Legalized Sports Gambling: Leagues and States Roll the Dice

Legalized Sports Gambling: Leagues and States Roll the Dice


– Good afternoon, good afternoon. Predictably this front row is empty as if I’d call on anybody. We will have some time at the back end for you and your questions
and your observations, so don’t lose heart about that. Our topic today is sports gambling, what’s going on, what will go on now that the Supreme Court has spoken. We have a panel, from a moderator’s point of
view it’s a terrible panel. They’re all lawyers, so
they may be very boring, I don’t know, lawyers tend to be boring. What’s interesting from your perspective since I assume that some of you are interested in sports, possibly interested in a sports career, these five people have integrated their legal education with sports, in highly successful ways. Derek, tell us about yourself. How’d you get to the
sports end of the spectrum? – Really by accident, I
had no desire necessarily to be in sports but I had a good friend who worked for the
National Football League, and was leaving the league
to go work for the Jaguars and called me up and said
would you be interested in coming back to New York
and working for the NFL and I said sure, and that’s how I ended up in the NFL. – You make it seem so obvious, who wouldn’t want to work for the NFL? – It was a great opportunity, at the time I was working for the NCAA what they call a boomerang employee. I worked for the NCAA
as a young investigator, and then came back a
number of years later, but sports is very much a
profession about relationships and who you know. You have to be competent, but contacts are really important. – So now you’re with the NCAA. – That’s correct. – You’ve left out your tour with the FBI. – Yes, I began my career
as a special agent with the FBI in New York, right after I graduated from law school, so I spent five years in
the New York office here. – Well, you’re proof of the proposition that life is fortuitous. You move along, and who knows. Ari, how about you? – Yeah, my story’s not
that different, really. I don’t wanna presume too much, but probably my law school
days are the closest to where I am now on this panel. (laughter) So I worked at a firm in
New York for a few years and wanted to get into something smaller, something a little more in line with the passions that I have, sports being one of them, and had connected with
some people at FanDuel. It was an emerging industry, one that I’m sure you’re all aware has some significant legal touch points, so it was a very interesting
company to get involved with. And just again, fortuitous. Right place, right time. – Rick. – Same general idea, although I think closer to
what you started with Arthur in terms of marrying an
existing interest in sports. I’m gonna open the sports page first pretty much every morning no matter what, with the happenstance of being a lawyer, after leaving law school, considering environmental law as something that I’d be interested
in and also sports law. Was fortunate to work at a
law firm in Washington, D.C. that represented the
National Football League and the National Hockey League and did some work for those clients and got to meet people at other leagues. In 1993 moved and took a job at the NBA, and that’s 25 years ago,
and I’m still there. – Do you actually read sports pages? Do you read the newspaper? – I said that for your benefit. I don’t really. (laughter) – He treats me as an old fogie. It’s funny, you read it first. – Yes. – I read it last. It’s like icing on the cake. I save it. You know I go past the obits and then I get to the sports page. – Got it. – Jodi. – So I’m on a panel here
with a couple of old friends. I just want to mention. Derek and I were both employed by the NFL at the same time, worked together. And while I was at the NFL, Rick was one of our outside lawyers. My story is very similar to Rick’s. I started out at a firm. My exit strategy was to
find a job in sports. I did, I moved onto the NFL. I spent 13 years there, and now I’m in academia, teaching among other things sports law both here and at Brooklyn Law School. – David. – Like everybody else it seems
like you just fell into this. My background is that I was
appointed by Governor Christie after being on his staff for a few years to work on Atlantic City reform efforts. For those who don’t know, in New Jersey, Atlantic
City is the only area you can engage in casino gambling. Lo and behold, New Jersey decides to have a sports wagering law. We passed it through constitution. We have a law that gets
promulgated by us in 2012. Requires regulations to be drafted by the Division of Gaming Enforcement which I am in charge of. I was very happy to do that, but I was hoping that the
leagues might get an injunction long before I had to get that work done. They did not. – [Derek] Sorry. – I know. And we were days from
starting legalized gambling under the first law when the injunction came in and therefore it’s NCAA versus Christie. I’m second, Rebuck. And the rest is history as we go through. – Okay. To bring everyone up to speed, our panel really begins, life in a sense begins with that decision last
made by the Supreme Court. What’s denominated NCAA I guess, Murphy. – [Jodi] Murphy. – It’s Murphy versus NCAA. In two or three minutes,
state the case, Jodi. – So this is a case– – I’ve always wanted to do
that to a law professor. (laughing) – Exactly. This is a case that David spent 10 years of his life litigating, so I almost feel that it’s something you might know a little bit more about than I do, but I just wanna point out because of a question a student asked me in my sports law class last week. I just want to make sure
everybody knows that before PASPA was passed in 1992, my student asked me, “Well, so what was it like back then when all the states had gambling?” So that’s not what it was like. This is a country that for a hundred years for the most part, had no legalized sports wagering and very little legalized gambling. In fact the only state that
had a full fledged sports book before the 1992 law and
mostly since then was Nevada. And there were a handful of other states that used sports wagering
as a basis for lotteries or other revenue generating activities. And PASPA was passed in 1992 largely as a result of
lobbying by the sports leagues and the NCAA to protect
the integrity of the game. And it basically said that states who currently had
any form of sports wagering were grandfathered, every other state had one year to pass a sports wagering legislation and then you’re out of luck. There will be no legalized sports gambling in the United States other
than in those jurisdictions. At the end of the day you
had four jurisdictions that allowed some sort of wagering and a lot of states with, what I would call, buyer’s
remorse or legislator’s remorse, like New Jersey, for example, that decided after the fact, after the deadlines had passed, gee, sports gambling would be a good, good way to revitalize Atlantic City. It would be good way to
generate state revenues. We should be entitled to
engage in this form of commerce because it’s traditionally been within the state’s police powers and there’s something about
PAPSA that doesn’t fit the constitutional structure that regulates the balance of power between the states and the feds. So they brought this lawsuit. It took them up and
down the federal courts three times to finally
get to the Supreme Court and last year under a
doctrine known as the Anti-Commandeering Doctrine, the Supreme Court decided PAPSA was, in fact, unconstitutional, head-to-toe. Opened up the floodgates
for every state now to reconsider and perhaps finally
introduce sports wagering. – Anti-commandeering. – Nice. Pound out. – Too new? – Yes. – Basically, under the 10th
amendment, the court felled. The federal government
could not commandeer, could not direct state legislation. And that’s the way the court read it with two dissents and one partial dissent. You were in the courtroom that day, weren’t you, Rick, I think I heard. – I was, along with others. – Yes. I mean, it’s one of those situations, those of you who are
going to be litigators, you lose, you lose, you lose, district judge, panel
of the third circuit, the third circuit en Banc. Basically, enforced this statute. – [Rick] Yeah. – Supreme Court of the United States, basically six and a
half to two and a half. – [Rick] Right. – Threw it out. – We have more judges than them, if you total them all up. If you add all of them over
the course of five years, ultimately, we had more. Doesn’t matter.
