Top US Senators Advocating for Federal Sports Betting Framework

Top US Senators Advocating for Federal Sports Betting Framework

Even as individual states scramble to get their local sports betting legislation and regulations all set up, the U.S. Congress may want in on the action too. Two powerful senators, Chuck Schumer (D – NY) and Orrin Hatch (R – Utah), have revealed their plans to regulate sportsbooks at the federal level.

About the Proposals

Senator Hatch is a social conservative and a foe of gambling expansion. Indeed, he was instrumental in getting the 1992 PASPA bill passed into law, which established the federal ban on sports betting in the first place. Now that the Supreme Court’s recent Murphy v. NCAA decision has struck down that ban, Hatch feels that the federal government has the duty to enact a nationwide framework for wagering on sports as the best alternative to impractical and unworkable prohibition.

Hatch first indicated his intention to pursue sports betting legislation in May, just after the Supreme Court handed down its Murphy verdict. His focus is on consumer protection and preserving the integrity of athletic contests. Hatch’s plan calls for strong measures to fight underage gambling, and a total ban on bets being placed by athletes, coaches, league officials, or anyone else connected with the games being wagered upon.

Senator Chuck Schumer revealed his own proposal in a memo in late August. It contains many of the same provisions that Senator Hatch has been pushing for. Schumer further addressed the role that the sports leagues would play in legalized betting. He envisions them as having a large amount of control in deciding what types of bets are allowed, and he also thinks that they should be the only source of game data that licensed sportsbooks should be able to use. Remarking on his motivations for pursuing sports betting legislation, Schumer stated:

“As a New York sports fan — especially my Yankees and Giants — and a senator, my priority in the wake of the Murphy v. NCAA decision is making sure the integrity of the games we love is preserved, that young people and those suffering from gambling addiction are not taken advantage of, and that consumers that choose to engage in sports betting are appropriately protected.”

States Going Ahead on Their Own

Ever since the Supreme Court voided the national prohibition on sports betting earlier this year, quite a few states have been launching their own licensed sports betting economies. New Jersey, Delaware, Mississippi, and West Virginia have already seen new sportsbooks open up while Pennsylvania is accepting applications for upcoming sports betting debuts. Additional states, perhaps more than 25, are expected to pass the necessary bills to allow sportsbooks within a few years, including the next anticipated to market movers of Rhode Island and New York.

The states have to determine what the tax rate on bets should be, whether to permit online and mobile wagering or stick with offline sportsbooks, which organizations can apply for licenses, and a myriad other details. Naturally, lawmakers in various jurisdictions have differing thoughts on these matters, and so the sports betting laws drafted by each state creates separate markets that are often very distinct from one another.

Proponents of local control over gambling and a separation of powers between the levels of government heartily cheer this scenario as an example of the “laboratories of democracy” that former Supreme Court Justice Louis Brandeis recommended. However, others are not as sanguine, including Senator Hatch. He thinks that state-level licensing of sportsbooks may turn into “a race to the bottom” with each state competing against the others to offer more favorable terms to gambling firms, while ignoring consumer protection and game integrity. Yet, there’s little evidence of this happening. Indeed, a few states, like Pennsylvania, are being criticized for charging heavy fees and taxes that some contend make for an unprofitable and unsustainable sports betting environment.

Sports Governing Bodies Weigh In

The sports leagues are big proponents of federal sports betting regulation, especially considering the legally privileged position that they would hold under the prospective legislation. As they would become the exclusive vendors of official game results, they would basically be guaranteed a monopoly position in a market for data that is currently distributed for free. Presumably, they would also be able to decline to provide this information to certain organizations, allowing the leagues to wield substantial power.

Unsurprisingly, the NBA, MLB, and PGA are onboard with Senator Schumer’s ideas, and in a statement these three leagues said, “We strongly support the legislative framework outlined by Senator Schumer and we encourage Congress to adopt it.” Meanwhile, the NFL and NCAA stated, “We applaud the leadership demonstrated by Senators Hatch and Schumer in supporting federal legislation to protect the integrity of our games.”

Gaming Industry Not Pleased

One might think that gambling companies would relish the opportunity to comply with a single set of federal rules rather than having to navigate dozens of separate state markets. However, this is not the case with sports betting. The industry body American Gaming Association (AGA) noted that the previous federal PASPA regulation was an “abject failure for 26 years” which did little to safeguard consumers, while driving a demand for black-market services. Instead, AGA envisions legal sportsbooks “overseen by effective state and tribal gaming regulators”, with Sara Slane, senior VP of public affairs at the American Gaming Association, seeing little constructive contribution that Congress could make to the process. Meanwhile, Slane points out that the federal government is already benefiting from an expanded legal sports betting industry, even without a federal framework, as there is currently a 0.25% federal excise tax imposed on all betting handles.

Also speaking out against a federal solution is Jake Lestock, a policy specialist at the National Conference of State Legislatures (NCSL), which is a bipartisan non-profit organization representing local and state government legislators in the U.S. According to Lestock, the Supreme Court’s decision to strike down PASPA confirms “the failings of a one-size-fits-all federal solution”. Consequently, he has indicated that his organization intends to support state authority on sports betting, and oppose any efforts by the federal government to overrule an individual state’s ability to determine its own approach on the issue.