Latest Homeland Security Resignation Clears Way for McAleenan

The Department of Homeland Security’s acting deputy secretary resigned on Tuesday, following her boss in a White House-directed purge of U.S. immigration agencies.

The departure of Claire Grady, who has been undersecretary for management, clears the way for Kevin McAleenan, the current head of U.S. Customs and Border Protection, to take over as acting secretary of Homeland Security.

Her resignation was announced Tuesday night on Twitter by outgoing Homeland Security Secretary Kirstjen Nielsen, who herself was forced to resign on Sunday.

“Acting Deputy Secretary Claire Grady has offered the President her resignation, effective tomorrow,” Nielsen wrote. “For the last two years, Claire has served @DHSgov w excellence and distinction. She has been an invaluable asset to DHS – a steady force and a knowledgeable voice.”

President Donald Trump said McAleenan would take over the department on Sunday night, in a tweet announcing Nielsen’s departure after a series of disagreements with the White House over immigration enforcement.

Yet the decision to promote McAleenan came despite existing federal statute that seemed to dictate Grady was next in line for the job, leaving the appointment on shaky legal footing.

Earlier on Tuesday, the president downplayed his personnel moves at the Department of Homeland Security, saying he is fighting “bad laws” on immigration and obstruction in Congress.

“We have to close up the borders,” he told reporters after he was asked about the resignation of DHS Secretary during a meeting on Tuesday with Egyptian President Abdel-Fattah El-Sisi at the White House. “We’re not doing anything very big.”

Trump said he did not plan to reinstate a policy that led to the separation of thousands of migrant children from their families after they illegally crossed the border last summer. “We’re not looking to do that,” he said.

Nielsen resigned Sunday after meeting with Trump at the White House residence to discuss a spike in illegal crossings at the U.S. southern border. Trump is increasingly frustrated by the border crisis, and last month empowered a hard-line aide, Stephen Miller, to have greater authority over immigration policy within the White House.

A senior administration official told reporters in a briefing on Tuesday that the Homeland Security department is plagued by a dysfunctional bureaucracy, the result of Trump not having enough political appointees in key positions at the agency. The White House wants a crackdown on migrants seeking asylum at the southern border, the official said, because many of the claims are considered spurious.

More than 66,000 people were apprehended after crossing the border illegally in February, about a 38 percent increase from the month before. Most were families or children traveling alone.

The official said that Homeland Security could discourage migration by refusing to issue work permits to people in the country waiting for their asylum claims to be adjudicated. The claims themselves could be more rigorously vetted, the official said, to determine whether migrants’ assertions that they fear persecution in their home countries are credible.

‘Binary Choice’

The official also confirmed that the administration is considering a policy known as “binary choice.” It resembles family separation. Migrants would be asked to choose whether to be detained together with their children in facilities run by Immigration and Customs Enforcement or to be separated from their kids, who would be placed in the care of relatives, guardians or government-contracted shelters.

The policy isn’t fully developed yet, the official said.

Commander Jonathan White of the Public Health Service Commissioned Corps warned Congress on Tuesday that resuming family separations would harm children.

White told the Senate Homeland Security Committee that the corps has improved the tracking of people in its care. Still, he said, “We do not have the capacity to receive that number of children, nor do we have the capacity to serve them, nor is it possible to build a system that would prevent the mass traumatization of children.”

Senator Ron Johnson, a Wisconsin Republican and the chairman of the Homeland Security panel, said that “I would be completely opposed” to resuming the zero-tolerance border policy that resulted in the family separations. The policy caused outrage among lawmakers and the broader public before Trump halted the separations in June.

Kelly’s People

Miller is eyeing other people in the government who were hired after recommendations or referrals by Nielsen or former White House Chief of Staff John Kelly, two people familiar with the matter said.

Kelly preceded Nielsen at DHS and recommended her as his replacement. He departed the White House late last year after repeated clashes with the president.

Two other top officials at DHS — L. Francis Cissna, the head of U.S. Citizenship and Immigration Services and John Mitnick, the agency’s general counsel — may also depart. And the leadership of Immigration and Customs Enforcement remains in upheaval after Trump last week pulled the nomination of acting director Ronald Vitiello, saying he wanted to go in “a tougher direction.”

The director of the Secret Service, Randolph Alles, whose agency is a unit of DHS, resigned on Monday for unspecified reasons. The White House is discussing a different job for him, perhaps within Customs and Border Protection, where he used to work, according to a senior administration official.

