Many U.S. States Are About To Legalize Sports Betting. How Can They Do So in a Way that Minimizes Risks of Sports Corruption?

Last May, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), finding the federal prohibition on sports betting unconstitutional. Accordingly, all states (not just Nevada) may now legalize sports betting. Excited about the potential revenue bump, a few states, including New Jersey and Delaware, have already passed legislation to open their doors to sports betting. Other states including Pennsylvania, New York, Mississippi, and West Virginia have sports betting bills pending in their legislature, and at least fifteen other states have introduced bills in some form. Unlike PASPA, a federal statute that provided a uniform application for nearly all states across the country, each state’s gambling laws will be unique to their state. And those lawmakers who are considering enacting gambling legislation are also trying to determine how to best regulate the industry—a complicated issue that requires balancing a number of difficult considerations, including: how the state should tax sports betting; whether the state should allow for in person bets only or also online betting; whether the state should permit access to bets with a higher risk of corruption, such as one-off prop bets; and whether the state should the state provide fees to leagues to assist them in corruption prevention. (See here for a discussion of these issues in New York).

While there is a debate in the anticorruption community about whether legalization of sports betting is good or bad for corruption, for those states that do decide to legalize betting, it’s important to do it in such a way that the black market for sports betting shrinks. States considering legalization must ensure that legal betting is a sufficiently attractive option as compared to sports betting in the black market. Otherwise, sports bettors will remain in the black market, which not only would pose numerous challenges for regulating corruption but also would lead to low revenues for states. Thus, at least for those states that choose to legalize sports betting in some form, the twin objectives of maximizing state tax revenue and preventing corruption (especially match fixing and spot fixing), often thought to be in tension with one another, are both advanced by maximizing the market share for legalized betting in their state, as opposed to limiting opportunities for betting.

To maximize market share and decrease corruption risk, states should include the following provisions in sports gambling legislation:

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Why the Recent Recommendations for Reforming College Basketball are a Step in the Right Direction

Last October, the United States was rocked by an FBI and DOJ probe into corruption in college basketball. The resulting report detailed a number of ongoing schemes, including bribes paid to players by shoe and apparel companies and bribes paid to coaches to steer players to certain financial advisers. As a response to the government investigation, the National Collegiate Athletic Association (NCAA) established an Independent Commission on College Basketball, chaired by former U.S. Secretary of State Condoleezza Rice, to make recommendations on “legislation, policies, actions and structure(s) to protect the integrity of college sports.” After six months of research, the committee produced a 53 page report which concluded that “[t]he levels of corruption and deception [in men’s college basketball] are now at a point that they threaten the very survival of the college game as we know it,” and outlined a number of recommendations for changing the college basketball system. It is now up to the NCAA to decide whether it will implement the recommendations.

The proposed reforms by the Commission have been met with great skepticism. Critics argue that the report only tinkers at the margins and fails to get to the root causes of the corruption and other problems in college basketball. (For a sampling of the critical responses, see here and here and here). These criticisms go too far. Fixing the complex problems that permeate college basketball will take some time. The reforms outlined in the report, though imperfect, are a step in the right direction, and the NCAA should embrace and adopt them. Among the many proposals advanced by the Commission, the following reforms, if implemented by the NCAA, will have an immediate impact on decreasing corruption in collegiate athletics:

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Revisiting the “Public International Organization” Designation for International Sports Organizations under the FCPA

Three years have passed since U.S. federal prosecutors rocked the global sports community by indicting roughly 40 individuals in connection with an investigation into corruption at FIFA. Some preliminary commentary suggested that prosecutors in the FIFA case might bring charges under the Foreign Corrupt Practices Act (FCPA). U.S. prosecutors instead pursued cases under money laundering, racketeering, and fraud charges against the individuals—primarily officials at FIFA and other soccer organizations—who accepted the bribes. In December 2017, for example, prosecutors obtained their first convictions from jury trials in this case, as Juan Ángel Napout (former president of South American football’s governing body) and José Maria Marin (the former president of Brazil’s football federation) were found guilty of racketeering, money laundering, and fraud for accepting large sums of money in exchange for lucrative FIFA media rights deals and influence over FIFA tournament hosting decisions.

