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How Regulated Sportsbooks Can Ensure Sports Integrity: A Case Study from the Recent UFC Scandal
How Regulated Sportsbooks Can Ensure Sports Integrity: A Case Study from the Recent UFC Scandal
By: Jake Gray
In the four years since the Supreme Court struck down the federal law prohibiting state-regulated sports betting in Murphy v. NCAA (2018), more than 30 states have legalized and are regulating sports betting in some capacity. Indeed, since the ruling, the nascent US sports betting industry enjoys rapid growth, especially in states where retail, mobile, and online betting platforms are permitted for consumers. For example, in November 2022 the state with the top total betting handle—the total of all money wagered by bettors—was New York, with a total of $1.5 billion wagered, which accounted for sportsbook revenue of $149 million and $76 million in state tax revenue. [1]
Evidently, Americans are very eager to bet on sports, and presumably always have been. So, why then was there a federal ban on regulated sports betting in the first place? As noted in the National Gambling Impact Study Commission Report from 1999:
Estimates of the scope of illegal sports betting in the United States range anywhere from $80 billion to $380 billion annually, making sports betting the most widespread and popular form of gambling in America. [2]
The impetus for a federal ban on state-regulated sports wagering was the intention of preserving the “integrity of the game,” from potential match-fixing, which was a significant concern of the top professional sports leagues and the NCAA. There were well-known, historical examples of such tampering by organized crime and crooked gamblers. The most famous example was the 1919 “Black Sox” scandal, in which eight Chicago White Sox players accepted money to throw the MLB World Series in a conspiracy spearheaded by White Sox first baseman C. Arnold “Chick” Gandil and a gambler named Joseph “Sport” Sullivan. [3]
While match-fixing has long been a significant concern for sports leagues, a late-1980s sports betting scandal was the straw that broke the camel’s back. An investigation by Special Counsel to the MLB Commissioner, John M. Dowd, found that the all-time hits leader and then-manager of the Cincinnati Reds, Pete Rose, had placed a number of bets on the Reds’ baseball games during his time with the team as both player and manager. [4] While Rose has continually asserted that he never bet against the Reds, and thus didn’t fix any games, a claim which was also corroborated by the Dowd Report, the betting activity earned him a permanent ban from baseball, and has prevented him from being elected to the Baseball Hall of Fame.
In the aftermath of the Rose-Dowd Report, the concerns regarding betting’s potential threat to the integrity of sports in America took hold. Support for new, strong laws prohibiting all sports betting was unanimous amongst commissioners of the professional sports leagues and the NCAA. Then-NFL Commissioner Paul Tagliabue testified in favor of the bill, saying:
With legalized sports gambling, our games instead will come to represent the fast buck, the quick fix, the desire to get something for nothing. The spread of legalized sports gambling would change forever—and for the worse—what our games stand for and the way they are perceived. Sports gambling threatens the integrity of, and public confidence in, amateur and professional sports. Widespread legalization of sports gambling would inevitably promote suspicion…[5]
As a result of efforts largely from then-Senator Bill Bradley (D) of New Jersey—a former Princeton University college basketball player and New York Knick—the Professional and Amateur Sports Protection Act, or PASPA, was enacted. The federal statute prohibited states from legalizing sports betting in order “to maintain the integrity of our national pastime,” while providing an exemption for four states that had already legalized sports betting, including Nevada and Delaware.[6]
Now that PASPA has been overturned, and the regulated sports betting scene is expanding rapidly in the US, it seems concerns for competitive integrity and sports betting have diminished significantly. In fact, partnerships between sports leagues and sports betting firms – unimaginable when PASPA was enacted – are now seemingly ubiquitous, while mainstream sports media channels openly advertise licensed sportsbooks and incorporate discussion of betting odds throughout their content.
One reason is that regulated sportsbooks actually help, rather than hinder, efforts for sports integrity, through their robust data collection and betting market monitoring practices, which sustain their critical commercial self-interest. Regulated sportsbooks, in effect, act as an integrity watchdog, often in collaboration with the professional sports leagues, as both parties inherently rely on fair sporting outcomes for the profitability of their product. A recent sports betting scandal illustrates this reality very well.
UFC Sports Betting Scandal
In October 2022, the Ultimate Fighting Championship, or “UFC”, issued an update to its Athlete Conduct Policy with new restrictions placed on wagering on any UFC fights by athletes, members of their teams, and others. Prior to this update, UFC had no limitations on fighters and their teams’ ability to bet on fights, even by fighters on their own UFC-produced fights. What then followed was a textbook illustration on how sportsbooks, rather than a sports league, stepped in to ensure the integrity of the sport’s competitions.
On November 5th, 2022, in the hours before a fight between Shayilan Nuerdanbieke and Darrick Minner in Las Vegas, several sportsbooks noted a steep odds shift in favor of Nuerdanbieke. One MMA reporter, Aaron Bronsteter, noted that the average odds had moved from -237 to -362 over a mere 90 minutes. According to ESPN, Nuerdanbieke’s odds to win moved from -220 to -420 in the four hours before the fight.