– Doesn’t matter. – When you lose at the end,
it only matters, yeah, yeah. – Yeah. So the one anecdote I
told earlier today was the interesting thing about the case, I was asked after the argument by someone who wasn’t there, what was discussed about sports gambling? And what the justices said
about sports gambling. And the answer was, nothing. Because the entire argument was about a very abstruse doctrine
of constitutional law called anti-commandeering, and there were three cases, or four, that have ever been cited
by the Supreme Court that relate to anti-commandeering, one of which has to do with bearer bonds, and so my response was
to the person who asked, I said, the justices said
nothing about sports gambling, but if you wanna hear about bearer bonds, I can tell you all about that, because they talked a
lot about bearer bonds. – Did you predict the result? – I predicted the result, it’s one of those ones where you can reasonably read where the
justices were coming out, they were pretty, they
telegraphed their views fairly directly, and so if I had placed a wager, I would have won. – Can I ask Rick something?
– Yeah. – So the NBA was one of
the defenders of PASPA, right?
– Yes. – They were one of the parties that wanted to preserve a
federal regime in which states could not legalize sports gambling. But about a year or so
prior to this outcome, maybe it was two years, your commissioner took
a very different stance. And yet you still pursued the case. I always wondered about that. – Well, I would say a couple things. First of all, we had
been in the litigation for quite a while, as was stated, it went up
and down several times, from the district court
to the third circuit, and we didn’t feel like it was appropriate to drop out of a lawsuit at a later point. Secondly, our view was and remains that the way to deal with sports gambling is on a uniform, national basis through a federal law that regulates it so that, at least from the
vantage point of our league, and I think other leagues, and maybe even the NCAA, that we’re focused on one
set of rules and regulations and it can be the same everywhere. We felt that in order
to get to that place, we’d be better off preserving
the existing federal law and then through congress to replace it, as opposed to what ultimately happened, which was striking down the federal law and then seeing what
would happen in congress, which so far has been nothing, and I would wager that it will
be nothing for quite a while, and now, sorta dealing with it in 50 different states,
which is what we’re doing. – So, Derek, why was the NCAA involved? – Well, I think very easily, the NCAA has had a long
standing opposition to sports wagering, and is just consistent with the philosophy of our membership, they don’t believe it’s
in the best interest of collegiate athletics, or the welfare of student athletes, so that’s been the NCAA’s
long standing position. The court’s decision in no
way changed our policies, so it’s still a prohibition
for a student athlete, for myself, for a coach, administrator, to engage in any sports wagering where the NCAA sponsors
a national championship. – I love it when you NCAA guys speak of the student athlete. (laughter) As if he or she exists. – We believe they do. – You believe they do. Belief is a wonderful thing. Now, David, were you
in the courtroom when– – Yes, I was also there, and I came to the same
conclusion that Rick did very early on, and the first thing we did when we returned to New Jersey was we pulled all the
casino leadership together and said three things to them. One, we’re gonna win this case. Two, the state of New
Jersey is gonna roll out sports wagering immediately
after we win the case and have a new law passed, because we need a new law passed, therefore, you need to be ready, you need to be ready
by doing three things. Start your construction plans now, for building your sports book. Two, pick your partners, because for people who don’t
understand sports wagering, casinos and racetracks do not
engage in sports wagering. They have partnerships with companies that are experts in that
throughout the world, that run the sports wagering for them. Pick your partners, get them into the state, and we have to vet them to make sure they’re not
tied to organized crime. And the last thing is, we told them get yourself a good lobbyist, because the legislature, when they get a hold of this, they’re gonna twist it all over the place before the law becomes
operational in New Jersey. And then sure enough, we won the case May 14th, and Governor Murphy, to his word, signed the law four weeks later, and on his desk, which he demanded of us, were the regulations to implement sports wagering immediately, and we began sports
wagering three days later. – Why was New Jersey so
pathological about this? I mean, the case was
originally Christie, right? – Correct.
