A proposal, attached to House Bill 903, to legalize sports betting in Georgia came alive late last week. With baseball, basketball, and hockey slowly moving towards playing again, the timing seems great.
Unfortunately, the current language would blindside taxpayers with one of the highest tax rates in the nation, at 20% of adjusted gross income. Not only that, it would give sports leagues power over what data sports books could use.
If they remain, these provisions promise to handicap Georgia sports betting business. Tax rates on bets approaching 20% and up are so high that they drive down betting activity, and actually reduce tax revenue.
They defeat the entire goal of the politicians seeking the high rates. And that analysis focuses on European countries. With sports betting in the U.S., many states have yet to legalize, and others have come in with very low tax rates, like Iowa’s 6.75% rate. The competitive situation could turn out even worse for states like Illinois and Tennessee, who have adopted high rates (and Georgia if the state follows their misguided lead).
In fact, Illinois has been getting crushed by neighboring Indiana. The Hoosier State has a 9.5% tax rate, and digital sports betting. Illinois’ own governor seems to not realize his state does not have live digital betting yet.
High tax rates also keep people betting with illegal offshore sports books. This is bad for consumer protection, and general security, as we don’t know where all that money goes. There is an estimated $150 billion sports betting black market.
Georgia’s legislation includes language on data that would allow sports leagues to determine at a whim that independent sports book operators would have to use their “official” stream.
This is damaging because the government is giving away regulatory power to private, protected sports leagues. Then the leagues get to use that power to tell people who they can do business with. It’s bizarre some state legislators think this is a good idea.
There is some recourse, as operators can argue terms for league data use are not “commercially reasonable.” That may be better than government stating what is “commercially reasonable”, but risks creating endless legal disputes that cost money, which only makes it more difficult to run a sports betting business in the state.
Meanwhile, there is a functioning competitive market for sports statistics data that would determine what is “commercially reasonable” for free.
It has been well established that sports statistical information is public. In National Basketball Ass’n v. Motorola,Inc. a court of appeals held that sports statistics are not copyrightable, and that compiling and distributing statistics was legal.
It is also completely unnecessary for the leagues’ success, as they have been signing agreements for using their official data all over the place. The major sports leagues have deals with Genius Sports or Sportradar – companies that compile and distribute statistical data, for example, the NBA’s deal for overseas statistics distribution is worth $250 million.
Hopefully Georgia lawmakers take steps to address these issues, and better prepare their state to compete in the growing sports betting marketplace. Otherwise, when Alabama and Florida join the fray, Georgia could blow whatever lead they gain by acting first.