David Stern: NBA Would Seek "Payment" for Sports Betting Legalization (and Other Interesting Revelations)

It turns out the Adam Silver was not the first NBA Commissioner to raise the prospect of legalized sports betting. Nearly two years before current NBA Commissioner Adam Silver penned the now-famous New York Times Op-Ed calling for the legalization of sports betting via a “federal framework,” his predecessor, David Stern, hinted at the very same thing. In a recently-unsealed deposition from the professional sports leagues' and NCAA's 2012 federal lawsuit to block New Jersey's efforts to legalize sports betting (the "Christie I" case), Mr. Stern elaborated on comments he made to Sports Illustrated columnist Ian Thomsen in a December 11, 2009 interview in which he stated that legal sports betting was a “possibility.”

In response to questioning from Attorney William Wegner (of the Gibson Dunn law firm, which represented New Jersey Governor Christie in the lawsuit), Commissioner Stern made a number revealing comments on why he believed legalized sports betting in the near-future was a “possibility” and “would ultimately be made legal” by the federal government. He pointed specifically to the “funding needs” of government and the changing attitudes about gambling as the main reason why believed PASPA would be "modified" at some point in his lifetime (if not his "professional lifetime"). Here is his full answer:

A:    Because in my sort of view, the coming hunger for money, funding, in order to deal with deficits that our nation faces caused me to believe that within the next decade or two, if not sooner, PASPA would be modified so that the federal government would take over gaming and over our objections likely because the march of funding needs is so great that, you know, they would ultimately be made legal. Not any time soon, certainly not in my – maybe not in my professional lifetime, maybe in my lifetime depending upon how long I was planning to live. . . . We've gone from a culture that didn't allow lotteries to one where I'll bet you a majority of our states have a physical presence that allows some kind of casino gambling, starting out on the Indian reservation going to downtown casinos in Detroit and Cleveland and New York City actually.. So that the broader context of gambling has -- the fact that it's a regressive tax concerning to the people who are supposed to lead us, and they're interested only on the funding side. So it's -- it has been a march. I've been a witness. I've been a witness to it.

Commissioner Stern was also asked about his earlier comment--from the interview that he gave to SI's Ian Thomsen in 2009--that “buried within the threat of legalized gambling there may be a huge opportunity as well.” In his 2012 deposition, Stern elaborated on that prior statement as meaning that whenever nationwide sports betting becomes legal, “it would come with enough money to deal with the apparatus necessary to protect the sports from the threats that are posed.” Presumably, he is referring to the “integrity monitoring” that would likely be at the core of any future legalized sports betting framework. Significantly, Commissioner Stern added that any future legalized framework would necessarily have to involve the leagues as part of the “policing efforts” for which “there would likely be a payment of some kind at that time.” (emphasis mine)

While many have speculated that the four major professional sports leagues (and perhaps the NCAA) would demand a percentage of the wagering activity as part of any future legalized betting framework (in fact, two New Jersey legislators have previously floated this idea), Mr. Stern’s testimony represents the first—and only—time that a commissioner of one of the professional sports leagues has broached the subject of payments being made directly to the sports leagues.

But he did not stop there. Commissioner Stern also candidly admitted that the NBA’s internal rules and policies in place to protect the integrity of the NBA games were “ineffective” in the case of Tim Donaghy, the now-disgraced former NBA referee who allegedly bet on games that he refereed. Stern characterized the league’s detection of Mr. Donaghy’s gambling activities as “accidental,” noting that the league only learned of it as a result of an FBI investigation.

Commissioner Stern also revealed that that the NBA was, by 2012, already working with “gambling monitors” to obtain information that would help the league detect unusual wagering patterns on the league's games. He testified that the NBA “ha[s] a relationship with somebody or some people or some folks and we watch lines and get reports of unusual activity and things like that.” Stern also acknowledged that the Las Vegas sports books have provided the NBA with information about “unusual” betting activity on certain games, which he characterized as “a couple of strange betting events.” While he could not recall any specific instance, Stern did indicate that these games involved “unusual movement” on the betting lines.

While these statements represent only a small slice of Commissioner Stern’s deposition testimony, they nonetheless provide a glimpse into the future sports betting landscape, one which will apparently entail the leagues receiving a cut of the gambling revenues and the installation of an “integrity monitoring” apparatus to detect unusual wagering activity. At the very least, Commissioner Stern’s 2012 testimony (elaborating on statements he made in 2009) reveals that the NBA has been examining the issue of sports betting legalization long before the New Jersey situation developed. Stern’s testimony also surprisingly reveals that Adam Silver was not the first NBA Commissioner to recognize that legal sports betting was "inevitable."