Legalized Sports Betting Presents Revenue Opportunities for Kansas and Missouri Businesses
As we discussed previously, sports gambling is coming to Missouri and Kansas sooner rather than later. While the specific form of each state’s law is yet to be finalized, all major participants in the sports industry are developing strategies to capitalize on sports betting once it becomes legal. Here we discuss the various potential avenues that businesses could use to generate revenue.
Potential Revenue for Teams and Leagues
After the Supreme Court issued its decision in Murphy v. NCAA, which cleared the way for states to legalize sports betting, Dallas Mavericks owner Mark Cuban commented that owners of any top-four professional sports team essentially saw the value of their team double. That’s unlikely to be literally true but many revenue opportunities exist for pro sports teams, including sponsorship opportunities, potential integrity fees, and in-game betting opportunities. We anticipate that Kansas and Missouri pro sports teams will seek to capitalize on these and other opportunities.
Partnerships and Sponsorships
Professional sports teams and leagues are already entering into sponsorship and partnership agreements with gambling companies in order to generate additional revenue. For example, the NBA recently announced a partnership with MGM Resorts, which includes access to real-time league data for use in betting. At the team level, the Las Vegas Lights soccer team recently announced an official partnership with sportsbook William Hill. Under the terms of the partnership, Lights fans can access matchday odds through William Hill’s mobile betting platform and are eligible to receive certain perks, such as a free $5 bet upon registering a new William Hill account. We anticipate that Kansas and Missouri sports teams will explore similar strategies.
Another prime source of gambling revenue for teams and leagues will be through in-stadium betting. In England, for example, fans at Chelsea FC’s games can place bets in the stadium doing grams. Teams in Kansas and Missouri may seek to emulate this model through betting kiosks in stadiums or through their own sports betting apps. Obviously, the specifics of such arrangements depend on the specifics of the Kansas and Missouri legislation, which are far from final.
Another potential way sports teams and leagues may be able to cash in on the legalized sports betting market is through “integrity fees.” Integrity fees are essentially state-imposed taxes on sports betting, which are then paid to professional sports leagues that theoretically police the integrity of a given sport. Integrity fees are collected as taxes on “handle,” the total amount wagered by bettors, as opposed to revenues. As a result, integrity fees realize a substantially higher net dollar amount than other taxes on revenue at a similar rate. Leagues like Major League Baseball assert that they are best positioned to police their own sport16 and that they should be compensated for the use of the league’s intellectual property. However, the gambling lobby has opposed integrity fees, and to date no state has introduced any.
Television and Media Revenue Opportunities
Sports betting can also be a huge driver of fan interest in the outcomes of sporting events, potentially generating significant revenue opportunities in the media sector. This increased viewership and readership can be monetized in a variety of ways, from increased advertising revenues to the increased value streaming rights In addition, media outlets could seek to capitalize on sports betting by developing betting related content, or advertising gambling websites on their pages. Media outlets could be one of the largest beneficiaries of legalized gambling in Kansas and Missouri.
Athletes’ Publicity Rights
Legalized sports betting has re-invigorated the debate as to whether companies like sportsbooks must compensate athletes for using their names and likenesses. With the potential revenue boon from sports gambling, players’ unions may have an added incentive to pursue these publicity rights or the right to protect players’ names and likenesses. In fact, just before the Supreme Court issued its decision in Murphy, the NFL, NBA, MLB, and NHL issued a joint statement, noting that the players’ unions “have been discussing the potential impact of legalized gambling on players’ privacy and publicity rights.” While not settled law, courts have typically ruled that using players’ identities in the context of fantasy sports does not require licensing and is protected by the First Amendment. In addition, the fact that college athletes may son be able to profit from their name and likeness creates a particularly sticky issue.
Finally, and most obviously, Kansas and Missouri will both derive substantial tax revenue from the legalization of sports betting. This is due not only to the corporate taxes on gambling companies’ revenues, but also to the taxes that may be imposed on individual winners. Many states have implemented gambling-specific tax regimes. For example, West Virginia has imposed a 10 percent rate on the adjusted gross receipts from all bets. Kansas and Missouri may create similar taxes, particularly given the budgetary issues those states face.
Kansas and Missouri sports teams, media outlets, sportsbooks, athletes, and other businesses stand to profit significantly from sports betting. However, these revenue opportunities come with substantial regulatory compliance challenges as well. Kennyhertz Perry specializes in helping clients navigate complex and rapidly-developing regulatory landscapes in order to capitalize on new revenue opportunities.
About Kennyhertz Perry’s Sports Gambling Practice Group
Kennyhertz Perry advises clients on a wide range of sports gambling compliance and regulatory matters. Kennyhertz Perry attorney Mit Winter is a former partner at an AmLaw 100 law firm. Mit is a specialist in sports law, having previously represented large college athletic conferences and major universities on a variety of matters. In addition, Mit advises clients on regulatory and compliance issues in a number of highly regulated industries, such as banking or medical marijuana.
Kennyhertz Perry partner Braden Perry spent time as a Senior Trial Attorney with the Commodity Futures Trading Commission and is well equipped to assist with the banking, AML compliance, and other financial and regulatory issues related to the sports gambling industry.
Kennyhertz Perry partner John Kennyhertz is former in-house counsel at a private equity firm, and has structured transactions for very small and very large clients alike. He has substantial experience in highly-regulated industries such as online lending, and industries with rapidly-evolving regulations, such as cryptocurrency. He provides sports gambling operational and compliance counseling, and offers advice on appropriate modifications of transaction structure and documentation.
Kennyhertz Perry attorney Ben Tompkins is a former federal prosecutor in Los Angeles as well as a former Trial Attorney for the U.S. Department of Justice Tax Division. He is well equipped to provide advice regarding the fast-changing tax landscape in the sports gambling industry.
Kennyhertz Perry attorney Arthur Chaykin is a former law school professor and head of litigation at Sprint. He is an expert on intellectual property law, and devises creative solutions to protect client’s IP in the sports gambling industry.
Kennyhertz Perry attorney Jeff Donoho is an expert in small business formation and government compliance. He has substantial experience advising clients on regulatory and compliance matters in other highly regulated industries, like medical marijuana.
Kennyhertz Perry attorney Jon Dedon previously worked in the appellate litigation division of an AmLaw 100 law firm. Jon has worked extensively on marijuana and hemp related regulatory compliance, including for numerous financial institutions and payment processors. This experience navigating fast-developing regulatory landscapes proves valuable to clients as Kansas and Missouri move to legalize sports gambling.
Clients also benefit from Kennyhertz Perry’s experience in related areas of law, such as litigation, banking, securities, tax, intellectual property, employment, insurance, and its regular practice before the Missouri administrative agencies and courts. Sports gambling clients choose Kennyhertz Perry because the firm’s lawyers tailor their advice to the unique issues presented by each matter they handle.
To learn more about Kennyhertz Perry, LLC, please visit kennyhertzperry.com.
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