– Governor Christie. Claims Governor Murphy. And you guys are losing,
losing, losing, losing, yet you say we’re gonna win this case. – Well, we did two things that worked in our favor. One, if anybody knows
about state governments, people get a little annoyed
when you’re spending millions of dollars on a case which people think you’re gonna lose, so behind the scenes, Governor Christie and the administration came to me to go the casinos and we went to the casinos and said, to the racetracks too, you’re a fee-funded organization, which means you pay us to regulate you, therefore, you’re paying for
the entire litigation costs. We didn’t have to worry
about taxpayer monies funding the litigation. The second thing that we did beyond that was you had some extremely
strong personalities in our legislature and with our governor, and when they think they are right, they’re gonna run to the end and fight you all the way, so the force of will with people like Ray Lesniack, state senator, president of the senate, Steve Sweeney, Governor Christie, Governor Murphy, you know, he’s the closer that brings this to finalization, but they just felt we had the right case and we’re gonna fight it to the end. And we got lucky. – Ari, were you just an idle bystander as this was going on? – It sounds like I was the only one not in the courtroom, but FanDuel traditionally
is a fantasy sports company, we had our interests in
this case, obviously, given the direction we’ve gone now, but for us, the NBA,
NCAA, state of New Jersey, these were the real stakeholders in it. Our observation was purely from a speculative commercial standpoint, in that since New Jersey has gone online with sports wagering, soon after the case was decided, our company was acquired by Patty Power, Betfair, which is one of the
largest worldwide operators, they obviously saw the value in having a well-known national brand that has millions of registered users who are avid sports fan, and so, as you’ve seen the success that both us and Draft Kings
have experienced in the market, to begin, it was an obviously
good thing for our business, and one thing that we kept a close eye on. – So what actually has New Jersey done? What’s legal in New Jersey? – Well, for those who ride the trains, which I just rode in
from New Jersey today, if you don’t know that
you can gamble online through Draft Kings, you must be blind. (laughter) Every ad on every billboard coming into Manhattan talks about Draft Kings and FanDuel and being able to gamble online. But what we have done is very simple. We now have eight operations, what I call retail, brick and mortar operations in the state, two racetracks, six casinos, we have eight mobile wagering sites, FanDuel, Draft Kings are two, there’s six others, we have a lot more in queue. I expect there’ll be two more casinos that will come up and live and probably another
half dozen mobile sites. We have some of the largest international mobile sites coming in. Sports wagering, you have to understand, is in a worldwide setting, it is a multi-billion dollar industry. United States, infancy stage. Europe, it’s a way of life, and it has been for
probably 20 years on mobile, and 100 years in England from the sports books that they run. So, there will be massive expansion, what New Jersey is doing now, we feel like we’re the poster
child for other states, we feel very nervous, I just came back from Nevada, there’s at least a half dozen states that are ready to strike in 2019 after the midterm elections, because if anybody remembers, your politicians in the audience, nobody wants to talk about sports wagering before they’re elected. After they get elected, they’re gonna move quickly. So the midwest, look out. (laughter) – So, if I get this straight, there are six casinos and two racetracks, and I can wager there, hm? – [David] Correct. – And I can wager online. – [David] Correct. – And what does New
Jersey get out of this? – Oh, we get revenue, of course, but the big argument right now– – Oh, you pass over that so quickly. – Nah, nah, nah.
– Get what? – This is all commerce, everybody wants a piece of the pie. The federal government
receives a tax today, the federal government who
opposed us in sports wagering is taxing sports wagering, gets about five percent of
the gross gaming revenue, tax. State of New Jersey, we get a lot more. We got eight and a half, plus another 1.25 kicker for locals plus the mobile side, we tax a little higher, just because we can get
more money from them because there’s more money
wagered mobile, online, than there is onsite. And the third group, the operators. They make a lot of money. They basically make five
percent of what’s handled, handled is how much is wagered, five percent is gross gaming revenue, and the last group of this
partnership is the leagues. They wanna monetize,
the direct monetization somehow, to assist their
corporate interests. And there’s a lot of debate on that, Rick can talk about the NCAA, I mean the NBA, what they’re asking for in
their model legislation. So yes, four groups, they’re
all getting a piece of the pie. – And what is it you’re asking for, Rick? Since the NBA is still among the more aggressive of the leagues. – So, we were fairly early into the effort to get model
legislation put forward for states to consider, who are interested in
legalizing sports gambling, we have a model bill that we have been working with legislators
on ever since May, actually, before May, because I came back from
the argument in December and said, we’re going down, so let’s get out there. So we were out there in January with what we thought made sense. And look, it starts from
the proposition that sports gambling that
we’re all talking about is happening by virtue of the product that our league produces,
and other leagues produce, and the NCAA produces. And in speaking for the NBA, excuse me, that’s an enterprise that costs us an excess of seven
billion dollars a year to produce, the games, and the
competition that’s out there, and so, our view is that
this isn’t a deck of cards, it’s not a piece of green felt that is easily rolled out, it’s something that costs a
tremendous amount of money to produce, and if
someone is then gonna go and earn money on wagering on those games, that we ought to at least be part of that, you know, as a royalty for
the intellectual property and for the effort of
expense that we have put in. Secondarily, there’s going to be and is ongoing in my office quite a bit of additional
effort around integrity, standing up an integrity unit that’s more robust than we’ve had before, hiring more people, and having platforms for
analyzing a lot of data. There’s a fair amount of
expense associated with that that also is a justification for having some amount of this money come back to us, and then the third point is just is the risk factor when there’s a gambling scandal, if there’s a gambling scandal that relates to our games, I don’t think that the gambling operators are really, depending on the facts, of course, and what exactly
we’re talking about, but I think the leagues are the ones that bear the risk of that issue, and so, for all of those reasons what we have said, we started out in our model legislation with a one percent royalty fee off of the handle, which means the amount bet on the contest, and discussions with the operators, discussions with the states, the place we are now is on a .25% fee, which we think is very reasonable and something that can be easily handled by the operators. – Are you still trying to
get federal legislation? It’s a misnomer to say
that the Murphy case legalized sports gambling, it didn’t. What could congress do, at this point? – Well, look, the main issue in the court, again, just not spending
too much time there, but in lay terms, the problem was that
the federal government passed a law that said
sports gambling is illegal, and then left it up to the states to essentially enforce that, and that’s not fair or right, you can’t commandeer the
apparatus of state governments to enforce federal policy, so what the federal government could have done, maybe should have done, back in the world when they were trying to ban sports gambling, was to create some office
of gambling enforcement, creating some apparatus
that would actually enforce that law and
put resources behind it, which they didn’t do, they left that all to
the states to handle. So, we certainly think that the federal government could adopt a set of regulations here that would require the kinds
of integrity provisions that we’re looking for in
state-by-state legislation that would provide consumer protections, which is part of what we’re
going to the states for, and it would create a regulatory
framework around this. Now there’s a ton of
expertise in the states, gentleman who has got a ton of it sitting down on the end here, and I’m not sitting here saying that I think the federal
government can do it better than he does it, I don’t
believe that for a second, my main issue is, what I’d like to do is nominate him for the federal job so that he could then go
and run the whole thing, and I wouldn’t have to– – Nah, nah, not gonna happen. Not in a Donald Trump and– – No, I don’t think, you know what? – He’d be fired in two weeks. – There may be an opportunity
in a couple years, just take the long view here, okay, take the long view. So, but the point is, I’d love to have professionals who have that experience but doing it on fifty states, we’re gonna get a bunch of
different approaches to this, we’re gonna get a bunch of different ways it’s gonna happen, and it’s gonna be very difficult for the leagues to deal
in that environment. – And anyway, I share
a lot of the statements made here with regards to integrity. I mean, when you look
at the model legislation the NBA is providing,
there’s two components. One is clearly how can they benefit with a commercial interest, and direct monetization
that doesn’t exist today. Eight states have
legalized sports wagering, and none have given them any
direct financial benefits. – But hope springs eternal.
