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Is Legalized Sports Betting Inevitable? One Pro Commissioner Says Yes

October 16, 2014

New NBA commissioner Adam Silver used an interesting word regarding sports wagering at a Bloomberg sports business symposium in September. Silver called broader legalized sports betting in the United States "inevitable."

Silver went further when he added, "We will ultimately participate in that."

Exactly what Silver meant by "participate" is open to interpretation, but some think it refers to franchise fees. Whatever the arrangement, clearly Silver believes sports wagering can be a direct or indirect source of revenue for the NBA.

NBA: Adam Silver

Considering the fiery resistance to sports wagering demonstrated by Silver's predecessor, David Stern, the new commissioner's stance was stunning. And while Silver's predictions may seem extraordinary on the surface, they really aren't outlandish when one considers what's been happening between big-time sports and what could broadly be described as the wagering universe during the last year or so.

This is what we're talking about:

Short-Term Fantasy Sports

The fastest-moving sector involving fans participating in a financial fashion in spectator sports is so-called short-duration fantasy sports. By now, many sports fans have heard about this, either by word-of-mouth or on TV commercials for the two industry leaders, FanDuel and DraftKings. Sometimes, ads for these two websites run back-to-back on cable sports channels.

For the uninitiated, short-term fantasy sports are Internet contests in which participants pick hypothetical teams of real players and the players accumulate points based on performance. But here's the interesting part, participants can easily enter contests for cash -- from 25 cents to thousands of dollars -- and winners get paid soon after the contests end. Every week during the NFL season, there are scores of contests from heads-up play to tournaments attracting tens of thousands of entries. In baseball, basketball and hockey, this happens every day.

Some may argue this amounts to gambling but in most places, such as Maryland, it is legal. It is not so different from trading equities on the stock market. To be consistently successful at short-term fantasy sports during a long period of time, it takes a lot of research and skill but luck doesn't hurt. Just like in trading stocks.

But that's the old news. Here are the more recent developments. Big-time private investors are so impressed with the prospects for short-term fantasy sports that DraftKings was able to raise $41 million in venture capital during the last few months, and FanDuel countered by raising $70 million. For FanDuel, those private investors included heavy-hitters Comcast Ventures and NBC Sports Ventures. FanDuel projects $40 million in revenue this year.

Now, major mainstream media companies are trying to play catch-up with their own short-term fantasy sports websites. Sports Illustrated rolled out FanNation and Gannett's USA Today is trying to get in on the action with FantasyScore.

Should one of the heavyweights in traditional fantasy sports get involved, say Yahoo, ESPN or for that matter, even NFL.com, the short-term fantasy sports business will skyrocket out of sight.

As far as major sports organizations are concerned, they're quickly warming to an association with short-term fantasy sports. During the past baseball season, MLB.com teamed with DraftKings for the Official Mini Fantasy League of MLB.com. Those were daily fantasy baseball contests that awarded prizes such as World Series tickets. This football season, DraftKings has special contests that will send winners to horse racing's Breeders' Cup, and the website has even crossed over into the poker world to award seats in World Poker Tour events in Atlantic City, N.J., and Las Vegas.

Getting back to Silver and the NBA, that league just gave its teams the green light to accept advertising for short-term fantasy sports. Just that quick, FanDuel and the NBA's Orlando Magic announced a deal that made the website a major sponsor of the team.

Next season, fans will see FanDuel's logo on the court apron at the Amway Center. Indeed, FanDuel will be the Magic's third largest partner behind Amway and the team's TV partner.

Sports Gambling

Of course, fantasy sports contests are all about individual player performances -- and that's what differentiates it from typical sports wagering where results are based on the game's outcome. And for many fans, wagering on the games -- meaning the final score -- is more appealing than fantasy because it's far simpler.

The state of sports wagering in America is an oft-told story by now. A federal law, the Professional and Amateur Sports Protection Act of 1992, restricts sports gambling to four states -- Nevada, Delaware, Montana and Oregon. Wide open betting is permitted only in Nevada. New Jersey -- which missed the boat in the early 1990s when it had a chance to have itself grandfathered under PASPA -- has been desperate for sports gambling in recent years as Atlantic City's casinos cope with a steep decline.

The legal chess match between New Jersey politicians and the professional sports leagues plus the NCAA seems to be never-ending. So far, Jersey has been getting pummeled in the courts. At last count, the scoreboard read NFL et al. 3, N.J. 0 in court decisions.

But the Garden State has a new trick. PASPA prohibits states from sponsoring or regulating sports wagering. So New Jersey's latest approach is to stay away from sponsoring or even regulating sports betting but instead, to either simply not enforce existing sports wagering laws at casinos and race tracks, or just scrub the books of anti-sports betting laws for casinos and race tracks. It's an ingenious end-run, but there's no telling if it'll work.

The NFL and its allies, which happen to include Silver's NBA (there is no end to the irony), take exception to New Jersey's fancy footwork and is challenging the state in court again. More arguments will be heard this month. The most optimistic sports wagering proponents in New Jersey still think there's a chance that Monmouth Park, a thoroughbred racetrack in North Jersey, will be taking NFL bets this season.

As an aside to all this, the NFL -- perhaps the most zealous of anti-sports wagering foes -- has said it would not consider playing even an exhibition game in Las Vegas. Presumably, that has something to do with Nevada's sports wagering business.

Meanwhile, the NFL keeps putting more and more regular-season games in London -- where there are three this season. And in London, a fan can walk from Wembley Stadium, where the regular-season NFL games are played, to sports book parlors and bet on the game.

Given the increasingly illogical and hypocritical objections to legalized sports wagering, you have to come back to Silver's take on the subject. Inevitable.

Issue 202: October 2014