House Subcommittee Conducts Hearing on Sports Betting Landscape Following Supreme Court's Invalidation of PASPA, Express Interest in Federal Oversight

To
NIGA Member Tribes
From

Chairman Ernest L. Stevens Jr.
Jason C. Giles, Executive Director

re
House Subcommittee Conducts Hearing on Sports Betting Landscape Following Supreme Court's Invalidation of PASPA, Express Interest in Federal Oversight
Date
October 1st, 2018

On September 27, 2018, the U.S. House of Representatives Subcommittee on Crime, Terrorism, Homeland Security, and Investigation (Subcommittee) held a hearing examining sports betting in America following the United States Supreme Court's invalidation of the Professional and Amateur Sports Protection Act (PASPA) in May 2018. The hearing featured five witnesses who provided testimony and answered questions from members of the Subcommittee. Members of Congress emphasized the need for this hearing in order to determine what role the federal government should have, if any, in the regulation of sports betting, especially in light of states and tribal jurisdictions already adding sports betting to their gaming offerings. By the end of the hearing, all seven members of Congress in attendance had expressed some level of concern that a lack of federal oversight on sports betting may lead to issues moving forward.

Representative Jim Sensenbrenner (R-WI) presided over the hearing. In addition to Rep. Sensenbrenner, other members of Congress present who asked the witnesses questions include:

Bob Goodlatte(R-VA);
Jerry Nadler(D-NY);
Cedric Richmond(D-LA);
Val Demings(D-FL);
Hakeem Jeffries(D-NY);
Martha Roby(R-AL);

The witnesses who testified include:

Jocelyn Moore, Executive Vice President, Communications and Public Affairs, National Football League (NFL)
Les Bernal,National Director, Stop Predatory Gambling
Sara Slane, Senior Vice President, Public Affairs, American Gaming Association (AGA)
Jon Bruning, Counselor, Coalition to Stop Internet Gambling (CSIG)
Becky Harris, Chair, Nevada Gaming Control Board

The Hearing

Of the five witnesses who took part in the hearing, three supported some form of federal regulatory approach. These three witnesses, with the help of the members of Congress in attendance, shaped the course of discussion at the hearing, which centered on regulating sports betting that takes place over the Internet. Still, two of the witnesses voiced their position that states and tribes should be the primary regulators of sports betting.

Pro-Federal Regulatory Approach

In his opening remarks, Rep. Sensenbrenner made a "personal appeal" on the record for Congress to consider the possible dangers of sports betting to the integrity of the game. This concern was echoed by other members of Congress as well as two of the witnesses, Ms. Moore of the NFL and Mr. Bruning of CSIG. Ms. Moore cited former Senator Bill Bradley in her opening remarks by saying that "the dangers of sports betting are of national importance" before laying out "core federal standards" that Congress should create to guide states. These standards placed a strong emphasis on upholding integrity of games; although she did not mention "integrity fees," Ms. Moore did include as a federal standard a requirement for sports betting operators to use official NFL data, which may mean that the NFL could decide to charge operators for the use of its data.

Mr. Bruning also favored federal oversight. In "offer[ing] the law enforcement perspective," he encouraged a federal approach in order to prevent unregulated illegal sports betting sites from conducting business. He further testified that federal authorities do not currently have the resources to enforce the Unlawful Internet Gaming Enforcement Act (UIGEA) and even called for the restoration of the Wire Act in order to prevent unregulated sports betting sites from attracting patrons. When pressed by Rep. Goodlatte about how to fix the lack of enforcement of UIGEA (which Rep. Goodlatte co-wrote), Mr. Bruning responded that it was up to the Department of Justice to use the laws in place and enforce them accordingly.

Finally, Mr. Bernal advocated for a federal approach that would prohibit sports betting nationwide. He warned that government-sponsored gaming normalizes attitudes towards gaming and that it is in many ways worse than illegal gaming. This position did not appear to gain traction with the Subcommittee, even with Rep. Goodlatte, who had in his opening remarks warned that "gambling is not a victimless activity." Rep. Goodlatte acknowledged the success of states regulating brick and mortar gaming operations but expressed concern over the "interstate nature" of the Internet and how that leads him to believe that Congress has to play a role in regulating, but not outright prohibiting, sports betting.

