited states from authorizing sports betting but that also exempted Nevada, Delaware, Oregon and Montana because those states had adopted sports betting practices by the time of PASPA’s enactment in 1992—was unconstitutional, any and all of the 50 states have been able to legalize sports betting.
New Jersey and Delaware have taken advantage of this right and have joined Nevada as states with legalized sports betting. A handful of other states, including West Virginia, Pennsylvania and Mississippi, are expected to do the same in the approaching months. Within the next few years, perhaps two dozen or more states will have legalized sports betting. Meanwhile, Congress could at some point re-enter the sports betting debate by passing legislation that, if signed by the President, would create federal standards for sports betting in all 50 states. Only time will tell how the legalization of sports betting in America will play out. In the meantime, there will be plenty of lobbying and political jockeying.
One important question is how the major professional sports leagues and their respective players associations will adjust their business models to account for legalized sports betting in some but not all states.
On the surface, the leagues find themselves in an awkward spot. The NBA, NFL, MLB, NHL and the NCAA unsuccessfully litigated against New Jersey over whether the state could legalize sports betting in contravention of PASPA’s ban. In other words, those leagues tried to stop the spread of sports betting. Such an effort arguably makes it difficult for leagues to now embrace sports betting. Not only that, but leagues played critical lobbying roles in the passage of PASPA. In doing so, leagues highlighted how integrity-damaging bribes and payoffs, such as when Cincinnati Reds manager Pete Rose bet thousands of dollars on baseball in the late 1980s, harmed the honor of their sports. Anxieties about sports betting ties and the fixing of games continued into the 2000s when NBA referee Tim Donaghy was found to have collaborated with mafia figures to influence scores.
On Tuesday, one league—the NBA—made clear that it intends to embrace sports betting in this post-Murphy v. NCAA world. In a press conference held in New York City on Tuesday, NBA commissioner Adam Silver and MGM Resorts International Chairman & CEO Jim Murren announced a multi-year partnership that will make the Las Vegas-based MGM Resorts the official gaming partner of the NBA and WNBA. The partnership marks the NBA’s first with a sports betting operator in the U.S. More symbolically, it signals the graying of what had been sharp lines of demarcation between sports betting and sports leagues.
A small but powerful partnership
The NBA-MGM deal is non-exclusive and is very modest by NBA deal-making standards. MGM Resorts will utilize NBA and WNBA data and branding on a non-exclusive basis across their land-based and digital sports betting offerings. At the same time, the NBA will promote MGM Resorts across the NBA’s digital assets including NBA TV and NBA.com. Stated differently, it remains possible for the NBA to reach similar deals with other sports betting operators, including those that operate in New Jersey and Delaware. The league can also sign deals with companies engaged in sports data and digital content (two years ago, the NBA, Sportradar and Second Spectrum signed a multi-year partnership related to global distribution of statistics and player tracking). Likewise, MGM Resorts can strike partnership deals with other leagues such as the NFL or NHL.
In addition, according to ESPN’s Darren Rovell, the NBA-MGM partnership is for three years and will pay the NBA north of $25 million. While $25 million is a great deal of money in the abstract, $25 million is arguably tantamount to a drop in the bucket for a league whose 30 teams reportedly generated $7.4 billion last year.
Although the NBA-MGM deal is relatively “small dollars,” it could prove far more consequential from a conceptual standpoint. Consider again the idea that the NBA and MGM Resorts, a sports betting operator, will now share data. It means the league will disclose real-time official NBA data which is faster and more accurate than third party statistics valuable with a sports betting operator. That operator, in turn, will use this new information for a variety of purposes. One likely purpose is to diminish incongruities between different sources of player and team data used by MGM. Another potential purpose entails MGM configuring more advantageous betting lines. NBA commissioner Adam Silver describes the NBA-MGM data sharing as “[resulting] in the best possible gaming and entertainment experience for consumers.” It’s safe to say the experience for the sports betting operator, MGM, will be enhanced as well.
