MLB Lobbies for ‘Integrity Fee’ in Washington State
Passing gaming laws and adopting regulations is slow going in Washington State. The legislature is part-time and meets for two months in some years. The state Gambling Commission may not meet more than 10 times a year. Currently, legislators are moving—slowly—on several bills that could legalize sports betting, including one by Rep. Joe Schmick (l.)
If a Washington State sports betting bill is ever passed, Major League Baseball (MLB) has demanded a 0.25 percent royalty (aka “integrity fee”) to “protect the integrity of the game.”
That fee, to be collected from sportsbook operators, not from bettors or the state, would be used to hire more employees and build monitoring systems, according to Marquest Meeks, MLB’s senior counsel for sports betting and investigations, who testified last week before the Washington State Gambling Commission.
“If someone bets $100 on a baseball game, we think we should get a quarter,” Meeks told commissioners. “The royalty is rooted in the fact that you can’t have bets on baseball without baseball.” He claimed that sports betting puts America’s pastime at risk.
100 Years Later, Black Sox Scandal Lives On
This is the 100th year since the infamous “Black Sox” scandal (named after the Chicago White Sox team) seared baseball’s reputation and led to the appointment of the first commissioner of baseball, Kenesaw Mountain Landis. The former judge banned for life the alleged miscreants accused of throwing games for cash—such as the legendary “Shoeless Joe” Jackson portrayed in the film Field of Dreams.
Meeks cited it as an example of what can happen if corruption takes hold. In the 1919 World Series, players schemed to throw games, letting bettors profit from foreknowledge. The scandal wasn’t discovered for a year, and the revelation rocked the public’s confidence in the game.
So far, no state that has legalized sports betting has given any of the national sports leagues a royalty, but the MLB isn’t giving up.
John Thorn, MLB historian, last week published the annual World Series centennial story for the MLB Media Guide. Asked by GGB News how betting might affect the sport, he said, “As a historian my crystal ball works only in reverse; I can tell you what did happen, but not what will.”
Meeks’ PowerPoint also showed a photo of baseball legend Pete Rose, banned for life in 1989 for gambling on the sport. Meeks said, “These scandals aren’t named for the bookies who took Pete Rose’s bets. They’re not named for the influence that corrupted the ‘Black Sox’ players. Instead, the association is attached to the baseball people. We are particularly sensitive to trying to make sure we can root out and avoid corruption before it gets to the point of scandal, because it sticks to baseball for a long time to come.”
For Meeks, the biggest threat to the game is the potential lure for players, coaches or referees to alter the outcome of competitions for profit. “Any event where the ultimate goal is not for players to win or lose based on their merits, we don’t think betting should be permitted,” he said.
If the state allows “in-play betting,” MLB wants sportsbooks operators to be required to use MLB game data and pay for it. This benefits consumers because, said Meeks, “official league data is the only verified and accurate data from the field of play.”
MLB: Ban Some Bets
Meeks called other kinds of data “pirated,” and said the MLB wants to be able to request that certain wagers be banned because they’re easily corruptible. “The example we use a lot is whether the first pitch of the game is going to be a ball or a strike,” Meeks told commissioners. “That’s a discrete event that a single person can control and manipulate, and we think it’s better to prohibit bets on those types of events.”
Commissioner Bud Sizemore reacted to that proposal negatively, saying, “This one I have a little difficulty with… It sounds like you want to be both a regulator and an operator, and that might be a little awkward in implementation.”
Seattle Mariners General Counsel Fred Rivera also presented MLB recommendations on how to “set the foundation for a safe, robust, and transparent sports betting market.” He added, somewhat ominously, “The statutory and regulatory structure has to reflect the fact that the leagues are partners in this process because as a baseline, you cannot offer bets without us putting on the actual games.”
Not coincidentally, Brian Considine, legal and legislative manager for the Washington State Gambling Commission, also made a PowerPoint presentation on “Sports Gambling Sports Integrity.”
He told GGB News it was no coincidence that he and Meeks and Considine gave presentations on sports integrity at the same meeting. “We try to pick a topic every month to educate the commissioners. They had asked a while back to talk about sports integrity and how the commission can fit into it. This is not a new thing for us. We’re fully commissioned as a law enforcement arm. We’ve been investigating illegal sports betting for 45 years.”
Washington Puts Out the Welcome Mat
The major complication for Washington gaming is that it has two flavors: tribal and small commercial cardrooms. “We are co-regulatory partners with the tribes,” said Considine. “Mr. Meeks knows they will have to go to the tribes. We wanted to talk more about what a partnership would look like. If there is match-fixing or something nefarious is happening, what does that partnership look like?”