Pro-Tribal/State Approach

At the other end of the spectrum, Ms. Slane from the AGA and Ms. Harris of the Nevada Gaming Control Board urged Congress not to disrupt the existing framework of state and tribal regulation of sports betting. Ms. Slane noted that states and tribes already have the authority to regulate lotteries, table games, slot machines, bingo, and other kinds of gaming; sports betting should be no different. She also was the only witness to mention the existing federal oversight provided by the Financial Crimes Enforcement Network, which promulgates and enforces Anti-Money Laundering and Know-Your-Customer regulations.

Rep. Sensenbrenner questioned Ms. Slane on whether or not legal, regulated sports betting operators could compete with illegal, unregulated sports betting operators who could offer certain incentives such as better odds and larger and faster payouts. Ms. Slane responded by observing that because of this competition, policies enacted to regulate sports betting operators need to not be so burdensome as to hurt its ability to compete with the illegal operators. To illustrate her point, she pointed out that taxes or fees placed on legal, regulated sports betting operators should be avoided as it takes away from operators' revenue streams.

Ms. Harris discussed Nevada's six decade-history of regulating sports betting successfully as well as how other jurisdictions should follow its lead when it comes to adopting legislation and regulation. When Rep. Richmond brought up his concerns about patrons accruing debt by overusing credit cards to make wagers, Ms. Harris pointed out that Nevada places limits on credit card use and encourages patrons to use pre-paid cards.

Ms. Harris also described other safeguards put in place to regulate sports betting, including allowing a league to contact an operator over a wager that they do not feel is appropriate and Nevada's ongoing partnerships with national and international law enforcement in order to prevent illegal sports betting. Finally, echoing Ms. Slane, she argued against "integrity fees" and other kinds of expenses that would take away from state and tribal revenues.

Recent Developments in Sports Betting

On May 14, 2018, the U.S. Supreme Court (Court) held in Murphy v. NCAAthat PASPA is unconstitutional because it improperly "commandeered" states' legislatures in violation of the Tenth Amendment of the Constitution by compelling them to maintain prohibitions on sports betting. The invalidation of PASPA has allowed states to have the ability to lawfully repeal their respective sports betting prohibitions and pursue the introduction of sports betting without the threat of legal challenges by the U.S. Attorney General or amateur or professional sports organizations.

Joining Nevada (which was exempt from PASPA) as states that could offer single-game sports betting in the months since the Court's decision are Delaware, New Jersey, Mississippi, and West Virginia. Each have created their own regulatory frameworks to ensure a fair product and protect consumers. These frameworks include licensing standards that gaming operations must uphold in order to offer sports betting, the collection of taxes and fees based on revenue accrued from sports betting, and age limits. These states are also considering the allowance of mobile betting within the state. To date, however, none of the frameworks have included what some amateur and professional sports leagues have demanded: an "integrity fee" or some other kind of share of the revenue from sports betting in order to uphold the integrity of their respective sports and protect those involved in the sport.

Of the states that have legalized sports betting in 2018, only Mississippi is home to a gaming tribe-the Mississippi Band of Choctaw Indians. The Tribe's compact with the state allows for sports betting to take place "only if such wagers are allowed on non-Tribal lands under the laws of the State." The Tribe has taken advantage of this opportunity and have begun offering sports betting at its Golden Moon Hotel and Casino under its own regulatory framework. Meanwhile, many Tribes in other states across the country are studying their respective compacts and weighing different options with regard to sports betting.

Shortly after the Court announced its ruling, NIGA released a "Sport Betting Notice" (Notice) in which it emphasized that it will "continue to serve as an information gathering and information sharing resource for our Member Tribes," as well as advocate for state and federal legislation that is favorable to Indian Country. This Notice may be accessed at the following web address: http://www.indiangaming.org/news/2018/5/18/sport-betting-notice.


For more information on the Subcommittee's hearing, including the written testimony submitted by each of the participating witnesses, please visit the following web address: https://judiciary.house.gov/hearing/post-paspa-an-examination-of-sports-betting-in-america/