Impact of the NBA-MGM deal on the NBA’s quest for integrity and related fees
The NBA stands to gain from the MGM partnership not only from a marketing standpoint, but also from the vantage point of integrity. MGM will share with the NBA “anonymized real-time data.” This type of data will reflect player and team performance, and will be shared only after removal of any identifiable markers. The anonymized feature should help to mitigate privacy concerns about the sharing of data between MGM and the NBA, and the sharing of data contemplated in any future deals. These are important considerations for the different stakeholders, including the league and players (as discussed below). Meanwhile, the league can use the data to better detect any suspicious statistical phenomena connected to players, coaches and referees. Had the NBA obtained enhanced data while Donaghy officiated games, perhaps the league would have caught scoring discrepancies in games officiated by him.
Money also matters here. The NBA has made so-called “sports betting right and integrity fees” (more commonly referred to as “integrity fees”) a critical demand of state legislatures that are contemplating the legalization of sports betting. Such fees, which are used in European sports betting markets, entail operators and sports books paying fees based on a percentage of revenue generated by bets on games played in those leagues. Leagues are the gratified recipients of the fees.
The NBA has articulated several justifications for sports betting right and integrity fees. One rationale is that sports betting is inherently derivative of sports itself. The ability of sports operators and sports books to accept, and profit from, wagers on NBA games unquestionably free rides on the numerous costs that are borne by NBA owners, NBA players and other parties who help to produce NBA games. After all, NBA games are created through the labor and talents of players, coaches, referees, arena workers and television producers, and are financed through the revenue generated by those games and through the coffers of owners. The sports betting industry doesn’t endure any of those costs. The NBA believes that it, and by extension NBA players, ought to receive a fee or payment to account for their vital role in the construction of games that serve as the foundation for wagers.
The NBA has also stressed that increased sports betting could lead to elevated risks of bettors with financial stakes attempting to influence the outcomes of NBA games. More bluntly put, the NBA doesn’t want players, coaches and referees to be offered bribes to alter games—even in the slightest and least perceptible of ways. To mitigate against such an elevated risk, the NBA intends to spend more resources on compliance, monitoring and investigation of potential irregularities.
Daniel Wallach, a leading sports gaming attorney and a partner with Becker & Poliakoff, believes the NBA-MGM deal could go a long way in advancing the NBA’s interests in promoting the integrity of games. “The deal,” Wallach tells SI.com, “gives the NBA several of the key integrity protections that the league has been seeking legislatively. Most importantly, the deal provides the NBA with ‘real-time’ access to MGM's account-level betting transactions [on an anonymized basis], which will enable the league to more effectively monitor the betting activity.” As Wallach observes, “Having such access has long been part of Adam Silver’s vision in monitoring the betting markets like a stock exchange and serve as an ‘early warning’ system for suspicious wagering activity.”
Integrity fees are inherently controversial. Betting operators and sports books dismiss them as opportunistic ploys by sports leagues to secure a cut of each transaction—the wagers—which those leagues not only long opposed through lobbying and litigation, but which are unnecessary for the transactions to occur. Further, opponents of integrity fees contend that neither the NBA nor any other league sought integrity fees from betting operators in Las Vegas, where legalized sports betting has been in place since 1949. If such fees were so essential, leagues presumably would have requested them decades ago. State governments also seem resistant to integrity fees should those fees reduce collected tax revenue. To date, no state has gone along with integrity fees.
Opponents of integrity fees are likely disappointed by MGM’s willingness to strike a deal with the NBA to share data. “This deal,” Wallach contends, “could serve as a precedent for inclusion [of integrity measures] in state legislation, since the gaming industry has resisted attempts to share betting data [even on an anonymized basis] with the sports leagues.” As Wallach highlights, “[With] one of the world’s largest gaming operators now willing to share this information with the NBA, the leagues will likely have greater success going forward in persuading state lawmakers to include such a requirement in state legislation.”
