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Comment for Industry Filing 20-004

  • From: Harry Levant
    La Salle University
    Philadelphia, Pennsylvania

    Comment No: 64795
    Date: 1/26/2021

    Comment Text:

    Harry Levant
    Dear Sir/Madam:

    Thank you for the opportunity to offer comment on this issues relating to the proposal to permit futures trading related to sports gambling. For the reasons outlined briefly below, I strenuously oppose this proposal. Simply put, the proposal, if approved, constitutes an existential risk to public safety and threatens to undermine the integrity of United States markets.

    By way of background and full disclosure, I am a gambling addict in recovery and made my last bet on April 27, 2014. I am also an Internationally Certified Gambling Counselor (ICGC-1). I am currently completing my Master's in Professional Counseling at La Salle University in Philadelphia, Pennsylvania. I was previously an attorney for 25 years before consenting to disbarment related to my gambling disorder in 2014.

    In my still developing career as an addiction counselor, I devote much time to research and advocacy related to gambling and gambling disorder. It is important to note that I am not opposed to gambling. On the contrary, my focus is placed on ensuring that gambling is regulated in such a way that recognizes Gambling Disorder is an addictive disease identical to drugs, alcohol, and tobacco (DSM-V) and this mandates that a harm prevention and public policy model be applied to all issues related to the expansion of sports gambling.

    Since the United States Supreme Court decision in Murphy v NCAA, 138 S.Ct. 1461 (2018), sports betting in the various states has enjoyed explosive growth. The pace of growth has far surpassed regulation, reform, or any type of harm prevention. These are topics for another time, place, and forum. For now, I am going to limit my response to Questions 5 and 6 in the CFTC request for comment. These questions address the risk of "influencing the outcome of an NFL game" as well as the potential "risk of public harm". The answer to both issues is an unqualified "YES" as the proposed trading of derivatives creates a real and existential threat to sports and, most importantly, public health and safety.

    Permit me to explain.

    Long before sports betting became legal, it was actually a classic example of how a free-market economy was designed to operate. A point spread was set (or a money line) and bookmakers attempted to attract equal wagers on each side and guarantee a 10% return for the house. Here is a straightforward example. The bookmaker receives 2 equal $100.00 wagers on each team. (Let us use Tampa Bay and Kansas City). One side will cover the spread and the winner will be paid $100.00. The other side will lose, and the bookmaker will keep the $110.00 wagered. Thus, for every $100.00 paid out the bookmaker will earn $10.00 or 10%. With a free-market approach the bookmaker would periodically adjust the line to account for scenarios where a disproportionate amount of money was wagered on a particular side. Thus, the free-market prevailed, and the public would benefit from movement in the point spread impacting betting options. The bookmaker would also benefit by continuing to attract equal wagers on both sides of each game.

    The possibility of gambling futures contracts destroys this competitive model. Rather than being forced to manage risk with a free market approach the bookmaker would be granted nearly free reign to mislead and manipulate the public. Bookmakers could mange their risk by packaging futures contracts on the opposite side of their exposure, thus enticing the investing public to gamble on futures on the opposite side of a game. This effectively permits the bookmaker to enrich itself by manipulating both marketplaces. This is the antithesis of a free-market economy approach. Rather, this represents a tacit license for publicly traded sportsbooks to manipulate the market by using futures as a hedge tool without risk. The publicly traded bookmaker would be guaranteeing itself profit without risk by offsetting any discrepancies in the betting market with futures contracts on the opposite side. Thus, the bookmaker has effectively utilized the public markets to manipulate and eliminate any free market business risk in sports betting. Meanwhile, the public faces enormous risk both in the gambling market with sports wagers, and the futures market with "investments and wagers" on futures contracts offered by the bookmaker. This certainly cannot be permitted in a government regulated free-market.

    Perhaps the most sinister aspect of this proposal is found in Question 6 and involves harm to the public. For decades, the NFL strongly opposed legalized sports betting and called it a threat to the integrity of the sport (Goddell, 2017). With the Murphy decision the NFL, fueled by greed and avarice quickly reversed course and now permits each of its 32 franchises to partner with sports gambling operators. The league itself has partnered with a variety of sports gambling operators and the American Gaming Association estimates these partnerships will result in more than 3 billion dollars of increased revenue on an annual basis (AGA, 2019).

    This reached a new and unprecedented level last week when the State of Virginia awarded a sports gambling license to the Washington Football Team. Thus, the team now controls the game on the field and the gambling operation (VA, 2021). Neither time nor space permit a full and complete description of the danger and risk inherent where the owner of the sports book also owns the team and controls the outcome of the game. Suffice to say that the risk of public harm has grown exponentially from this development and a government and public policy response is mandated. To ensure the risk of harm does not continue to intensify it is of paramount importance that gambling operators be prohibited from writing and trading futures contracts.

    The time has come for common sense to prevail and some much-needed circuit breakers be applied to the virtually unchecked growth of legalized sports betting in the United States. We need to pause and figure out how the federal government and market regulators can become involved in a public policy discussion designed to prevent harm. This can and must begin with a prohibition against the proposed futures trading. A comprehensive public policy model focused on harm prevention is mandated.

    Lastly, please recognize that although gambling is a recreational activity for most, it is also a dangerous and addictive product (DSM-V). We have been down this road before with alcohol and tobacco. We must not repeat the mistakes of the past. The time has come to begin a much- needed public policy discussion related to legalized sports betting. For if we forget the past harm associated with alcohol and tobacco, we are certain to repeat it, and more, with gambling. Let us instead bet on harm prevention and public safety and start by prohibiting the proposed trading of futures contracts related to NFL football.

    Thank you for taking the time to consider my comments.

    Respectfully submitted,

    Harry Levant

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