Ohtani-Mizuhara Scandal: A Case for Regulated Sports Betting, Not Against It

By: Jake Gray

Shohei Ohtani finds himself at the center of a sports betting scandal and regulated sports betting naysayers have taken the opportunity to toot their own horns. The opening line of this LA Times article, by Pulitzer Prize-winning journalist Michael Hiltzik, states: “Question for Major League Baseball: How do you like your sports betting partnerships now?” His implication is that the MLB’s embrace of sports betting has blown up in its face, as their biggest two-way superstar since Babe Ruth faces a gambling-related investigation at the same time. Hiltzik calls it a “truly toothsome irony.”

The rhetorical deception here is frustrating—all for a swipe at the MLB, and other leagues by implication, in order to stoke the fires of alarmism over legalized sports betting for a few clicks. Only armchair sophistry, rather than real-world data, supports these sentiments.

Arguments such as Hiltzik’s and others conflate regulated sports betting with illegal offshore operators, erroneously assigning the issues proceeding from the latter as coming from the former too. But legalized sports betting is specifically designed to combat the ills associated with unregulated offshore operators, like potential violations of sports integrity, which hasn’t even alleged to be the case for Shohei, and problem gambling, from which Ippei Mizuhara apparently suffered to the detriment of Shohei. So, it’s unclear how this controversy—involving an illegal bookmaker operating in a state without legalized sports betting—falls at the feet of regulated sportsbooks and sports leagues.

Hiltzik’s sort of argument, if we pretended it were adequate reason to deregulate sports betting, would thus provide perfectly valid reason to deregulate the meat industry re the Federal Meat Inspection Act, which was passed in 1906 in response to the horrific and unsanitary conditions in the meatpacking industry, as famously exposed by Upton Sinclair’s novel “The Jungle.” According to Hiltzik’s logic, the existence of scandals or outbreaks related to meat safety after the Act became law, which became more abundant as a result of the Act’s increased oversight and enforcement, are themselves justifications for deregulating meat once more.

The absurdity of this hypothetical arrangement is readily apparent. The issues don’t  go away, they just become less visible to regulators and the broader public. Blaming the existence of these regulations for the very issues they are designed to prevent only undermines efforts to create safer, more transparent environments for consumers and the respective industries. Notice how spoiled meat is not much of an issue anymore? And, further, that when it is, we all know about it?

Mizuhara is a paradigmatic example of everything wrong with illegal bookmakers—the lack of regulatory oversight and consumer protections—and everything right with the legalized market. Mizuhara was the well-known interpreter and best friend of the world’s biggest baseball star, whom everyone in the sports world anticipated to be receiving the largest sports contract in history. Mizuhara’s offshore bookmaker certainly exploited these facts in choosing to allow Mizuhara to steep himself deeper and deeper in debt despite clear signs of gambling addiction. Ohtani likely would have never been roped in, at least not more than by association.

By the very nature of operating illegally, the bookmaker evades the very consumer protections and regulatory accountability inherent in heavily regulated industries like sports betting. Legalized sportsbooks don’t offer credit, so Mizuhara would have never been able to accumulate such mountainous debt if he could and would have used one. And further, responsible gaming regulations and protections would have long prevented such monumental losses and chasing behavior, since legalized sportsbooks are obligated by law to actively identify potential problem gamblers and prevent them from betting. In a hypothetical (and, hopefully, future) world where illegal, off-shore bookmakers don’t operate in the U.S., Mizuhara’s issues would have never reached scandalous heights. Put this way, Mizuhara himself is another victim to the offshore market who was not afforded protections already in place in other states.

Without legalized sports betting, sports leagues and regulators are defenseless to root out problem gambling and violations of sports integrity because they occur solely within the opaque offshore market. The rise of regulated sports betting has spawned data collection and analytics companies that assist sportsbooks, sports leagues, and regulators in detecting suspicious activity and abnormalities in betting data. Legalization extends the range of oversight and protections while decreasing the market share of the offshore market. In this way, it is only natural for sports leagues to partner with regulated sportsbooks: each has a vested interest in ensuring sports integrity, maintaining accountability to regulations, and eradicating illegal platforms.

More emphasis than ever has been placed on responsible gaming protections, in no small part due to the new states coming online for sports betting. According to the American Gaming Association, for instance, “more than eight in 10 (84%) of past-year gamblers are aware of at least one responsible gaming resource, including 91 percent of sports bettors,” with more than half reporting an increase in responsible gaming messaging over the past year.[1] Additionally, three-quarters or more of players consider the following measures effective ways to encourage responsible play: deposit limits (85%), time limits (78%), wager limits (77%), employee training (77%), and industry code of conduct (75%).[2]

Similarly, players themselves are a central component of education efforts for sports leagues. The NFL ramped up its gambling policy education efforts before the 2023 season in response to a spate of player suspensions for betting-related infractions the preceding year. Mandatory training videos for rookies, in-person presentations from compliance personnel, signage across team facilities, and “integrity of the game” clauses in player contracts are just some of the measures the league is taking to ensure its athletes understand and abide by the rules, especially the cardinal one: never bet on the NFL.[3] While it remains to be seen whether these enhanced educational initiatives will be effective in curbing future violations, early indications are promising, with players noting the improved clarity from coaching staff this year compared to last, particularly regarding the prohibition on placing wagers from inside team facilities.[4]

But regulated sports betting naysayers would rather prohibit the activity altogether, effectively sweeping potential issues under the rug unless they reach the scale of infamous scandals like Pete Rose, Tim Donaghy, or the Black Sox. This approach is tantamount to protecting those whose violations are small enough to escape public scrutiny, allowing harm to consumers and the harm to the integrity of sports to continue unchecked.

[1] https://www.americangaming.org/resources/consumer-trends-in-responsible-gaming-awareness/

[2] Ibid.

[3] https://sportshandle.com/nfl-enhances-gambling-educational-measures/

[4] Ibid.