– Right. But the second part of their legislation, I would agree with, and that is how we begin to work together to share information to reduce
the risk of match fixing, because match fixing is real, we have a whole history through
illegal sports wagering, where there have been terrible
situations of match fixing, and we need to find ways to work together, and the only way we can do that is by working with some
of the ideas they have, negotiate, put behind these
adversarial relationships, which were real, and now move forward. And there’s two areas they’ve asked for that I would kinda disagree with but would negotiate with, and that is one of the
factors they’ve asked for is absolute veto power over any event that’s gonna be gambled on. We’re not gonna give
them absolute veto power. But we are giving them a good mechanism, we’ve gotta communicate, because they have
information that we need, where they can come to us and say, as a state, we’re very suspicious about this event, can you pull it off the board? Absolutely, they have full authority to pull anything off
the board at any time. Second thing is, they’ve asked for unimpeded access to all gaming data. Unimpeded access to the entire record of everybody who’s ever gambled on any event for whatever reason. Very suspicious of that request, however, there is a desire
to work together with them, and there should be a mechanism where they get access to all the data that we have that allows them to deal
with integrity issues associated with an event or something that’s unusual or suspicious where they can talk to us and say, something about tonight’s Nix game, not really happy about that, could you pull the records on everybody that’s gambling on that, and we can analyze it. We’ll work with them on that. – So, just since I know
this will live forever on the internet in the world where there’s no right
to be forgotten anymore, and because I’m a lawyer, I will only say that a
couple of those descriptions were not actually what we’re asking for, but that’s fine. (laughter) We’re asking for a more
limited set of data from people, we don’t need
to see every single thing, it can be anonymous, et cetera. But, generally speaking, I would say that we are
trying to work with states and we share common
interests on integrity, we share common interests
on consumer protection, trying to figure that out, we differ on whether the leagues should be able to receive any
compensation for this at all. – So I would just point out that there’s a useful blueprint for how the federal government might regulate, and even how
the states might regulate in a statement that our
senator, Chuck Schumer, put out over the summer after the Murphy decision came down. Protecting the Games We Love after Murphy, a Federal Framework
for Consumer Protection and Sports Integrity, and it covers a lot of the issues that were just raised, it’s basically a three part statement which prioritizes protecting young people and people who suffer
from gambling addiction, protecting the integrity of the game, and protecting consumers, and a key point which
bears repeating is that information exchange and coordination amongst the various stakeholders is essential for avoiding match fixing, and that’s what goes on in Europe. I don’t know if any of you
follow European sports, but there have been scandal after scandal in cricket, rugby, soccer,
tennis, you name it, there’s actually a
European-based newsletter called Law in Sport,
which gives a bi-monthly, this is how frequently this is happening, bi-monthly, they report on all the latest match fixing and what’s known as spot fixing scandals, and it’s nonstop. Now I’m not sure that
the reason they’re aware of so much integrity
threats to their games is because gambling is legalized, there is the argument that the situation is worse
when gambling is illegal, we just don’t know about it, and that legalized gambling generates the data that allows us to make the connections, put the puzzle pieces together, and find the integrity threats. But the fact is that those are very real, and that the European
model is a useful one in designing how we avoid those threats in the United States. – If I were a gambler, this is purely hypothetical, and prized my privacy, I’d rather gamble
illegally and be anonymous than have these two data freaks know everything about me. Ari, do you have this problem? – Well, I’ll let Ari answer, but only to the point, again, I wouldn’t get into the weeds here, but I’m not interested
in knowing your name, in this hypothetical
world in which you gamble. (laughter) This very unusually
strained hypothetical– – You should know, Rick is
a former student of mine, and is now getting even. – Payback’s a bitch. (laughter) So in this world of hypothetical gambling, and I’ll recite your
social security number now, I don’t wanna know any personal details, I just need, what I’m interested in is anonymized stuff that would allow us to see trends. So we’d see a spike in
interest on a certain thing, not necessarily that you’re
doing it, particularly. – And I think we’ll have
a system in play for that, and they should have access when needed. We’re not gonna give it to them upfront. Data elements that we’re talking about are hundreds of thousands of wagers, anything in New Jersey now, we had a 186 million handle
in the month of September, 110 million was through
the internet, or mobile, the transactions are massive, and that doesn’t include the illegal sites that the professor, sorry, I have to call you that, was talking about. Law enforcement reports to me, they’ve identified 108 illegal websites that are currently operational
in the United States. Every state, they’re operational in. Every state. And we can monitor them, why can we monitor them? They’re right on the internet. Check your phone now, how can you place a bet in
the state of New Jersey? First site on Google that pops up, MyBookieLive.lb It’s illegal. You can go create an
account, gamble on that, probably in a minute, two minutes, and you can start wagering. And you have complete privacy protection, because no one’s gonna
ever find out about you. – But we prefer you go to New Jersey and wager on FanDuel. (laughter)
– Yes. – As for the privacy thing, I think, look, I have friends who’ve
said the same thing to me, why, I have a bookie, why don’t I just go to him, I won’t get a tax return. I think this is an emerging market, and one of our duties as a
new operator in that market is to provide a fun and also a safe place, and I know that sounds a bit cliche, but the truth is, as a regulated entity, you have consumer
obligations to hold up to. And if you as a user run
into an issue with a bookie, like, good luck, I don’t think it’s someone
you’d particularly wanna chase after to get your money if they’re not paying you out. Us, on the other hand, you know who we are, you know our brand, and you know our regulator. And so, if FanDuel does something that you feel wrongs you, you have an avenue to raise it, and I trust that Director Rebuck will let us know about it. That doesn’t exist if you’re operating in the black market. – Derek, as you’ve listened to this, all this talk about money here and there, and match fixing, do you have confidence now that you can probably
bet on college sports at casinos, racetracks, online, are you particularly worried since you deal with the first
A is PASPA, amateur? – It is a significant concern in the NCAA and after the court ruled in Murphy, our president appointed
an internal task force within our office to really do a top-to-bottom review of sports wagering issues and the impact on the NCAA and collegiate athletics. There was some discussion about whether there were opportunities for member institutions, the NCAA conferences to monetize it so there’s no support in our membership for that, at this point, I think the areas they’re really focused on are we need to make sure we continue to do efforts to educate our student athletes, we do a lot of education with them now, they have an annual certification, they have to attest that
