As he promised he would before retiring, Senator Orrin Hatch introduced a new federal sports wagering bill this week. The stated goal of this bill is to regulate and standardize sports wagering among states that legalize it. Let’s take a look at what the bill could provide, both good and bad, and then analyze the likelihood of it becoming law.
Attorney General Veto Power
The bill provides for the US Attorney General to take up to 180 days to review a state’s proposed law and potentially veto it. The stipulation being that states must meet certain requirements in their laws when offering sports wagering. Among them:
- No betting on amateur sports except collegiate sports.
- Betting must occur at a casino or other licensed facility.
- Internet betting must be intrastate and have geolocation provisions.
- States must make efforts to deal with problem gambling.
- States must use official league data through at least 2022.
That last point is potentially troublesome. This would essentially create the integrity fee that leagues have sought since the legalization movement began. States would be forced to purchase the official league data for use in their sports betting operations.
In its current form, there is no grandfathering of states that have already enacted legalized sports wagering. A stipulation that betting must occur in a casino or licensed facility could be problematic for Delaware. It currently generates much of its high-margin parlay-card sales through retailers such as bars, restaurants, convenience stores, and barber shops.
Modifies the Wire Act
The bill modifies the Kennedy era Wire Act. It permits interstate “layoff bets” between sports wagering operators. This is an odd modification since the practice of laying off wagers is rare among operators. Earlier in the bill, it permits interstate wagering between states that have consented to a compact. However, the wording of the modification of the Wire Act does not appear to be explicit enough to permit it. It’s likely the contradiction would be resolved in future versions of the bill. The prospect of interstate sports wagering compacts is encouraging.
National Sports Wagering Clearinghouse
One of the more interesting sections of the bill is the establishment of a National Sports Wagering Clearinghouse through which all sports wagering transactions will flow. The data will be anonymized, but it sounds like it’ll work much like the ticker on the bottom of a financial-news network. It will have information about every wager that takes place. Regulators can use that information to spot anomalies and suspicious activity. The downside to sharp bettors will be that it would also make the sports betting market far more efficient. It’s similar to when the various options-trading markets in the US consolidated to become the Chicago Board Options Exchange (CBOE). This development could result in even more “movement on air” via reactions to anonymous data. I’m also not sure bookmakers would want this. There’s an advantage to recognizing sharp action and not necessarily reacting immediately to it.
Crackdown on Offshore Wagering
The bill provides for steps and measures that can be taken against offshore sports books that do business with US residents. It permits the seizing of website domains and also the blocking of website traffic. It also makes the advertisement of illegal sites subject to civil penalty and confiscation. As with previous federal laws, it does not impose a criminal penalty against those who wager offshore. It places the burden on the entity accepting the wager. There are states that have laws against placing a wager with an illegal entity.
Direction for the Federal Excise Tax
Since 1951, there’s been a federal tax on sports betting handle. It was originally a whopping 10%, but since 1984 it’s been a manageable 0.25%. With just Nevada contributing, that 0.25% was often overlooked. In fact, it was never earmarked for anything but the General Fund. Now with the US probably approaching $10 billion in annual handle within the next year, that 0.25% adds up to some real money. The bill looks to assign those funds to a Wagering Trust Fund. That fund would facilitate the enforcement of this law — presumably, the fight against offshore sports books. It would also provide funding for the prevention of gambling addiction.
What are the Odds?
Considering Senator Hatch was one of the original authors of PASPA, the prospects were dim. Those of us who’ve kept a close eye on the developing world of sports betting legalization still believe letting the states find their way is the best path. Divergent paths will ultimately tell us what works best. That said, the bill has some good ideas in provisions for interstate compacts and direction for the excise tax. Unfortunately, the requirement to buy league data smells of a placation to league lobbying efforts.
In the end, this is still a bill whose main sponsor is less than a month from retirement. There’s no support for this bill from any committee in either the Senate or House. This is generally not a pressing issue for Congress. With a divided Congress, it’s unlikely that many bills will be passed in the coming year. I don’t believe this one has the prospect of becoming law anytime soon.
However, I’m reminded of 2006 and a similar political landscape. Many of us in the online-gambling industry were confident that a bill from Senator Bill Frist would never make it to a vote. His bill, the Unlawful Internet Gaming Enforcement Act, was ultimately shuffled hundreds of pages deep into an anti-terrorism bill and passed late one night. This bill might sneak by us in much the same fashion someday.
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If Hatch, a lifelong rabid conservative, wants it, then it by definition must be bad for the country. No doubt it shovels money to billionaires in some surreptitious fashion.
I have never seen any reason or rationale for federal oversight of gambling. It should be left to the states as much as possible. It’s risible as well as suspicious that the sponsor of this bill is a politico from one of the two states that have no gambling whatsoever, and the one where a lot of people still think it’s a sin. What’s Hatch’s angle? Maybe a really nice retirement fund for him as a reward?
It appears Senator Hatch’s bill now has bipartisan support. Democratic Senator Chuck Schumer of NY will co-sponsor the bill and presumably take up the fight after Hatch leaves office. You can expect to see this bill formally introduced this week.