Why has the USA been slow to legalize sports betting?

And why was the NBA the first American league to be open to gambling on its games?

A major court ruling last week enabled sports betting to be legal throughout the United States. It’s a huge change that the NBA was anticipating a decade ago, as I realized while interviewing commissioner David Stern in December 2009.

By then Stern had been running the NBA for a quarter-century. He could be sensationally charming, and after so many years on the job he also had a quick temper. I had a series of questions ready for him on a number of topics, and midway through the interview I brought up sports betting. The scandal of Tim Donaghy, who went to prison for betting on NBA games that he had refereed, had been revealed 17 months earlier.

Stern began by referring to a number of international betting scandals involving European football and cricket, in order to place the Donaghy case in a larger global context.

Gambling on sports has been, for the most part, illegal in every American state but Nevada. My question to Stern was whether the NBA and other American leagues should want to decriminalize betting on sports – to make it legal in hope that improved regulation and transparency would help prevent gambling scandals in future?

Stern lowered his head and sighed as he began his answer.

 “It has been a matter of league policy to answer that question no,” he said. “But I think that that league policy was formulated at a time when gambling was far less widespread.”

Stern gave a quick history lesson. He remembered that in the 1960s gambling of all kinds had been viewed as a sin that should not be allowed to spread beyond Las Vegas and its other sanctuaries in Nevada. In recent years that view had changed throughout America. The need for new taxes by local and state governments had led them to embrace gambling. Stern indicated that he personally was not in favor of state-sponsored lotteries – “it may be a little immoral,” he said, “because it really is a tax on the poor” – but he and the NBA had to accept that the official view of betting was not what it used to be in America.

“It’s now a matter of national policy: Gambling is good,” Stern told me. “So we have morphed considerably in our corporate view, where we say, look, Las Vegas is not evil.”

Stern said he didn’t like the idea of NBA fans focusing on the point spread. My response was that the NBA had become a global league, representing a diverse variety of audiences and interests. Gambling amounted to another point of view.

“OK, but then you’re arguing there may be good and sufficient business reasons to do that,” Stern said. “And I’m going to leave the slate clean for my successor.”

Stern laughed. He was opening the door for Silver to eventually push for a national law that would legalize American sports betting in a way that could deliver money to the NBA while also helping to protect the sport from scandal.

“But it’s fair enough,” Stern went on, “that we have moved to a point where that leap is a possibility.”

With that, Stern had become the first commissioner of a major American sports league to be open to legalized betting.

America’s repression of gambling is one of those things that people around the world can’t understand. When I lived in England, it was a revelation to attend football matches and walk by betting windows on my way to the concession stands. In many countries, betting on games is accepted as part of the fan experience.

Stern and Silver understood this. Their international experiences taught them that the desire to bet on sports is universal – and it doesn’t have to be hidden out of sight, as has been the case in American sports. The most popular leagues in the U.S. have always benefited from gambling. In the 1950s the top American sports were baseball, horse racing and boxing – all successful in part because Americans bet on them. 

Today, the popularity of the NCAA Tournament for men’s college basketball (March Madness) is driven by betting. The same is true for the NFL. In a court deposition he gave in 2012, Stern acknowledged that the NBA was not a favorite among gamblers.

“We’re only dealing in estimates,” Stern testified six years ago. “But based upon what I know of NBA fans, I would say we’re probably well behind the NFL, college basketball, college football, maybe even Major League Baseball in wagering … I once was told that the action on NBA in Las Vegas is relatively small, which is pleasing to us.”

And yet, as Stern acknowledged, the NBA had a bigger issue than the other leagues in America.

The credibility problem. “I’m painfully aware that fans have reason to question the outcome of our games, the competence of our officials,” Stern said in the 2012 deposition. “We often read that our officials have been directed by the league office to cause an outcome to occur in a certain way because we’ll get higher ratings or earn more money.”

Stern was referring to the constant speculation that he ordered referees to favor the most popular teams in the NBA playoffs in order to generate better TV ratings. The theories made little sense, Stern said, because the contracts are negotiated for the long term. Most recently, in 2014, the NBA signed a nine-year, $24 billion deal with American broadcasters ESPN and TNT. Altering the result of a playoff series here and there wasn’t going to affect contracts of that magnitude.

“And actually it’s much harder than just rumor; it’s reported sometimes as fact that the NBA got its way in a particular game,” said Stern, who had been deposed to testify on behalf of lawsuit that had been filed by the NBA, National Football League, National Hockey League, Major League Baseball and the NCAA against the leaders of New Jersey state government, which at that time was trying to legalize sports betting. 

“Where do you think this perception that is so troublesome comes from?” asked attorney William Wegner, who was representing New Jersey in the deposition. 

“It’s hard to say,” Stern said. “It could be disgruntled losers of bets, but that would be too easy to ascribe it to just that. But I’m sure that’s one fact. There’s nothing as difficult to cope with as the zeal of a disgruntled bettor who thinks that he has been deprived of something to which he was entitled – and looks for a reason to ascribe for that loss.”

