Should the National Basketball Association get its way, it would ruin the financial math for sports gambling, American Gaming Association President Geoff Freeman said Tuesday.
Freeman delivered his annual sports betting commentary, normally administered the week before the Super Bowl – football’s biggest game and one of the biggest wagering days of the year. The most recent bump in the road in the AGA’s efforts to legalize sports betting, however, came this week from another sport: professional basketball.
Freeman again argued against an NBA proposal to cull 1 percent of all legal betting revenue, pointing out that most sports books have a profit margin of 3.5 to 5 percent. A 1 percent rake off the top, then, amounts to a revenue loss of 20 to 30 percent for the sports books. With that kind of math, Freeman says, patrons will continue to frequent illegal sports betting operations.
“Taking money from the top will handicap the legal market in the U.S.,” he said.
Freeman said the AGA was surprised that the NBA suggested the 1 percent measure in a recent Indiana sports betting proposal. But even if the NBA is just using the 1 percent as a starting point, any kind of a rake from leagues would put the legal market at a disadvantage, Freeman said.
The NBA has also spoken of making real-time data available to casinos and allowing advertising patches on uniforms.
“We certainly expect states to impose taxes on this. The key is ensuring (that) the tax does not choke the legal market,” he said.
He said that a tax range of 6 to 10 percent could keep the legal market competitive.
“When people hear the amount spent on sports wagering, they think 1 percent sounds pretty good,” Freeman said. “They’re not focusing on the gross gaming revenue and the market realities. It’s incumbent on the AGA to help them make informed decisions.”
Freeman cited the United Kingdom as the “perfect” example of the market; the NBA did apparently study Australia’s regulations before making the 1 percent proposal, but Freeman argues that in Australia, the illegal market is still thriving because of the size of the rake.
Meanwhile, the AGA estimates Americans will wager approximately $4.76 billion on Super Bowl LII between the New England Patriots and Philadelphia Eagles, with $4.6 billion of that bet illegally.
In December 2017, the U.S. Supreme Court heard Christie v. NCAA, in which New Jersey challenged the Professional and Amateur Sports Protection Act of 1992 (PASPA). Based on the nine justices’ lines of questioning, Freeman and others expect either a complete repeal of PASPA or a narrow ruling favoring New Jersey and opening the doors to federal and state-by-state lawmaking. He noted that 14 states have some sort of sports gambling legislation in the pipeline, in anticipation of the court ruling.
“The big question we’re asking: Is 2018 finally the year when governments, sporting bodies and the gaming industry work together to put the illegal sports betting market out of business?” Freeman asked.
No one really knows how much money is bet illegally. To compute figures for the news conference, the AGA extrapolated numbers from a 1999 study. They used the most conservative estimate of illegal sports betting activity ($80 billion per year) from the 1999 National Gambling Impact Study Commission’s Final Report and applied GDP growth as reported by the Bureau of Economic Analysis to convert to today’s dollars.
For the illegal-vs.-legal Super Bowl numbers, the AGA used the records from Nevada sports books and then applied the same ratio from the 1999 study, with GDP growth again factored in, to arrive at an illegal wagering estimate for The Big Game.
In Nevada last year, a record $138.5 million was wagered on Super Bowl LI.