they have not participated in any form of sports wagering, but they are a young and often
times vulnerable population and so we have to continue to educate because even though it’s legal, they still can’t participate in it as as student athlete. I can’t participate in it, anyone else in America can, but they cannot. I think the things that concern us, not just about the ability to wage, but confidential information, information they have access to about their teammates. My alma mater, the University of Alabama, there’s a lot of interest in whether our quarterback
will play this weekend and whether he will play going forward, his ability to play impacts the betting line dramatically. So that’s another issue we’re looking at, we’ve engaged with a vendor to assist us in integrity services so that we will receive very timely
and accurate information if there is significant or
suspicious or unusual activity in the betting lines on our games. They were gonna look at all the sports, but quite honestly, our biggest concern, men’s
basketball and football. Those are the areas that I think would prevent the greatest challenges. We look at our officiating, unlike the professional sports leagues, those officials are employees of the National Basketball Association, the NHL, the NFL, and so forth. Ours are independent contractors, so they don’t work for the NCAA or our conferences necessarily, but they are independent contractors and engage with their services. So we already do extensive
background investigations, those will be enhanced in many respects. The last area is really looking at what we call information
and data management, injury reports, as I
alluded to just briefly, we have challenges in that area because they are students, and student records, as you all know, are governed by FERPA. So when you talk about
whether a player will play and the status of his injury, or a student athlete, what information can you divulge without violating FERPA? Those are some of the challenges that we’re dealing with now, the internal working group is working on and trying to come to some resolution. The last area, as you all may know, we’ve had a prohibition for years with regard to any of our
national championships being played in states
that allow sports wagering, and so that has been suspended because of a decision because essentially now you would take virtually every state that
hosts a national championship off the table, so that policy has been suspended and it will allow our host committees to entertain bids for the
Division One Men’s Basketball Tournament Final Four to be located in those areas, so those are some of the key issues that we are dealing with now, that are really priorities for the association going forward. – Do you have a position with regards to federal legislation? – We do, in fact, our senior executives recently have had some meetings
with the Justice Department around a federal framework, we think that’s the most
effective way to address this, as opposed to having
50 different state laws regarding sports wagering, so we’re hopeful that there will be some federal framework that will put out a consistent policy
about sports wagering, so that is something that is
very important to the NCAA. – But realistically, you don’t think that federal legislation will prohibit wagering on
amateur athletic events? – You know, I honestly don’t know, I mean, if we, in a perfect world, we would hope that’s the case it’ll be, but I think it’s pretty
much understood now the horse is already out of the barn, I think that’s the landscape where we’re gonna be going forward, that sports wagering is acceptable, it’s legal, it’s regulated, and I think we just have to adjust, that’s the environment going forward, where do we fit in in collegiate athletics to make sure that our games stay legit, and that our student athletes are not harmed in any way, so I think that there’s a recognition that this is the reality
of where we’re going to be, and going forward, how do we coexist in that new environment? – Hey, Derek, I know this is
not the topic for the day, but doesn’t the fact that
there’s sports wagering, and it’s gonna happen
on NCAA competitions, put pressure on the NCAA,
on the pay-for-play issue, because now you have
college students who are not getting what they think
they deserve, monetarily, and there are going to be all sorts of external pressures on them, influences, pay-offs,
to effect game outcomes, because they are now significant to gambling interests
and maybe paying players, college athletes a little something reduces the integrity threat? – Alright, you know,
that’s been an argument that’s been advocated, in fact, I read an
article just this morning on the flight here that advocated that position, I don’t know that I
necessarily agree with it, I think there are always pressures that our students athletes face, just candidly especially the
revenue producing sports, football and men’s basketball, they see the money that’s generated, they’re not blind or naive to it, and we get it in a lot of ways, and I think there are a number of efforts within the association to address those, from looking at out amateurism
model in many respects, so I don’t necessarily know
that paying student athletes would lessen the likelihood
that they could be compromised, I think that could be a case, may that it would, but I don’t know that that’s
kinda settled at this point. – And I think from my perspective as a regulator and in law enforcement the greatest risk we feel for integrity is clearly tied to the
lower-level funded athlete, whether it be a minor leaguer or a g-leaguer in basketball, or college athletes, and to put it in perspective
so people have facts, state of Nevada handle last
year on sports wagering was five billion dollars. Number one sport that was bet on in Nevada were the NCAA
football and basketball teams, because they had more games, they had more teams, and people are really interested in gambling on college
athletics in the United States as opposed to, as Jodi mentioned, some of the European jurisdictions, they really don’t have that type of event to wager on in their countries. So yeah, I lose sleep at night worried about the NCAA, I know Derek has a big job, we need to be engaged deeply in preparing for the risks
that are associated with low-paid athletes who may or may not have an opportunity to make the next level and will be approached, either through bribery, extortion, blackmail, and as Derek mentioned, the greater risk, I call it insider trading. 18 year old goes back to his dorm, mentions that the Alabama quarterback, he’s not playing this week, somebody’s gonna use that information to their advantage to take advantage of
financial opportunity. And that insider trading, whether it’s negligent or intentional or even grossly negligent, that is a big concern when you have hundreds of amateur athletes who are 18 to 21 and are engaged in the social
network that they’re in in a college and university. So, they have a lot of work to do, we’re happy to work with them and we need to look at this in the future, because the last thing we need is a major scandal, we’ve had them before, mostly in collegiate athletics, and they’re high risk. – The low-hanging fruit for the opportunities for corruption is what the Europeans call spot fixing, what we call proposition bets, prop-bets, alright, because it’s sorta easy enough to compromise your performance to avoid scoring a touchdown or to fumble the ball in the third quarter when somebody has a prop-bet on that, what do you recommend, the folks who are closer to
the lobbying process right now, in terms of avoiding that threat, are there efforts being made to, for instance, allow
wagering on game outcomes but not on prop-bets? – Yes, so, what–
(phone chimes) Excuse me. Yeah, that’s, I’m not
