MLB and NBA Exploring How to Capture Sports Betting Revenue

American football player

30-second summary:

  • For many years, the major sports leagues were against legal sports betting
  • Since the federal ban was overturned, most have tried to get a slice of the action
  • The PGA Tour, MLB and NBA have been seeking integrity fees
  • The NFL is not seeking any direct compensation
  • The NHL is targeting direct deals with gambling companies

Opposition to sports betting

The history between the major sports leagues in the US and the issue of sports betting has been interesting. Initially, the major sports leagues were against legalizing sports betting.

The leagues did not want the integrity of their sports becoming compromised. They actively fought motions to legalize it by resorting to legal action.

This battle went on for many years. But in May 2018, the Supreme Court voted in favour of ending the federal ban on sports betting.

This meant that the gig was up for the sports leagues. They then quickly turned their focus to ensuring the integrity of their events and trying to capitalize on legalization in any way that they could.

Trying to capitalize

Many of the leagues, most notably the NBA, MLB and PGA Tour, began to look at obtaining integrity fees from sports betting operators. This would see a slice of every bet going towards the leagues. However, the main issue with this type of monetization is that it cuts the operators’ margins too thin.

In what is already an already tight-margin industry, the operators simply would not put resources into their sportsbooks if the margins were cut even shorter. However, certain states are still considering integrity fees, despite no state to date including such a provision in the final draft of a sports betting bill.

Instead, many leagues are looking into licensing their official data to sports betting operators. While standard league data is publicly available, the live data is not. This type of data is very important for live betting purposes and therefore operators may end up purchasing licenses to obtain it.

Most of the major leagues also now have major gaming sponsors that support them with their integrity monitoring systems. In return the sponsors can use the official league logos in their advertising campaigns. The NCAA is the only one of the major sports leagues that does not seem to be interested in getting its own cut of sports betting revenue.

Latest developments

Most of the sports leagues seemed to be on a different wavelength in 2018. They missed out on getting a cut from the early adopters of sports betting. But with many more states set to legalize it this year, there will be plenty of opportunities to rectify this.

While previously, the likes of the NBA and MLB sought integrity fees in the region of 1-2% of each sports bet, they are now looking for a more modest cut of 0.25% in 2019 in certain states. Those states still considering implementing integrity fees of between 0.2% and 1% are Iowa, Illinois, Kansas, New York, Missouri, as well as Massachusetts.

To date, six states have a provision for integrity fees as a clause in a submitted draft sports betting bill. This number is set to rise, according to experts. The PGA Tour, MLB and MLB are lobbying to the states directly. They say they want this money to ensure that the integrity of their sports is upheld.

The leagues also do not want operators making money from their intellectual property without getting a slice of the action for themselves. This would cover everything from the close monitoring of betting activity to hiring consultants, developing specialist software and implementing complex systems to keep everything in order.

However, the leagues have put no solid figures out as of yet as to how much this is likely to cost. It is especially important given that illegal sports betting has been rife in the US for many years. Therefore, such systems were even more important than when legal sports betting is in place.

Free market deals

Other leagues are putting more focus on forging deals on the free market with individual companies in the gambling space.

The NFL is the most popular sports in the US for bettors, but it is not interested in looking for integrity fees. Instead it is focusing its efforts on entering direct deals with gambling companies, such as MGM Resorts International.

One of the few things the leagues actually do agree on with one another is that of federal regulation of sports betting. They want a uniform set of rules for the whole country rather than differing laws state by state. There are ongoing talks in Congress relating to this issue.