But the problem went beyond those unhappy people who had lost bets on NBA games, Stern said. The negative perception of the NBA was also drawn from the speedy and unpredictable nature of basketball, and the fact that it is so difficult to referee.

“We’ve had some poorly officiated games, despite our great wishes,” Stern acknowledged. “Our referees are only right about 90 percent of the time. And there have been occasions when the wrong call – and many are instant plays and the judgment is made in a flash of an eyelash – has an impact on the outcome of the game. And people say, `Oh, it was so clear to me that that was a wrong call, that the ref must have had money on the game, or that he must be favoring one team, or the commissioner must have told him to do it.’”

But that’s just speculation, Wegner offered.

“It’s worse than speculation,” Stern said. “It’s completely wrong. They’re making it up, but it’s out there.’’

Stern noted that NBA supervisors grade every call and non-call by referees. “We have enhanced the use of video replay, eliminating human decisions to the greatest extent possible,” Stern said. “We do whatever we possibly can to be as transparent as we possibly can. But it’s an area that has bedeviled us for the last couple of decades.”

The opposing attorney was unusually sympathetic. Because the NBA’s games were played at a much higher speed than games of American football or baseball, said Wegner, “I would think that referees and the league would get the benefit of the doubt on those calls, even if there were a percentage of them that were false or wrong.”

“It doesn’t work that way,” Stern replied. “In the close quarters (of) a basketball game – which is an advantage of our game, the fans are closer to the game – when a player remonstrates or a coach yells, you can hear it … the fans almost take their power from watching a player’s reaction to a call.

“And if he doesn’t get the call – let’s say he’s a hometown player – (the home crowd) thinks that the referee did something bad because if this player were so violently hit that he went sprawling, then the referee must have it in for the team. And it builds. So we’ve placed me in sort of the ridiculous position as the final authority, even though it’s done by others, of deciding whether to post on a website a flop and thereby identifying a player as a flopper. And a laughing matter though it may be to some, to us it’s serious as a protection of the integrity of our game so that our fans don’t think that the referees are disregarding it, or making up calls that are not justified, or refusing to give calls that would be justified.”

Stern was speaking with unusual candor, under oath, and yet his statements were consistent with everything we know about the NBA. These games are impossible to officiate. The plays happen too fast, and too many of the rules are subject to interpretation – the best referees watching a replay in slow-motion may disagree on the call because they interpret the rulebook differently – which means there will never be total agreement on the decisions that referees are forced to make in the flow of the game. The quality of officiating needs to be improved, there is no doubt, and yet the human error that is built into NBA refereeing has led to an epidemic of conspiracy theories – some of them hatched by coaches, players and general managers who believe their teams have been wronged on purpose by the referees.

How was the NBA going to deal with this issue of credibility?

A new approach was necessary. For the last century – dating back to the 1919 “Black Sox” fixing of the World Series that threatened the existence of professional baseball in its early years – American sports leagues have feared potential gambling scandals as the original sin capable of destroying their business. 

In 2007 the NBA experienced such a scandal with Donaghy, and realized that it could be survived. Along the way, gambling in America has come to be viewed less as a threat to morality, and more as a source of revenue for governments. And then there have been the international experiences of Stern and Silver, who have seen around the world that legalized sports betting may be preferable to the current American system – which is no system at all. Outside of Nevada, essentially, American sports betting has been managed by the black market and offshore bookmakers.

Ultimately, the NBA believes that its business can grow via legalized gambling. The reason Stern joined with the other leagues to sue New Jersey years ago was because the NBA doesn’t want each state to come up with its own laws on sports betting. The NBA is a national league, and it wants a comprehensive federal law that will be applied to all 50 states – and, of course, it also wants a percentage of every bet that will be wagered legally on its games.

The argument on behalf of legalized sports betting is that it will result in greater transparency – that potential gambling scandals are more likely to be exposed when the wagers are licensed, regulated and taxed. 

Transparency is an important theme here. In response to the credibility issues that Stern was citing in his 2012 deposition, the NBA has pursued an agenda of increased transparency. Think about the “Last Two Minute” officiating reports that the NBA has made public in recent years. The referees themselves have argued that these reports are too easily taken out of context, but the NBA’s belief is that transparency is the only response to questions of credibility. The mistakes that are revealed are embarrassing, for sure. But the larger message of those reports is that the game is naturally difficult to officiate, that refereeing mistakes are part of the game, and that there are no conspiracies. 

The old way was to keep refereeing secret and to rarely admit mistakes – which helped fuel the conspiracy theories. 

The new approach is taking shape. In this larger world view, gambling on sports is a fact of life. You can pretend it doesn’t exist, as American leagues tried to do for the last century; or you can deal with it head-on, which is the right step for a global league that is focused on credibility.

NBAnswers is a newsletter from American insider Ian Thomsen for NBA fans everywhere.

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