gonna make that joke. (laughter) So, David, in somewhat
inflammatory language, said that we were proposing
an absolute veto right over types of bets, I wouldn’t use that language myself, but I would say that, to Jodi’s question, that’s one of the issues
that we’re focused on, we wanna make sure that it’s not acceptable to have a prop-bet placed on who is gonna make the
first turnover of the game, or whether the first
pitch of a baseball game is gonna be a ball or a strike. And the operators have a similar interest, within a lot of ways, we are aligned, we want there to be gambling
products with integrity that don’t lead to
perceptions of impropriety or scandals or anything else, but that’s precisely for the reason that you’re saying, Jodi, that’s something that we’re interested in
getting some say-so over, because this whole area is new, the mobile aspect of it is reasonably new, the kinds of bets that
are gonna be offered, I think will be creative, there will be a lots of new things that nobody has seen before or has thought about before, and we’re gonna have to be able to respond in real time to those to make sure that we
aren’t getting into those easily manipulable situations. – I think Rick’s onto something here. – Opened up, in a sense,
through fantasy football. – Yeah. – Sorry, repeat the question? – I mean, prop-bets, how far away is the prop-bet issue
from fantasy football, where I can bet on a player? – Right, so fantasy, the
key difference there is it’s not binary, you’re not saying, is Odell gonna have over a hundred and a half yards this week, you’re building a roster
of nine different players out of a near infinite
amount of possibilities. In terms of an integrity
issue with fantasy, every one of those players
is generating points, so it is almost impossible, it’s impossible already to throw a game, in a sense, because they are only trying to add to their totals for the day. And given each of them is involved in a team sport, you would require an entire other team working in their favor to allow them to gain a
certain amount of yards, and this is just one player you have in a roster of nine people. So the integrity issue doesn’t, like, cross over on fantasy. And for the pros, I think if you think of
the match fixing things that have happened in the past, it’s a different world now in the sports industry, a lot more coverage around it, the players make a lot more money, you’d be hard-pressed to expect, and going back to Odell, him intentionally getting over 100 yards, I mean, it seems with the Giants he could do that all on his own, unintentionally at the moment, (laughter) but I do hear it in the sense of in more amateur and more obscure games, and that’s why I view it as somewhat in working with a regulator, that the types of bets we offer we make sure are approved, I don’t think we currently take action on Division Three European Handball, so I do think in the major sports the opportunity for corruption can largely be crowdsourced, in terms of how it’s controlled, and again, as Jodi pointed out, sports betting exists on a black market and has for while anyway, and we haven’t seen a massive scandal in the United States in the major sports of recent memory. – So I won’t be able to make a prop-bet on whether Odell has a tantrum this week or not? – That line would be too easy to hit. (laughter) – Rick, does the league expect with the opening-up that’s going on, a lot more wagering? Or is it just a shifting from the illegal to the legal market? – I don’t know, I would say it’s somewhere in between, I would say we expect more. But part of the problem, of course, is that while there are lots
of estimates thrown around as to the size of the black market, there really aren’t any
studies that I’m aware of, at least, that I would put
a whole ton of stock in, principally because it’s a black market. So it’s pretty hard to put an exact figure on that, so I don’t know if we’re all working from the same baseline, but look, my expectation throughout has been that if you make
an illegal activity legal, that there are some number of people in our society that are
law-abiding citizens where the circles overlap, and they would like to
engage in this activity but haven’t previously simply because it was against the law. So I would think that you would get some additional activity of its kind, yes. – David, you had your head
moving when Rick was– – Well, I agree that the illegal market is massive now, I don’t know the number either, for all the reasons Rick said, but I do know this, from what we see online, and publicly, there’s public forums, we know it’s very big, and to put a dollar figure on it is very much uncertain, so we just let the economists predict what it could be, but we also look to Europe, because Europe’s been involved in this a lot, lot longer, and one of the points that Rick mentioned I would agree with: the end-play wagering,
because of technology, technology is driving this marketplace, this business, in ways that many old folks like myself, I don’t even understand. I try to learn it everyday, but in the United Kingdom, 80%, their records, public records, of the wagers that are made, are made on end-play wagers, that is, once the game begins, there are anywhere from 10 to 100 to 1000 different activities you can bet on in that one event. Now, the risk there is what Rick said, you know, how far are we
gonna go in this area? How far are we gonna go in this area? Certain sports, and the NBA is not one, because they’re very fluid, they have less stoppages, but think of baseball. Baseball, I mean, it’s
methodical, deliberate, so you could easily come up with a hundred thousand
different bets on baseball and know the results publicly
watching what happened, and be fairly confident that if you expected Aaron Judge to hit a home run in the first inning, and you wanted to wager on it, you’ll know the result. Now, if you had Aaron Judge would take a ball for the first pitch, Rick may be onto something. So, FanDuel knows, they came to us with a proposition bet on their first couple weeks taking bets, and they’re looking and went, you gotta be kidding me, because it was Le’Veon Bell, we wanna take a bet on Le’Veon Bell, when he’s gonna come
back and play football in his sitting out, and I said, no, we’re not doing that, I mean, we’re just getting off the floor, and all I need is Le’Veon Bell to go tweet on his line, I’m coming back tomorrow, I’m gonna play in game three, you know, it’s not worth it, so, input from the industry, working with the operator, working with us to reduce the risks, definitely necessary, and we’ll get there, and we don’t need the federal government to help us get there, because we’re on the line, they’re on the line, the leagues are and the operators are, and everybody, I mean, it’s
a commercial operation, nobody wants it to fail. We all have a financial stake, leagues have a major
stake beyond finances, it is their livelihood. They lose integrity, fans feel a little conscious about maybe not watching
the event anymore. So, technology again in this area is driving this nation into areas we have never experienced. And so, the goal of the operators, they wanna have gambling 24/7. They don’t wanna have it just when the basketball
game’s on tonight, they want to take bets from Europe, Asia, think of horseracing. The federal government authorized on the interstate horseracing act, casting, online wagering, fifteen years ago. Why? To save the horseracing industry, and you can bet on a
horse race now in Japan, in China, well, I don’t
know if they had it, but Malaysia does, and Europe, United States. So you can almost gamble
online 24/7 on horseracing. Now, it’s a dying industry
for other reasons, because you don’t, you know, your generation isn’t really too interested in horseracing, some of you, maybe, but most of you have probably never been to
a horse race in your life. – So I think one of the
