In The Courts: The State of NBA Betting

LeBron James was done hiding it. 

After getting swept in the 2018 NBA Finals, James sat at the postgame podium and briefly rested his hands on the table in front of him. A tsunami of camera flashes began flooding the room because, there it was, for all the world to see: a soft cast covering his right hand. James picked up the microphone with his left hand and began to take questions from the surrounding media.

Sitting at his Las Vegas home, Vic Salerno couldn't bring himself to watch. The legendary Vegas bookmaker, who is the president of USBookmaking and was inducted into the American Gaming Association Hall of Fame in 2016 for his innovation in the regulated sports wagering industry, thought he had seen it all in his 40 years of work in the sports betting industry. But nothing quite like this. 

In that presser, James admitted he played through what he described as "pretty much ... a broken hand," confirming the stunning media reports that trickled out within moments after Game 4 final buzzer. Salerno was blindsided by the news that James had suffered a serious injury to his shooting hand in the aftermath of a bizarre Game 1. Multiple MRIs were taken, according to ESPN's Brian Windhorst, for his visibly swollen hand. Still, James kept playing through the injury and averaged 28.3 points, 10.7 assists and 8.7 rebounds in the final three games, all losses. No one said a word about the hand.

To many, it was a Herculean feat by James.

But to Salerno, this was something entirely different. In Salerno's eyes, this was a devastating blow to the integrity of the game, an inexcusable breach of trust. Perpetrated by, not LeBron, but the NBA itself. And Salerno was ready to battle the league office head on, in the courts.

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Even before the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) on May 14, 2018, NBA lawyers had begun lobbying in various state courts and proposing that sportsbooks (like the ones Salerno helped operate across the US) should be required to pay the NBA a small percentage of every bet placed on its games to ensure integrity is being maintained.

"Call it a royalty, call it an integrity fee," NBA commissioner Adam Silver told reporters at his annual NBA Finals press conference two weeks after PASPA was reversed. "We will have additional expenses [to further protect integrity], and it's ultimately our intellectual property and we ultimately believe we should be compensated for it."

Salerno was incensed at James' revelation, and so were other sportsbook operators, he says. Here was the NBA's biggest star playing on the biggest stage, suffering what he says was a broken bone in his shooting hand, and laboring through it for multiple games.. Millions of dollars were wagered on these games with betting lines based on, in large part, official injury reports provided by the league, the Cleveland Cavaliers and the Golden State Warriors. 

Nothing in those reports said anything about James' injured hand and thus bettors went heavy on the Cavs. After Game 1, 94 percent of bets to win the series at William Hill's Nevada sportsbook were placed on Cleveland and MGM's sportsbook took six times more bets on the Cavs than the Warriors, according to ESPN's David Purdum. As it turns out, the Cavs failed to cover the spread in any of the remaining games (though Salerno says the sportsbooks didn't lose money on the bets, nor did they spot any irregularities in betting). 

But the issue raises a host of questions. How soon did the Cavs know about James' injury? Who in the organization knew? Did the league know and if not, why not? And did anyone leak that information to bettors? 

Without citing concrete evidence, Salerno believes the league was aware of James' injury and chose not disclose it.

"Oh, they knew," Salerno says over the phone. "They knew."

But when contacted by NBC Sports this week, NBA spokesman Tim Frank called that claim "100 percent false" and denied any knowledge of James' injury before it became public following Game 4. Salerno finds that hard to believe, considering the stakes and, you know, the fact that the hand belonged to LeBron James.

Dan Spillane, NBA Senior Vice President and Assistant General Counsel who is leading the league's efforts to lobby for royalty fees and a compensation package in state legislature, says the Cavs followed league policy that requires teams to detail whether a player is probable, questionable, doubtful or out due to injury, illness, personal matters or resting.

"In this particular situation, LeBron [James] played in all of those games and played very well," Spillane explained over the phone. "This wasn't, as I understand it, an injury that was going to affect whether he was going to play or not. LeBron was going to play in the rest of the series."

John T. Holden, a leading sports law expert and an assistant professor at the University at Oklahoma State, worries that the NBA's policy needs to be expanded to cover injuries like James' that could affect the gambling world.

"These things need to be disclosed," Holden says. "Otherwise, you're just creating a market for people with that information. And that's where integrity really gets threatened."

Spillane believes it's hard to imagine the NBA expands its injury-reporting policy to include injuries that might affect performance without "hundreds of reports being filed constantly" by NBA teams. 

"While it's a fair question to raise, it's not obvious how you would construct a rule that would require disclosure of that kind of thing without becoming all-encompassing and requiring a much more burdensome, intrusive and wide-range of disclosures than we have today," Spillane says.