The reason that the DOJ has only targeted bribe-taking FIFA officials, and has not used the FCPA to prosecute those who paid those bribes, is that bribes paid to FIFA officials fall outside the FCPA’s scope. But that could, and perhaps should, change.

The 1998 amendments to the FCPA expanded the statute’s scope to cover bribes not just to officials of foreign governments, but to officials of “public international organizations.” An organization may be designated as a public international organization either through an executive order pursuant to an existing statute (the International Organizational Immunities Act), or—importantly for present purposes—“any other international organization that is designated by the President by Executive order[.]” Pursuant to this statutory authority, the President has the power to designate international sports governing bodies like FIFA, the International Olympic Committee (IOC) and others as “public international organizations” for FCPA purposes. (The fact that these sports bodies are nominally private does not prevent this; while most of the roughly 80 public international organizations currently covered by the FCPA are intergovernmental organizations like the World Bank and the International Monetary Fund, the list also includes some private, non-profit organizations, such as the International Fertilizer Development Center.) If the President designated international sports organizations like FIFA or the IOC as “public international organizations” for FCPA purposes, then individuals or firms that bribed officials at those organizations could be prosecuted under the FCPA, so long as the U.S. has jurisdiction over the defendants.

This is not a novel or radical idea. For decades, legislators and activists have clamored for designating sports organizations such as FIFA and the IOC as public international organizations under the FCPA. The discussion first surfaced in 1999, when U.S. Senator George Mitchell requested President Clinton to declare the IOC a public international organization following findings of a bribery-ridden culture in the Olympic movement. Senator John McCain later introduced a bill that would bring the IOC under the definition of public international organization under the FCPA, but the bill never made it out of committee. Although these past efforts proved unsuccessful, the time is ripe for revisiting this idea. Indeed, there are at least two compelling arguments for designating FIFA and the IOC as public international organizations under the FCPA.

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Legalized Sports Betting in the United States: Analyzing the Impact of Legalization on Corruption Risk

The rise of corruption in sport has captured the attention of many anticorruption groups, including Transparency International and the United Nations Office on Drugs and Crime. Sports corruption takes many forms, but one of the most prevalent is match fixing, which occurs when players or officials alter the outcome of a sporting event in a way that benefits those who bet money on those “fixed” games.

In the United States, concerns about match fixing, among other things, led Congress to enact the Professional and Amateur Sports Protection Act (PASPA) in 1992. The Act prohibits most states from legalizing sports gambling, with only Nevada allowed to offer betting on single games. Yet PASPA failed to curb gambling on sports, mainly because bettors turned to the black market; each year, Americans gamble an estimated $150 billion-$400 billion in illegal sports betting.

PASPA appears to be in legal jeopardy: Last December, the U.S. Supreme Court heard oral arguments in the case of Christie v. National Collegiate Athletic Association (NCAA), and while a decision in the case is not expected until later this year, legal experts believe that the Supreme Court will invalidate PASPA. This would provide all 50 states with the opportunity to legalize and regulate sports betting in their state. With that in mind, it is important to consider the effects that legalized sports gambling may have on bribery in professional sports.

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Bribery in College Basketball: What the Corruption Ring Means for the Future of Collegiate Athletics

Last Tuesday, the U.S. Attorney for the Southern District of New York, Joon H. Kim, shined light onto the “dark underbelly of college basketball” by charging a number of individuals with violating federal bribery, fraud, and corruption statutes. Among those charged were James Gatto, Director of Global Sports Marketing for Adidas, and assistant basketball coaches at the University of Arizona, Auburn University, Oklahoma State University, and the University of Southern California. Additional investigations are currently ongoing at the University of Louisville and the University of Miami.

U.S. Attorney Kim outlined two distinct schemes that were uncovered during FBI investigations. The first involved Adidas executive James Gatto, who allegedly bribed high school basketball stars to sign with certain colleges that were sponsored by Adidas. The second scheme involved financial advisers and agents bribing assistant coaches at universities in exchange for convincing their players to hire those advisers when they became professional athletes.

