The Sham of Integrity Fees in Sports Betting

Abstract

Following the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association, states can legalize sports gambling for the first time in more than 25 years. The advent of legalized gambling has sports leagues clamoring for compensation from states that authorize wagers on the particular leagues’ games. Legal sports gambling promises to be one of the largest growth industries in the United States for years to come. Americans spent upwards of $150 billion gambling illegally in 2017. The opportunity to convert some of that money to legal markets has state legislators salivating, gambling operators lining up, and sports leagues abandoning policy positions they have maintained for the better part of the last century. Derivative industries are also popping up, including companies that traffic in public information (e.g., scores) through partnerships with major sports organizations. There has be a collective push of the false narrative that sports leagues own the information generated by sporting events and that the leagues should be compensated when sportsbooks use this information. On this basis, the sports leagues seek compensation from state legislatures voting to legalize sports betting. Acceptance of the position pushed by the sports leagues could generate a windfall of upwards of $2 billion for the leagues, while preventing that same $2 billion from funding state programs. This Article examines the legal foundations of the sports leagues’ quest for mandated fees and the monetization of information in the public domain by the integrity monitoring industry. It concludes that the quest for compensation by the sports leagues is baseless rent-seeking.

Keywords: sports betting, intellectual property, integrity fee, First Amendment, Constitutional law, gambling

JEL Classification: K0, K00, K11, K14, K19, K22, K23, K3, K4, K40, K42, K49, L83 O3, O30, O33, O38