In that sense, he said, Washington was more welcoming to Major League Baseball than other jurisdictions. “My hope is there is information-sharing. I think (the MLB has) been shut out in some states and not even listened to. We do consider them a stakeholder. We want to hear from them and build that kind of relationship.
“It’s hard to do that if people are in silos. Things are fluid. If we have the good relationship with tribal and federal government and others, then if something pops up we can look at it in unison.”
Tribal gaming in the state accounts for about 85 percent of the total. Plus there are about 40 commercial card clubs. There is also a lottery commission and horse racing commission, which are separate entities.
“When we look at sports gambling, the tribes are largest from a revenue side, with 22 tribes and 29 facilities,” Considine said. “Then you have the card rooms, where recently Maverick Gaming purchased most of the house banked card rooms and became the largest owner operator of card rooms.
“I don’t know if we’d had this kind of consolidation before,” said Considine. “That adds a wrinkle to it.”
Ultimately, the legislature will decide on sports betting, with or without an integrity fee. “Where we provide recommendations is on enforcement side,” said Considine. “We think it’s good to look at current laws and sports fixing laws , making sure the regulations (some of which are many decades old) capture such modern issues as money laundering.”
Washington’s situation as a gaming state is somewhat similar to California and Oklahoma, in that tribal casinos are spread around the state, not just in one part of the state.
“What we continue to see is the saturation of the casino industry,” Considine told GGB News. A market study in 2016 by Spectrum Gaming “found that 90 percent of Washingtonians were within an hour of a casino or cardroom and ninety-eight percent within two hours. That is a unique situation; where in other states it’s more centralized. Ours is more spread out. There’s nothing in Seattle. We have card rooms and casinos out on the peninsula, near the mountains, in the central part of the state, and down the Columbia river. It’s unique in the sense how spread out it is, from large properties and smaller ones that are niche facilities.”
He added, “We don’t know yet what the viability is for a retail sports gaming, but the likelihood is most will be interested if it’s going to make economic sense.”
Schmick: Integrity Fees ‘Muddy the Waters’
HB 1975, the one active sports gambling bill that a House committee approved this year—but which did not advance beyond that—would allow sportsbooks only at tribal casinos.
The author of that bill Rep. Joe Schmick, told GGB News the MLB’s proposed royalty “would muddy the waters, so to speak. In Washington the only places that could currently offer it are Indian casinos. Right now, private businesses would like to offer sports betting, but I don’t think that would be met favorably. All the tribes would have to agree, and if you have baseball and hockey and football all wanting the same thing, it would make it difficult to pass.”
Schmick added, “Unless there is an agreement among all the tribes I think it will be difficult. If the tribes want it, they are going to have to some agreement. If they are split nothing will happen.”
Although mobile sports betting is the hottest form of sports betting in jurisdictions such as New Jersey, Schmick’s HB 1975 does not contemplate online gaming outside of the brick-and-mortar premises of tribal casinos.
“In the conversations we’ve had here at the commission meetings, we know that mobile and internet sports gaming has caught hold, but most of them are not tribal,” said Considine. “There are challenges in seeing how that works. The tribes are big stake holders. They have a lot of influence. If you are going to go online mobile what does that do to current compacts? How does that work in that system?”
And perhaps the biggest question of all: Does mobile sports betting open the door to online gambling?
“Historically,” said Considine, “we’ve been a conservative state on online gambling. (Lawmakers) are not feeling comfortable that they want to run that way. Especially if something happens in 2020, it will be retail and mobile will be authorized for on premise only.”
Although Washington doesn’t have the politics of California and Oklahoma, it has some of the same challenges. But the legislature and to a degree the commission itself works methodically and slowly in rolling things out.
“When we work with our tribal gaming partners we tend to be thoughtful so that we do it right the first time,” said Considine. “We do the same sort of things when we write regulations—and new bills would require new regulations and that’s a public process.”
Even the simplest regulations take at least six months, because the commission only meets 10 times a year. “Things can take time,” said Considine. “Usually a good use of that time is getting out to the stakeholders on the profit gaming side and get their input to make sure it gets done right the first time. If we have to come back it’s doubling the process time.”
The next session runs January 13-March 13, 2020. “If it doesn’t pass during that window it will go to 2021,” he predicted.
In his MLB guide, Thorn wrote about “how eight men on the team betrayed the public trust, and ultimately were banned from baseball for life by Commissioner Kenesaw Mountain Landis.” Find Thorn’s in-depth essay on the scandal at this link: www.nytimes.com.