Impact of the NBA-MGM deal on NBA players
NBA players and the National Basketball Players Association (NBPA) are no doubt carefully watching the league’s maneuvers in the sports betting industry. In May, the NBPA joined other major players associations in seeking a “seat at the table” in any contract negotiations between leagues and companies in the sports betting industry. This request was understandable given that players are (obviously) integral to the playing of games on which bettors bet. If leagues stand to profit through sports betting right and integrity fees, many would argue that players ought to profit as well.
The NBA is well aware of this dynamic. As reported by The Crossover in May, sources familiar with the NBA’s thinking on sports betting right and integrity fees do not forecast disagreements between the league and players. The NBA intends to recognize any fees and other gambling revenue as part of “basketball related income” (BRI). BRI is a technical term that is detailed in Article VII of the collective bargaining agreement and that contemplates revenue generated by TV broadcasts, apparel sales, arena signage and other NBA products and services. Per the CBA, NBA owners and players split BRI more or less evenly, with each receiving between 49% and 51%.
BRI is important for NBA players and teams since its value impacts the salary cap. Indeed, at the most basic level, higher BRI translates into a higher salary cap. If NBA teams anticipate a surge in revenue like the surge they experienced from higher-value TV contracts a few years ago, teams and players would be able to negotiate higher-value contracts. This effect would most likely provide a disproportionate benefit to players who happen to become free agents while the surge takes place. In order to offset those players benefitting by sheer happenstance and to create a more equitable distribution of benefit to players, the NBA and NBPA would need to agree on a plan to smooth out any increases to the salary cap (they failed to agree on such a plan for the recent surge in TV money).
In reality, the NBA-MGM deal is hardly a game-changer when it comes to BRI or the salary cap. The three-year, $25 million (or so) deal pales in comparison to the nine-year, $24 billion TV contract the NBA signed in 2014. However, if the NBA signs other deals in the sports betting industry, and if sports betting right and integrity fees become a reality, the surge in revenue could prove quite considerable. There is real money to be had: The sports betting industry in the U.S. is projected to be worth anywhere from $67 billion to $150 billion. If the NBA and its players can acquire a meaningful portion of that industry, NBA players would stand to benefit with a higher cap.
In addition to economic considerations from the NBA’s deals with sports betting entities, NBA players and their union will be mindful of the relationship between those deals and the disclosure of players’ intellectual property and biophysical data. To be clear, most actual and potential intellectual property and biophysical data issues are resolved through detailed language contained in the CBA. In addition, the NBA and NBPA have exhibited a collaborative and cooperative spirit to resolving questions related to player privacy.
Still, as emerging technologies make it increasingly possible to understand what makes each NBA player unique—and what are each player’s unique health advantages and unique health risks—the NBA and NBPA will need to agree on how proprietary information about individual players is shared with sports betting operators and other third parties who stand to profit from such knowledge. These are hardly theoretical or academic matters: As I detailed in my analysis of the recent wrongful death lawsuit brought by the family of deceased G League player Zeke Upshaw against the NBA, basketball players appear to experience heart problems at higher rates than other persons. Such information could be useful to many types of companies that conduct business with the NBA.
It’s also worth noting that measures designed to secure player privacy are not without vulnerabilities. As we know too well, servers can be hacked. Moreover, unlawful and unethical leaks by persons with access to confidential information happen from time to time. Consider the four Major League Baseball players whose names were leaked as testing positive for performance-enhancing drugs in 2003 even though they were “guaranteed” confidentiality as a condition of partaking in a supposedly anonymous drug-testing survey. They thought they had nothing to fear. They were wrong. Could such a design weakness surface with “anonymized real-time data?” We’ll see.
Overall, though, most NBA players are probably thrilled to see the NBA move first among the major pro leagues in this new world of legalized sports betting. Silver has long seemed “ahead of the curve” on this topic, including in 2014 when Silver openly advocated for the legalization (and federal regulation) of sports betting. While the precise impact of the NBA embracing sports betting remains to be seen, the most likely result will be more money for NBA players. Such an outcome is one that should be well-received.
The Crossover will keep you updated on the NBA’s entry into the sports betting market and its relationship to NBA players.
Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.