Still, Salerno isn't satisfied with the league's stance.

"This really blows their whole argument apart," Salerno says. "That proved to me that we couldn't count on the NBA to protect the integrity of the game."

This isn't just an opinion of a bitter bookmaker. Salerno is one of the biggest, most-trusted names in the sports betting industry. In October, as the director of sportsbook operations for BetChicago, Salerno testified in front of Illinois lawmakers at a sports wagering hearing and raised the Finals issue as an example of why sportsbooks should not be required by the law to pay an integrity fee to sports leagues. In that meeting, a National Basketball Players Association representative defended James' right to withhold that information.

State legislatures, so far, are siding with Salerno and the sportsbooks. None of the eight states with legal sports betting have included an integrity fee, which is currently proposed by the NBA, MLB and PGA Tour as 0.25 percent of the amount of money wagered, otherwise known as the handle. (The compensation package was initially introduced as an "integrity" fee in January but has since been called a royalty). Still, Spillane and the NBA's team of lawyers continue to make their case that the NBA deserves a cut off the top. It's a big ask considering sportsbooks in New Jersey, for example, took home just six percent of the handle. 

"It has been a part of several bills that have been introduced in various states over the course of the year including a couple that came very close to passage," Spillane says. "We view this as the very beginning of the process, though."

Four years after Silver wrote a groundbreaking op-ed for the New York Times, the NBA has put on the full-court press to leverage the Supreme Court ruling and boost revenues for NBA owners. The integrity fee (or royalty fee) is just one revenue stream related to gambling. 

The others will undoubtedly change the way fans will experience the sport. Already, the whole NBA landscape is shifting before our eyes.

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Sports leagues and the gambling world have long been embroiled in something of a cold war. 

For years, the NFL went as far as banning the Las Vegas Convention and Visitors Authority from advertising during the Super Bowl, even without any reference to sports betting or gambling in general. Now, the NFL will relocate the Oakland Raiders to Vegas in 2020 and commissioner Roger Goodell announced on Wednesday that it will hold its 2020 NFL Draft in Sin City, saying the NFL is "looking forward to working with" that same Las Vegas Convention and Visitors Authority in its press release. As recently as 2012, then-NBA commissioner David Stern wrote in a declaration in a New Jersey case against legalized sports gambling: "The NBA cannot be compensated in damages for the harm that sports gambling poses to the fundamental bonds of loyalty and devotion between fans and teams."

Like the NFL, the NBA also reversed its position recently. In one of his first landmark moves as NBA commissioner, Silver's 2014 Times op-ed argued in favor of legalized sports gambling. Silver's direct repudiation of his mentor changed everything and laid the groundwork for the current gambling-friendly climate. (Stern now backs legalized sports gambling).

"Silver's op-ed was huge," Holden says. "It was sort of the first professional sports league change in policy in about a hundred years. It was certainly a monumental change."

But May 14, 2018 changed tides and opened up the floodgates. That afternoon, Dallas Mavericks owner Mark Cuban went on CNBC and didn't hold back when summarizing the SCOTUS decision: "Everybody who owns top-four professional sports teams just basically saw the value of their team double," Cuban said. "At least."

The NBA didn't hesitate to line up business deals that industry sources say are amounting to millions of dollars of revenue. In late July, the NBA announced that MGM Resorts would become an official gaming partner of the NBA and WNBA, marking the first partnership of its kind with a sports betting operator in the United States. This week, the NBA landed another partnership, this time with the Stars Group, which operates in New Jersey under its BetStars brand.

Things have changed so quickly that Las Vegas is now seen as a potential safe harbor for an NBA team. On Wednesday, the Arizona Republic reported that Phoenix Suns owner Robert Sarver was threatening to move the team to Las Vegas (or Seattle) if the city couldn't agree on an arena deal. The NBA has developed strong roots in Las Vegas, holding its Summer League there since 2004 and making it the premier offseason showcase in recent years. In 2017, it became the MGM Resorts NBA Summer League through a marketing deal with the casino giant. 

With the climate softening on Vegas and NBA gambling in general, Cuban hired the most famous NBA bettor, Haralabos Voulgaris, and brought him into the Mavs' front office to help him win games. Voulgaris' nearly 150,000 followers on Twitter won't have access to his keen insights into the NBA anymore. But soon, fans might be able to attend an NBA game and legally bet on it without having to look over their shoulder. Yes, in-arena betting may be coming sooner than you think.

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At the local level, teams are joining in on the betting biz boom. 

