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As States Legalize Sports Betting, Big Sports Corps Are Demanding Their Cut - By Force of Law

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Here’s a lesson in how one should never underestimate the corruptive power of politics.

Following the big May 14 Supreme Court ruling that negated “PASPA” -- former NJ Senator Bill Bradley’s clearly unconstitutional 1992 federal “Professional and Amateur Sports Protection Act” preventing all but three “grandfathered” states from seeing legal, "regulated" pro and amateur sports gambling -- many state legislatures began to look at legalizing the practice, which has been garnering over $150 billion annually in the black market. Sounds typical. State politicians want cash. Pulling it out of the black market lets them tax it, and black markets don’t allow for easy resolution of disputes. Why not bring it above board?

Well, for a long time, big-money sports corporations opposed this, but now, seeing as it looks to be inevitable in state after state, they have changed their tactics – from opposing state moves to legalize the ancient practice of sports betting, to, just like the state politicians…

Getting a piece of the action.

As Jason Huffman and Russ Latino report for Reason.com, in the four states that have already legalized the commerce of sports gambling following the Supreme Court ruling, and in many other states that are preparing to do so, obsessive lobbyists for Major League Baseball and the National Basketball Association have descended on the state legislatures, changing their tune from trying to stop sports gambling to trying to get the state legislatures to pass what they’re euphemistically calling an “integrity fee” of one percent on gross sports gambling receipts.

That’s one percent on what is estimated to be a $200 billion industry when it’s all above board. In other words, that’s an extra $2 billion for the major leagues.

There’s a weak, though initially resonant, sentimental argument on the side of the big sports corporations. They say that it’s their activity that’s being observed, their activity that’s the source of all the betting fun, and their activity being “exploited” by the sports gamblers, so they deserve a cut.

But that overlooks a great deal.

First, one cannot control, and has no moral authority to control, the peaceful actions of others. So if I am on a high ledge, and street-bound observers want to bet on whether I jump, that is their interpersonal agreement and prerogative. I have no more moral claim to their exchange than a cloud does on people betting on lighting.

Second, the major-leaguers argue that this extra one percent “integrity fee” they want the states to impose will help curb corruption, but as Huffman and Latino write:

It's unclear why suddenly legalizing this existing market would lead to widespread fraud. If anything, match-fixing is likely to be more common in the black market, where regulatory oversight is nonexistent… Nevada, which was always exempt from the federal sports gambling ban, imposes no integrity fee. Yet there is no rampant insider or fraudulent betting there. Those who do engage in bad behavior, like Pete Rose, are punished according to the rules that sports leagues already have in place to deter cheating.

So the sports lobbyists’ arguments don’t stand up to scrutiny. Not a surprise. This appears to be a case of what economists call “rent seeking”, or one party engaging the government to gain revenue at the expense of others, rather than conducting their practices in the free market, and only profiting by providing things to people via voluntary exchange and revealed subjective valuation.

It’s laughably ironic that the lobbyists are engaging in such activity under the guise of “integrity”. These are the same big corporations that often get massive taxpayer-paid subsidies from states and cities to build stadiums...

In many ways, the people conducting sports betting in the underground are less insulting. At least they’re not claiming they should get a cut of other people’s tax cash and voluntary market exchanges when they gamble.

And they’re not asking the government to collect it for them through the force of the state. 


(Cover Photo: Flickr/Marit & Toomas Hinnosaar)

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