The Business of Sports –What the Future Holds Prof. Mark Conrad Gabelli School of Business, Fordham University New York, NY SABEW Teletraining Session June 26, 2017

Who am I? Teach and write about Sports Law and Business Author: “The Business of Sports – Off the Field, In the Office, On the News” (Routledge, 2017) Teaching: Fordham’s Gabelli School of Business where I direct its sports business program (full- time) Adjunct, Columbia University, Graduate Program in Sport Management Frequently quoted in the media Started my career as a legal journalist

The Main Topics Sports Gambling/DFS Concussion litigation Sports Governance/Arbitration Issues Professionalization of College Sports Stadium/Facilities International Tax

Gambling and Sports

Federal Powers – Limitation of Sports Gambling Professional and Amateur Sports Protection Act (PASPA) Bans persons or government entities from operating or authorizing any betting or wagering “schemes” based on competitive games in which amateur or professional athletes participate “pursuant to law or compact.” 28 U.S.C. § 3702.

PASPA Created Exceptions PASPA permits states that have legalized gambling schemes predating the statute to retain their gambling schemes 28 U.S.C. § 3704(a) Nevada, Oregon, Montana, Delaware

New Jersey’s Attempt to Legalize Sports Gambling In 2012, New Jersey legislature enacted the Sports Wagering Law permitting state- regulated sports gambling in casinos and racetracks Struck down by federal courts New Jersey’s law was pre-empted by PASPA 2014- Another attempt by NJ was passed Negated the power of the state to “regulate” such activity in casinos and race tracks Also struck down

Appeal to Supreme Court Today, court may make determination

Other States Since January, these states introduced similar bills: West Virginia New York (2 bills) – S. 1282 and A. 5438 Michigan – H. 4060 Maryland – H. 989 Pennsylvania – H. 519 South Carolina – HJR. 3102 and SJR 309 (amending State Constitution)

Legislative Options Possibility that legislation amending or voiding PASPA may be introduced in Congress May get the federal government out of sports gambling and leave it to individual states to regulate/legalize

Daily Fantasy Sports

Daily Fantasy Sports DFS evolved from traditional fantasy sports (season-long competition) Users select a lineup of players and receive points based on how well the lineup performs How a lineup gets constructed depends on how a user manages his in-game budget The key to success is finding players who are undervalued by the service

Is DFS ‘Illegal Gambling’? Matter of debate Depends on the state’s definition NYS Attorney General -- “a person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence.” Represents a wager on a “contest of chance” where winning or losing depends on numerous elements of chance to a “material degree.” (NY Penal Law 225.00) NY legalized DFS in August 2016

Is DFS ‘Illegal Gambling’? MA Attorney General – DFS is legal and no plans to shut down Nevada – DFS is illegal as it is: (1) a wager; and (2) it is not settled whether skill is predominant factor

2017 Legislative Map Nine states formally legalized DFS 12 states failed to pass legislation in 2016 14 states gave introduced legislation as of January 2017

FanDuel/DraftKings Merger Top two DFS providers announced merger plans in November 2016 Could create 90% share of the DFS market FTC blocked the merger Arguments for: Stabilizing the marketplace that has many DFS providers Start-up type business with opportunities for many to enter markets or disrupt markets

The Professionalism of College Sports

College Sports Focus: Efforts to Unionize College Players The O’Bannon case

Unionization Are college athletes receiving grant-in-aid “employees” under sec. 2 of the NRLA? Definition: “an employee is a person who performs services for another under a contract of hire, subject to the other's control or right of control, and in return for payment. . . .” If so, are student-athletes subject to unionization?

O’Bannon and Progeny Antitrust litigation based on forced contract that restricts student-athletes’ right to compensation Courts divided District court concluded that the NCAA’s compensation rules were an unlawful restraint of trade. It then enjoined the NCAA from prohibiting member schools from giving student-athletes scholarships up to the full cost of attendance at their respective schools and up to $5,000 per year in deferred compensation, to be held in trust for student-athletes until after they leave college.

O’Bannon 9th Circuit – limited the lower court’s remedy O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir.2015) Reversed determination that allowed students to be paid cash compensation of up to $5,000 per year, was erroneous. NCAA changed its rules to allow schools to offer student-athletes the full-cost of attendance. Amount in addition to that received by student-athletes through grant-in-aid (financial aid). Per NCAA rules, grant-in-aid is capped at tuition and fees, room and board, and required course-related books.