points David just made is that we’re in a very
disruptive period for sports, especially for professional sports, technology, wagering, new
regulatory environment, and when any business faces
that kind of disruption, they have to make adjustments, and you do it on all fronts, you lobby for a piece of
the pie through regulation or you change your business model, and I actually have a
question for the leagues, what’s the new business model going to look like going forward now that there’s sports wagering? You lose the legislative battles and you’re not gonna get your
vig from an integrity fee, how are you gonna change the business, are there gonna be sports
books onsite in your venues, are you going to partner with
organizations like FanDuel, I know there’s already
some partnering going on, how deep is that gonna get? (laughter) – What’s a vig? She used the word vig, does anybody know what that means? I don’t know what that means. – Google it. – So look, yeah, the answer is, this thing is a little-known fact, if somebody asked me what has been the subject matter that we have spent the most time on in my office in the last 12 months, and I mean in the legal department at the NBA in the last 12 months, well, you know, I take it back, I would expand it to be
the whole league office in the last 12 months, and it would be two things, and outside of this forum I doubt anybody would
guess what they were. The first one is this
topic, sports gambling, and the second one is
our new NBA 2k league, we now have a fourth league, which is an electronic gaming league, and so to Jodi’s point about disruption, and changes and developments, these are things that we
spend a ton of time on. There are so many facets
of the gambling issue, so many different areas
that we have to look at, it’s a little mind-numbing, but one of them, obviously, is what the commercial landscape
is gonna look like for us, so we made, about six weeks ago, our first gambling partnership with MGM, MGM is a company that we have
done with business previously, but not in the sports
book area, in other areas, they own a WNBA team
in one of our leagues, so MGM is the official
gaming partner of the NBA, they have that designation, they, on a non-exclusive basis, have entered into a
commercial arrangement with us where they will be
receiving our official data, which we think is extremely important for the integrity of betting on our games, and they have agreed
commercially to give us a lot of the information that we have been seeking legislatively. So, we are partnering with that operator, we are looking to partner with others and hope to do that soon, and we wanna have
gold-plated relationships with the very best and
most reputable companies in this space, so we’re trying to do that. – And we’re supportive of
that commercial arrangement, I mean, I understand where
the leagues are coming from, we get their position on integrity fees, it’s obviously a cut of
our handle and our revenue so as operators we’re
not as in favor of it, but we view it as something that should be decided as
a commercial relationship. We’ve, on the fantasy side, worked with the NBA before, we’ve worked with many NBA teams, many NFL teams, and what the NBA has
accomplished with MGM, I’m sure what they’ll
accomplish with other operators and other leagues will as well, is how we see that it’s an arrangement that works for both parties that will allow the
industry to be monetized. – Turning from integrity, which the five of you have focused on, what, if anything, is going to be done to protect people against themselves? Youth, the addicted, the poor, in terms of the possible
side effects of gambling? – I would mention that
Senator Schumer’s proposal includes bans on gambling advertising, especially where it
targets youth populations, and that if you examine
the Australia experience with legalized gambling, and there, it is absolutely pervasive, I mean, there’s every type of gambling, including sports gambling, you know, in your local 7/11. And they’ve found that the failure to regulate advertising
and exposure to youth has created a culture that has so normalized gambling that it’s actually hurt youth
sports there tremendously and they’re trying to
roll it back a little bit, and I would just hope that we as a nation can get ahead of that for precisely the reasons
you’re suggesting. – Well, we gave in to tobacco, it’s very interesting that
the major tobacco settlement stopped Joe Camel as an advertising tool, and stopped advertising about
smoking to young people. Now, what about gambling, because it’s not restricted to youth. The vulnerable are ageless, even old people have a problem. – You touch upon something
that’s very important in the entire gambling industry. All three of those issues you’ve mentioned are critical to every state that has legalized gambling today, not just casino gambling. The audience should understand 48 states right now
have legalized gambling of some sort right now
in the United States, only two states do not. One surprises everybody, Hawaii, second, probably is no surprise, is the state of Utah. I’ve publicly stated
that the state of Utah is no longer out of the box, and they authorized FanDuel, Draft Kings, fantasy sports to be played by their citizens. Some would argue fantasy
sports is not gambling, but I guess Utah feels it’s not, and can be protected through
consumer protection laws, but to answer your question, this matter of underage gambling, truth in advertising laws, consumer protection laws, the responsible gaming community, which is trying to help
those who are addicted, it’s a mental health issue, it’s clearly identified as such, are real big issues in this country, and with the explosion of sports wagering, it’s gonna be bigger, and what protocols, safeguards, are gonna be built in and what treatment and assistance is gonna be given to
those who will struggle? And we’re not ready, and as a state, we’re trying to do the best we can, but this is a widespread program that goes beyond state lines. I’m less concerned with the underage when it comes to mobile, I can assure you that
the safeguards built in on trying to get a new account, it’s not like you’re signing up to open an account at Amazon. You have no privacy when you open up a gambling account in the state of New Jersey. We know exactly who you are, we know exactly where you live, we know your social security number, we do a credit check on you, we know so much about you I wouldn’t go online and gamble
if you want some privacy. We know where you’re gambling from, we have geolocation devices that if you want to right now try to get in to the state of New Jersey, we can pinpoint that
you’re in this building trying to get into the state of New Jersey on a gambling app. You will be denied, go ahead, try it, you will be denied, but what you can do, and what we did in New Jersey, because we wanna have
the business succeed, you can create an account, you can fund your account from here. Just when you flip the switch to gamble on one of the sports sites or on the other sites, you’ll be blocked. – David, that is the
most anti-tourism message I have ever heard. (laughter) – Casinos will not be happy with me, FanDuel will not– – Not signing up as a
spokesperson any time soon. – The reality is, in this
generation that I’m looking at, you all have a cell phone, and you are as engaged as
anybody is in the United States on the internet and mobile devices. – I guess I’ve taken my last
trip to MetLife Stadium. Okay, we promised we would come to you. Questions, comments, sir? Wait, wait, we’ve gotta get a mike to you, so that you can be reported to New Jersey. (laughter) – [Male Student] I was wondering, with the talk of these massive data sets, what’s the conversation around restricting usage, such as, you know, we see people betting on a
particular day of the month, so they probably get