In October, the Philadelphia 76ers' ownership group, Harris Blitzer Sports & Entertainment, announced a multi-year partnership with Caesars Entertainment, which operates the Harrah's Philadelphia just 30 minutes away from the Sixers' home at Wells Fargo Center. Caesars also operates sportsbooks in Atlantic City, which will be the destination for Sixers in-game promotions such as "Score For The Shore" half-court shots or "Live Like A Caesars VIP" social media contest on the team's official feed.

Was it a coincidence that they struck a deal just months after PASPA was repealed?

"It's not," says Caesars SVP Marketing & Chief Experience Officer Michael Marino. "For us, we think there's a lot of value in meeting sports fans because we believe they're highly likely to become sports betting fans as well. There's certainly more interest now than five months ago in meeting these fans. We're looking forward to the many different activations as a brand partner and then also, obviously, the more direct to the consumer we can get, the better."

Caesars has reason to be bullish about officially getting into the NBA space. In less than six months of operation, gamblers in New Jersey have wagered nearly $1 billion. (Under the hypothetical of a quarter-percent royalty fee, a $1 billion handle would mean sportsbooks would have to write a $2.5 million check to sports leagues). On Thursday, Philadelphia's first sportsbook, SugarHouse Casino, is set to open just a 15-minute drive from the Sixers' arena.

Marino envisions that in early 2019 fans seated inside Wells Fargo Center can open up their Caesars app on their phone and bet on the game. The state of Pennsylvania legalized land sports betting in November, but online gambling hasn't been launched yet. Now, fans on their phones can only bet legally in New Jersey, just a few minutes away. 

It's partnerships like these that have people wondering how soon we will see a sportsbook at an NBA arena. Salerno believes fans will be soon able to bet on NBA games in a brick-and-mortar space at an NBA arena "within the year." Think Churchill Downs, but with an NBA game as the live event.

Marino doesn't think Wells Fargo Center will have a sportsbook any time soon, but it's not out of the question for Caesars to open up a sportsbook on-site down the road.

"Someday," Marino says, "we would love that."

One theory is that legalizing sports gambling will make more fans tune into games and attend live events.

But that hasn't happened just yet. According to Sports Media Watch tracking, ratings have been in surprising decline so far this season. Through last Friday, ESPN and TNT have seen a year-over-year drop in 24 of the 37 NBA games they have aired this season. Part of that might be due to Stephen Curry's injury, general Warriors fatigue and the early struggles of elite teams in some of the NBA's largest markets like Houston and Boston. Still, the gambling boom hasn't led to more eyeballs quite yet.

"The numbers are well below what I expected this season with LeBron's move to L.A.," said Jon Lewis, who writes under the psyeudonym "Paulsen" at Sports Media Watch and has been covering sports ratings since 2006.

However, at the local level, it might be a different story. As Pennsylvania and New Jersey ramp up their sportsbooks offerings, the 76ers now rank No. 1 league-wide in attendance, averaging 20,339 fans per home game. What's more, the team's local broadcast partner, NBC Sports Philadelphia just posted its highest November average since 2001 -- the year Allen Iverson won MVP. It's far too early to attribute that growth to the legalization of gambling in the Philly region, but these sort of viewership gains are the goal.

To Salerno, this is why lobbying for integrity or royalty fees is a waste of time. In his view, the NBA will make plenty of money on gambling-related private partnerships, advertising and increases in franchise value. The NBA, from his perspective, has already benefited greatly from gambling even before PASPA was repealed.

"Who's going to watch the Nets-Celtics game when the Celtics are a 16-point favorite? If nobody's betting on it, nobody's going to watch the game," Salerno says. "We've made them a lot of money."

Holden believes that won't stop the NBA from going to the courts and advocating for an integrity fee. A federal sports betting bill has recently been drafted and, though it's unlikely to pass in Holden's view, how Congress proceeds will be worth monitoring. Still, expect more NBA/MGM-like business deals to continue.

"I think the league is going to continue to press very hard to get a cut of the handle, but I think the best opportunities for the league to profit from legalized sports gambling is through these private partnerships," Holden says. "There are a number of legal issues associated with states mandating integrity fees."

Holden warns that the NBA might be sending the wrong message to fans that, before the federal ban was lifted on sports gambling, the league wasn't financially or systemically equipped to protect integrity of the game. If bringing sports gambling from the shady underground to above ground will be safer for bettors as Silver argued in his op-ed, why suddenly ask for integrity fees now?

"That's a very contradictory statement that they've made," Holden says. "I don't know how sustainable it is to continue asking for the integrity fee. They are not going broke paying lobbyists to ask for integrity fees but at some point, how many times do you want to strike out, before you move onto something else?"

Holden then pauses.

"But it can't hurt to ask for free money,"