Sports Betting May Further Complicate NCAA Antitrust Concerns

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By Victoria Graham

The NCAA and member schools seeking to profit from bets on their games after the U.S. Supreme Court struck down a federal ban on sports gambling risk subjecting themselves to increased antitrust scrutiny.

The University of Connecticut and Rutgers University are reportedly among the schools pushing for a fee model where sports betting venues would have to pay a portion of gambling revenues to sports governing bodies such as the NCAA. The schools say this integrity fee model is necessary to cover new compliance costs associated with sports gambling.

“The NCAA and its schools could certainly be subjected to additional scrutiny from an antitrust perspective if they participated in an integrity fee model with any of the states where they received a percentage of the betting action,” Jennifer O’Sullivan, a partner at Arent Fox LLP in New York who specializes in sports litigation, told Bloomberg Law. Such a move would “dilute their primary stance” of student-athlete first, O’Sullivan added.

Critics contend that student-athletes, who help generate revenue for universities and the NCAA, should be entitled to compensation beyond scholarship funds.

The debate is the subject of ongoing litigation that will go to trial in December in California challenging the NCAA practice of scholarship capping. The plaintiffs in that case, Jenkins v. NCAA, argue that the caps on student scholarships for playing college sports is an unlawful restraint of trade under antitrust law.

Piece of the Action

In Murphy v. NCAA, the Supreme Court overturned a nearly 30-year ban on sports betting, giving states the right to draft legislation on sports wagering.

Five states so far have attached an integrity fee to pending sports-betting legislation. Major League Baseball and the NBA worked behind the scenes to ensure their stake, actively lobbying across state legislatures for at least a 1 percent fee model. New York is proposing a 0.25 percent fee. Indiana and Missouri are proposing a 1 percent fee. And Kansas has bills pending for both percentages.

Representatives from the University of Missouri, Rutgers, and the University of Connecticut talked with MLB this month about how gambling revenue can be funneled back to schools, according to ESPN. Schools and the professional leagues have expressed concerns that sports gambling will mean additional compliance measures will be needed to ensure the integrity of the game. A fee would help pay for some of those costs, the leagues said.

Muddy Waters

However, the inclusion of a potential integrity fee model adds some concerns, Creighton Macy, a partner at Baker & McKenzie LLP and former Justice Department antitrust enforcer, told Bloomberg Law. The integrity fee “could play into the current litigation and current conversation going on right now with respect to revenue sharing with college athletes.”

An integrity fee creates a new source for potential anticompetitive behavior that mirrors prior lawsuits against the NCAA, Sathya Gosselin, a partner at Hausfeld LLP in Washington, told Bloomberg Law.

“Any time there is an agreement among competitors with payment price thresholds and the benefits afforded to college athletes, there could be significant concerns,” he said. Gosselin served as trial counsel in O’Bannon v. NCAA, a case in which former athletes challenged the NCAA practice of using students’ images for commercial purposes without compensating players.

“The concern is that universities might see more revenue opportunities coming from sports gambling and take their eye off the ball in protecting the integrity and athletes involved,” Amy Perko, CEO at the Knight Commission, an independent panel that advises the NCAA on its policies, told Bloomberg Law.

Money Grabber

The integrity fee, as proposed now, would likely take in more revenue than what is needed for compliance costs.

The American Gaming Association estimated that more than $10 billion was bet on the 2018 NCAA men’s basketball tournament, of which only $300 million was wagered through sports books in Nevada, where sports gambling was already legal. Ten percent of American adults, nearly 24 million people, bet nearly $3 billion on college basketball pools alone, according to an AGA survey.

The NCAA and NFL are advocating for a federal model that would regulate legalized sports gambling. Until then, “maintaining the integrity of competition and student-athlete well-being” are the NCAA’s highest priorities, said the organization’s president, Mark Emmert.

Despite the high revenue potential that comes with sports gambling, it’s important for the NCAA to stick to its stated goal of student-athlete first and foremost, Perko said. Many of the recent legal challenges for the NCAA came about “because the goals became more about producing revenues than keeping the focus and priority on educating and the development mission of college sports,” she said. “Everyone wants a piece of the pie,” O’Sullivan added. “How they get there while maintaining their core principles is the question.”

The NCAA declined to comment for this story.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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