paycheck the week before, so we should send them a bunch of messages reminding them to bet based on that trend, so I was wondering if you could speak to a conversation around
restrictions such as that? – Sure, so I’ve never thought of it as target this person because they’re getting their paycheck tomorrow, but we certainly locate trends in data to try to optimize for our business. I think they are usually more a combination of event-based, obviously, Sunday is a big day, Sunday at 12 is our busiest time. I’ll point out as we’re talking
about responsible gaming, as you’re talking about
someone getting their paycheck, I just wanna dispel the notion that as an operator, you just wanna take
all of someone’s money. There’s no real value to us to have someone lose their house playing on our site. Again, there’s our handle, our revenue is five percent of that, like, we don’t want five percent of someone’s life for them to be miserable, we want users to come back and enjoy and play repeatedly. So there’s no advantage
to the business, really, to put people in a position where they are no longer able to play, that’s not what we do, and so, I think it’s a fair question, but we have a strong amount of responsible play controls in place, designed to look at patterns
of people’s behavior that could be a red flag, but otherwise, in terms of looking for behavior to encourage betting, it’s more about optimizing around events that we know people like to play. – Over here, Michael? – [Male Student 2] Yes, you had said that the integrity fee might be deserved because the NBA is supplying the product that’s being wagered on, but in the prop market, you could possibly argue that last night if Jason Tatum had 20 points, that was partially his product that he put onto the table, if I bet on that proposition, so why do the players not
deserve the integrity fee if the prop market exists, or, even, you could extend it to the Super Bowl anthem taking longer than a certain amount of time, does that singer deserve a fee for creating that product? So with such a varied betting market, why do only the leagues
deserve the integrity fee? – So, I used the word league as a shorthand for the
league and its players. The way our system works is revenue that comes into the league is shared 50/50 with our players. And so, here, if we were to receive a fee on a royalty basis for this activity, the players would get half of it. – Isn’t it in the CBA already, the BRI includes gambling revenue? – Correct. – I’ve never had a law student who said, I should tithe to you, because you taught me procedure. (laughter) – [Male Speaker 3] Thank you. On that topic about the salary cap, so the salary cap is
a function of the BRI, and taking into account the floodgates opening with gambling, do you foresee the salary cap going up in steady spikes through
the next few years, or do you foresee a huge
spike in the salary cap? – Yeah, that’s a great question. I don’t foresee that, and I don’t foresee it because while there is nonstop attention and
conversation about this topic, I actually believe this
is gonna be a slow build, in terms of the number of
states that come online and how they come online over time. I mean, we’ve got eight
states that have legalized, six of eight are operational right now, I mean, you could have
different predictions for where it’s gonna be, I would sorta say by the end
of this season we get 15, I mean, there are some states where this is super complicated, take California as an example, where the Indian tribes
have come out publicly and said that based on compacts entered into 100 years ago, all of this revenue is theirs. So, they’re gonna have to
fight that out with the state, they’re gonna have to have
a constitutional amendment, there’s an awful lot that’s gonna have to go on for some of these states to actually legalize this. And my prediction is that that will all happen in kind of a ramped way, where it just comes in, it builds pretty slowly over time. And then of course, the other piece of it is, the league revenue, to your point about building our BRI base, that’s gonna be dependent upon what kind of revenue we’re receiving. If we end up being successful in some of our lobbying efforts and getting a royalty fee as a legal matter, that will change the revenue posture and move things in one direction, if it’s only commercial
deals that we’re making, it’ll be different, so, the short answer is, I don’t see a big spike coming in, I’d be happy to be wrong, but I sorta see it sorta building in slowly. – Can I also add something
to the question about what are the players’ interests here. So there’s already been talk amongst the players’ unions that they have a right
of publicity interest, and that there may be a
spate of new litigation in the intellectual property space, where players and perhaps even the leagues argue for yet another way that they should be able to
monetize sports gambling, to the extent that the sports
books and their partners are using league
intellectual property visibly to market their product. – When you talk about the monetization, it works both ways. The operators are monetizing, not just from the revenue they’re making from sports wagering, comes an amenity for
all sorts of other forms of financial benefits
they’re gonna receive from that actual event, whether it’s a casino or racetrack or even a mobile site, there’s other forms of financial benefits they can receive, and you know, they’re kept
very close to the chest, and I’d say the same
thing as with the leagues, there’s other forms of financial benefits that are clearly in play here, and you’ve heard Mark Cuban say that, you know, thank you very much to the Supreme Court, the value of my team just doubled. And then you have advertising money, and you have sponsorships, and you have more people engaged in watching your event, so therefore, the future
advertising dollars coming to the leagues may go up. Now, it’s all hypothetical, and we can’t pinpoint it, but I think we have to be honest that there are multiple
forms of monetization here for both the operators and the leagues. Hesitancy to share that information and make it public, and the only thing we’re
really focused on now when we argue in the states are the two issues that
the leagues presented, they want an integrity
fee, or a royalty fee, let’s call it a royalty fee now, integrity fee was just a very
bad advertising part on them, royalty fee, direct payment, mandated by law, where they get a share of
the money that’s gambled, or this concept of pay us for our data, and that you can’t take
wagers on our events unless you use our, quote, official data. And that has to be mandated by law. Now the NBA, as you can see, is going a different route, and that is to have
traditional, commercial setting negotiated so that between
the operator and the league, they make an arrangement whereby they can each have a benefit. So, most of the states who have commented on these two issues, the direct monetization basically, the legislatures are
reacting very negatively, saying we’re not paying you anything, you should be paying us. And it gets very ugly and very nasty. And the focus is on those two issues when there’s a lot of other
financial forms of benefits for all parties, all parties, and people just don’t want to focus on those difficult questions. – Right, so just on that last point, we’re not asking the
states to pay us anything, so it’s not the states that are unhappy, it’s operators that would be paying this royalty fee that we’re talking about, just so we identify correctly the parties that are at issue here. – Well, we’ve hit the magic hour, and you can see that
there’s an enormous amount of legal work waiting for you to graduate. (laughter)
And take care of. So you can see any of these people, even Jodi, in terms of future employment. My thanks to the panel, it was good of them to come and share their experience. (applause)

Leave a Reply

Your email address will not be published. Required fields are marked *