Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
Connecticut’s legalized sports betting market could generate $100 million in revenue per year—and officials from the National Basketball Association and Major League Baseball told Connecticut lawmakers that the leagues want a share.
At a hearing before the Connecticut General Assembly’s Public Safety and Security Committee March 1, a sports betting executive estimated that the legal sports betting market in Connecticut would handle $1.5 billion to $2 billion worth of bets a year, worth $100 million in revenue to sports book companies.
Dan Shapiro, vice president of strategy and business development with the William Hill Race & Sports Book, said the estimate was based on the company’s assessment of the market. William Hill operates more than 100 sports betting locations in Nevada and is the exclusive risk manager for Delaware’s sports lottery.
He urged the committee to keep taxes and fees on the industry low, allowing the industry to compete with the illegal market. The sweet spot is somewhere between a low of 6.75 percent of gross revenue—what Nevada levies—to the 9.25 percent proposed by New Jersey.
“Once you get into double digits, you eat into the product,” Shapiro said.
A bill pending before the Connecticut General Assembly, H.B. 5307, directs the state’s Commissioner of Consumer Protection to adopt regulations to regulate wagering on sporting events, should states be allowed to legalize sports betting. Officials from both pro leagues said they would prefer a federal law regarding sports betting instead of leaving it to the states as it would ensure a general uniformity that would protect the integrity of the game.
States are coming out with proposed tax and legislation while awaiting a U.S. Supreme Court ruling in Murphy v. NCAA—New Jersey’s attempt to repeal part of its state ban on sports betting. The high court agreed to review the case after a lower court ruled that the partial repeal violated the federal Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits states from “authorizing” gambling related to professional and amateur sports leagues.
Democratic lawmakers are eager for the state to legalize sports betting, vowing at a Feb. 28 news conference to pass legislation later this year.
“If the court opens up this extremely popular market to the states, Connecticut should be ready to go from both a regulatory and an operational standpoint,” Speaker of the House Joe Aresimowicz (D) said.
“Connecticut should be ready to act as soon as the Supreme Court decision is handed down,” House Majority Leader Matt Ritter (D) said. “Based on the oral arguments before the court late last year, it seems entirely possible that the federal ban on sports betting will be overturned, and we want to be competitive with other states.”
Connecticut is among more than a dozen states that have proposed more than 40 bills preparing to legalize, regulate and tax the industry, according to the American Gaming Association.
One of the stickier issues legislators are grappling with are “integrity fees” pushed by professional sports leagues. The NBA and MLB are asking states to provide a 1 percent payout of the amount wagered on league sporting contests.
Indiana, Kansas, and Missouri have introduced bills proposing a 1 percent integrity fee. In Nevada, where sports betting is legal, no such fee exists.
“Sports betting is built on our games, and the leagues also bear the risks that come with sports betting,” Dan Spillane, the NBA’s senior vice president and assistant general counsel for league governance and policy, said during the Connecticut hearing. He called the 1 percent figure a “reasonable amount” to be paid back to the leagues. “It makes sense for leagues to get a percentage of the amount bet on our games,” he said.
The money generated by the integrity fee would provide funds for the leagues to ramp up their investigatory and data analysis divisions to analyze and investigate allegations of impropriety.
“Games are not scripted, with the best athletes in the world striving to do their best on every single play,” Bryan Seeley, MLB’s senior vice president of investigations and deputy general counsel, said during the Connecticut hearing. It was the first time the MLB had participated in a public hearing on sports betting.
“We want to investigate anything that makes fans lose confidence in the spontaneity and unscriptedness of the games,” Seeley said. “It’s a brand protection issue.”
Spillane called the integrity fee a misnomer because it would pay for more than just expenses resulting from investigations. NBA Commissioner Adam Silver recently called it a “royalty fee,” Spillane said, something that would represent reimbursement for the value of the games the league provides, as well as coverage for the risks that sports betting imposes on the leagues.
Asked if the two leagues would support legalized sports betting in Connecticut without an integrity fee, both league executives said no. They avoided directly answering a question from Rep. Patrick Boyd (D) on whether the leagues would sue the state if a regime was enacted without an integrity fee.
“Our focus is on the legislative process. We’re not thinking about litigation,” Spillane said.
Rep. Joseph Verrengia (D), co-chair of the Committee on Public Safety and Security, said he supports an integrity fee but only if limited to reimbursing leagues for their investigations.
“I’m not in favor of lining the pockets of sports team owners,” he said.
To contact the reporter on this story: Aaron Nicodemus in Boston at email@example.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
Text of H.B. 5307 is at http://src.bna.com/wJN.
Copyright © 2018 Tax Management Inc. All Rights Reserved.
Notify me when updates are available (No standing order will be created).
Put me on standing order
Notify me when new releases are available (no standing order will be created)