For those who follow college sports, particularly football and basketball, the illicit activity is not surprising. As longtime collegiate sports journalist Pat Forde explained, “Every basketball program in America is running scared right now, because this is how business gets done. A lot of people knew it, but nobody was able to lay it out with proof like the feds did on Tuesday. It’s a dirty sport, and today we know how dirty.”

It’s nevertheless a bit surprising that the Department of Justice decided now was the time to get involved, as if the corruption has not been going on for decades. The recent charges raise two questions: First, given the longstanding history of bribes in college basketball, why did the Department of Justice finally decide to get involved? Second, what does this mean for the future of collegiate athletics?

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Direct Democracy as the Solution to Corruption in Publicly Funded Sports Stadiums

In 2002, billionaire Jeffrey Loria purchased the Miami Marlins, a Major League Baseball team, for $159 million. In May of 2017, Luria agreed to sell the team for reportedly $1.3 billion, earning a profit of over $1.1 billion. Some of that profit can be explained by the increased valuation of all sports franchises in the last decade, but a large reason for the eye-popping jump in value is the Marlin’s new, privately owned—but largely public funded—stadium. In 2011, Miami-Dade County agreed to contribute more than $400 million for the stadium. Including interest, the estimated total cost to the county is $2.4 billion dollars. Prior to reaching a deal for the new stadium, Mr. Loria donated various amounts to local government officials, including $40,000 to the county commission chairman in 2008, and $50,000 to Mayor Alverez.  (The SEC conducted a four-year investigation into whether Loria’s donations were unlawful bribes, but ultimately dropped the investigation.)

Such a story is common in sports stadium construction. In the past 15 years, more than $12 billion in public money has been spent on privately owned stadiums. The loans used to pay for such construction, typically tax-exempt municipal bonds, will also cost the federal government at least $4 billion in taxpayer subsidies to bond holders. There’s an ongoing debate about whether taxpayer dollars should be used to fund privately owned stadiums, but that’s not my focus here. Rather, I want to focus on how this system creates opportunities for corrupt deals between team owners and local government officials.

Before government officials vote on whether to approve public funding for a new stadium, the team’s billionaire owners often make “campaign contributions” to the responsible government officials. It is difficult to prove that these donations are unlawful bribes, as doing so would require proving a quid pro quo exchange. Yet when billionaire owners donate to local government officials, who then happen to approve hundreds of millions of dollars in public funding for the billionaire’s stadium—which directly increases the value of the owner’s assets by hundreds of millions of dollars—it looks a lot like bribery. The example of Mr. Loria making donations to Miami-Dade officials is hardly unique. Consider the following additional illustrations Continue reading

Reforming FIFA: Why Recent Reforms Provide Reason for Hope

Over a year has passed since Gianni Infantino was elected President of FIFA. When elected, Infantino promised to reform the organization and win back the trust of the international football community following the numerous incidents of corruption that preceded his tenure as President (see here and here). Corruption not only existed at the executive level of FIFA, but also permeated down to the playing field, where incidents of match fixing and referee bribery were widespread. On the day he was elected, Infantino remarked, “FIFA has gone through sad times, moments of crisis, but those times are over. We need to implement the reform and implement good governance and transparency.”

Yet despite some reforms in the past year, a recent Transparency International report–which surveyed 25,000 football fans from over 50 countries—showed that the public still lacks confidence in the organization, with 97% of fans still worried about corruption, especially match fixing and bribery of officials. While the results show some improvement compared to the previous year, the numbers should worry both Infantino and FIFA: 53% of fans do not trust FIFA, only 33% of fans believe FIFA is actively working against corruption in football, and only 15% of fans have more confidence in FIFA now than they did during last year’s corruption scandal.

The public’s distrust of FIFA is certainly understandable, as is a degree of cynicism regarding Infantino’s promise to clean up the organization. After all, Sepp Blatter ran on a similar platform to Infantino when he elected President in 1998, also claiming that he was going to reform FIFA. Yet despite the lack of confidence in Infantino and FIFA, there are a few reasons to believe that change may be occurring within the organization, and that FIFA, under Infantino’s leadership, may be making strides in the right direction. Since Infantino’s election, FIFA has undertaken the following steps to curb corruption within football and the organization:

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