Alston v. NCAA Similar challenge to grant-in-aid formula Top five conferences also sued Difference – remedies Alston sought money damages, not just injunction January 2017 – settlement; not approved yet Class members should generally expect to receive between $5,000 and $7,500 Cost to NCAA to pay $208.7 million No admission of wrongdoing

Jenkins v. NCAA In Jenkins v. NCAA, Case No. 3:14-cv-01678 (D. N.J., filed March 17, 2014), Current and former Division I basketball and FBS football players allege the NCAA, and major conferences “earn billions of dollars in revenues” but place limits on athletes’ compensation is inherently anti-competitive Case still pending

Dispute resolution – Professional Sports

Powers of Private Dispute Resolution Methods Upheld In the last year, the courts have upheld the power of league-mandated arbitration. National Football League Management Council v. National Football League Players Assn.,820 F.3d 527 (2016). NFL Commissioner Goodell punished Tom Brady and the Patriots, for using underinflated footballs during that season’s AFC Championship Game Patriots employees were alleged to have reduced the pressure in footballs the Patriots would use on offense to below the league-mandated minimum of 12.5 pounds per square inch

Brady NFL Commissioner can arbitrate disputes under Art. 46 of the Collective Bargaining Agreement

Concussion Litigation

NFL Players Retired players filed suit in 2011 Modified settlement in 2014 Up to $1billion for claims for players showing neurological symptoms, $75 million for baseline testing $10 million for medical education and research NFL admits causation Most players accepted

NHL Players Over 200 former NHL players have sued the NHL alleging that the league “concealed what it knew about the long-term effects of repeated head trauma.” District court denied the NHL’s motion to dismiss Depositions have begun and are continuing Seeking medical monitoring for players, covering the costs of medication and regular medical attention and brain scans. The league would also face having to pay potential damages to players who say they are now permanently disabled.

NCAA In re Nat'l Collegiate Athletic Ass'n Student- Athlete Concussion Injury Litig. Similar to NFL and NHL actions Much like the complaints against the NFL and NHL, plaintiffs allege that the NCAA was negligent in safeguarding student-athletes from the risks of concussions. July 2016 -- settlement approved NCAA will pay $50 million to set up a 50-year medical monitoring program for college athletes and another $5 million to start a program to research the prevention and treatment of concussions. Medical screenings and evaluations for all current and former NCAA student-athletes

Conferences January 2017 - a group of former Big 12 football players sued the NCAA and the Big 12 conference in the District Court for the Southern District of Indiana for an alleged breach of contract regarding inadequate concussion protocol Alleging that the institutions breached their respective contracts with the players by failing to protect and warn student-athletes of the consequences of head injuries By allegedly breaching their contracts with the players, the NCAA has violated its own constitution, rules, and bylaws according the NCAA manual Claims breach of express and implied contract, fraudulent concealment, negligence and unjust enrichment The plaintiffs are seeking damages for brain injuries incurred on the field as well as class certification 

Stadium Economics and Team Relocation

Other Issues to Watch Team Relocation Stadium issues and financing Raiders’ move to Las Vegas approved Chargers move to Los Angeles Stadium issues and financing Eminent domain Tax deductibility of bonds Types of financing Questions to ask: Who controls the stadium lease? Who is responsible for expenses? “State of the Art” clauses and other grounds to terminate

Olympic and International Sports

New Patterns of Bidding Are the costs worth it? Rise of Cities with Leverage Questions: Look at the bidding contracts What rights does the IOC have?

Ethics and Transparency Issue of making international sports federations more transparent FIFA? Others?

PEDs Issues of positive drug tests will continue Future: Gene alteration? Technology Rich v. poor nations

Taxation

Players Huge differences among states High-tax states: CA, NY, MA Low-tax states; FL, TX Player that signs with a FL team, in effect gets about 12% more net income than one who signs in NY (specifically NYC) for the same salary Jock Taxes Out of state players playing road games in a given state are taxes on portion of income earned in that state

Team Owners Generous depreciation rules Costs of minor leagues Lack of requirement to report

For More Information or Media Inquiries. . . conrad@fordham.edu @Sportslaw1 (Twitter) 212-636-7975