Because of such a rapid and unexpected line shift, US sportsbooks flagged the situation as suspicious. US Integrity, a Las Vegas-based firm that works with sportsbooks and state gaming regulators to monitor the betting market, conducted its own investigation three hours prior to the start of the fight at the behest of related sportsbooks. US Integrity’s report showed that even after the line moved to significantly less attractive odds (for example, -420 on Nuerdanbieke to win), betting continued to pour in on the favorite. [7] Even further, US Integrity established that there was a relatively disproportionate number of bets on Nuerdanbieke to win in the first round, which he did.
Nuerdanbieke won by technical knockout after 67 seconds—Minner threw a kick with his left leg, after which he displayed noticeable pain by clutching at his leg while hobbling and wincing, and then immediately threw a kick with the same leg. Nuerdanbieke quickly capitalized until the referee called the fight. [8]
According to reports, rumors circulated before the fight that Minner injured his left leg and betting insiders seized on the opportunity.
While the UFC announced the following Monday that its own sports betting partner, Don Best Sports, was conducting an investigation, several regulators took matters into their own hands in a coordinated effort from US Integrity and the states’ licensed sportsbooks. On November 18th, the Nevada State Athletic Commission (“NSAC”) suspended the corner license of James Krause, Minner’s coach, pending the results of the commission’s investigation. [9] The New Jersey Division of Gaming Enforcement prohibited New Jersey-licensed sportsbooks from taking wagers on any fight in which Krause is involved. Krause, a former UFC fighter turned coach and well-known sports bettor, has repeatedly and publicly touted his since-deleted sports betting handicapping service that he ran through a Discord server, for which people paid him on a tiered-basis up to $2,000 for wagering advice. [10]
The Alcohol and Gaming Commission of Ontario went a step further by prohibiting its licensed sportsbooks from offering UFC wagers altogether, citing “concerns about non-compliance with AGCO’s betting integrity requirements.” [11] Alberta, another Canadian province, also followed suit—the Alberta Gaming, Liquor and Cannabis agency (AGLC) temporarily prohibited UFC gambling in its province, although the ban was lifted following the measures taken against Krause by both the Nevada State Athletic Commission and the UFC. [12]
In response to these regulatory actions, the UFC released Minner from his contract and banned Krause not only from attending or cornering any UFC events but also preventing any of his trainees from fighting in the UFC while under his tutelage:
UFC has since advised Krause and the respective managers working with impacted fighters, that effective immediately, fighters who choose to continue to be coached by Krause or who continue to train in his gym, will not be permitted to participate in UFC events pending the outcome of the aforementioned government investigations. [13]
In the latest development, in a decision that came down on December 24th, another Krause-trained fighter, Jeff Molina was suspended by NSAC. Although an official reason was not listed, a source told ESPN that the action is related to the Minner-Nuerdanbieke investigation, which now involves several government agencies, including the FBI. [14]
There is no official timeline for the investigation, but many lay blame for the ordeal on UFC, especially in light of its formerly lax gambling policies, which stood in stark contrast to other professional sports leagues. Other influencing factors included a lack of union representation for fighters, as well as adequate healthcare, both of which are the norm across popular professional sports. This structure leaves UFC’s fighters potentially open to a host of incentives to avoid disclosing any pre-fight injuries they may have suffered, because fighters’ injuries are covered by UFC healthcare only if they occur during a sanctioned fight, as well as other motivations to intentionally tamper with the integrity of the match in order to make more money. This is further exacerbated by the relative poor compensation for UFC fighters. Whereas athlete compensation commands between 47% – 50% of revenue in other professional leagues, UFC only pays fighters between 16% – 19% of their revenue. [15]
Wrapping Up
Sportsbooks have a critical commercial interest in ensuring the integrity of the games on which they accept wagers. Not only would sportsbooks’ bottom lines suffer if match-fixing were rampant, but so would their reputations. In regards to the former, as we have seen with the UFC scandal, match-fixing – or even insider-tipping – can result in a disproportionate volume of losses by the bookmaker on a side predetermined as the winner. And, in the latter case, even though sports books are not “in on the fix,” many consumers, upset about an unfair outcome, may blame individual sportsbooks or the sports betting industry as a whole as having a negative effect on sports, as was done in the past. It is likely, though, that the entire sports industry would suffer as a result, not just sportsbooks.
The good news, however, is that sportsbooks far and away have the expertise and capacity to assist sports leagues in their mission of maintaining the integrity of their games, and can even take that responsibility by themselves when sports leagues fail to do so.
[1] https://www.gamingtoday.com/revenue/
[2] https://govinfo.library.unt.edu/ngisc/reports/2.pdf
[3] https://en.wikipedia.org/wiki/Chick_Gandil
[4] https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1351&context=umblr
[5] https://scholars.law.unlv.edu/cgi/viewcontent.cgi?article=1026&context=glj
[6] S.REP. NO. 102-248 (1991).
[7] https://www.espn.com/chalk/story/_/id/34968905/ufc-fight-investigation-suspicious-betting-detected
[8] https://www.youtube.com/watch?v=PmE_6WJ3SYo
[10] https://www.rt.com/sport/567954-james-krause-ufc-betting-scandal/
[11] https://twitter.com/DavidPurdum/status/1598367308350529536?s=20
[13] https://www.ufc.com/news/ufc-statement-regarding-james-krause