Republicans have expressed alarm at Trump’s purge of DHS, questioning whether the president has a plan to regain control of migration over the border or if he is simply adding to vacancies in the immigration agencies.

Will We Ever See Trump’s Tax Returns—And Does It Matter?

Ever since President Richard Nixon was found to have understated his tax liability in the early 1970s, it has become common practice for presidents to release their tax returns. Donald Trump is the only president since Nixon to refuse to do so, but Congress does have one law at its disposal.

Section 6301(f)(1) of the tax code stipulates that upon official written request, the Treasury Secretary “shall furnish such committee with any return or return information specified in such request.” On April 3, the House Ways and Means Committee Chairman Richard Neal did exactly that and sent a letter to the IRS formally requesting President Trump’s tax returns.

But many legal experts agree that this law is intentionally open-ended, meaning Congress still needs a legitimate legislative purpose to make that request. Neal made a case for this in his letter, writing that the request was part of his committee’s oversight role, with the objective of determining whether the IRS is fairly and impartially auditing Trump.

“Consistent with its authority, the Committee is considering legislative proposals and conducting oversight related to our Federal tax laws, including, but not limited to, the extent to which the IRS audits and enforces the Federal tax laws against a President,” the letter reads. “Individual income tax returns of a President are subject to mandatory examination, but this practice is IRS policy and not codified in the Federal tax laws.”

Considering Nixon’s issues, that argument could be enough.

What We Learned From the Nixon Audit

When Nixon was first audited by the IRS, he was given a clean bill on his returns, but a subsequent audit of the same returns found that he owed nearly $500,000 in additional tax on interest.

“This highlights the fact that there’s an inherent conflict of interest for the agency to appropriately audit its boss,” George Yin, a University of Virginia School of Law professor and former Joint Committee on Taxation chief of staff tells Fortune. “Ironically, the very reason that trump says he won’t hand over the information is one of the very reasons that congress should rightfully be requesting that information.”

Trump has said numerous times that his being under audit precludes the release of his returns, a refrain he has used numerous times since 2016.

“I’m always under audit, it seems, but I’ve been under audit for many years because the numbers are big, and I guess when you have a name, you’re audited,” Trump told reporters earlier this week. “But until such time as I’m not under audit, I would not be inclined to do it.”

But some experts don’t buy Trump’s argument.

“Every president since Nixon has been releasing their taxes and facing an audit simultaneously,” Steve Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center, tells Fortune, adding that it was Trump’s choice to run for president. “Trump is the commander-in-chief and leads our executive branch–this is just legislative oversight of the executive branch.”

Requesting Trump’s returns is particularly legitimate, he says, since the president is effectively the boss of the IRS–the same organization responsible for impartially auditing him:

“We’ve seen [Trump’s] willingness to fire subordinates who don’t do his bidding.”

How Trump Could Legally Avoid Releasing His Tax Returns

There are two legitimate ways that the president can refuse to disclose his returns: by demonstrating that the request is outside the committee’s legitimate purview, or that the request itself is unconstitutional, according to Harold Krent, dean of the Chicago-Kent College of Law. Nevertheless, it should be noted that the law itself does not stipulate a basis to refuse the request.

Trump’s recently appointed lawyer, William Consovoy, appears to have taken the first approach in his April 5 letter to the Treasury in which he claims Neal’s request “flouts” numerous “fundamental constitutional constraints.”

Consovoy argues that even if the Ways and Means Committee had a “legitimate” reason for making the request, it is “a transparent effort by one political party to harass an official from the other party because they dislike his politics and speech.” He also says that the stated reason for the request doesn’t match the request itself.

“If Chairman Neal genuinely wants to review how the IRS audits Presidents, why is he seeking tax returns and return information covering the four years before President Trump took office?” Consovoy writes. “Why is he not requesting information about the audits of previous presidents?”

Acting White House Chief of Staff Mick Mulvaney suggested that the American people will “never” see Trump’s tax returns.

“That’s an issue that was already litigated during the election,” Mulvaney said on Fox News Sunday. “Voters knew the president could have given his tax returns. They knew that he didn’t, and they elected him anyway–which, of course, is what drives the Democrats crazy.”

But early in his campaign, Trump had promised to release his returns. And while Trump can stall their release, it was his choice to run for president, Steve Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center, argues.

“Trump is the commander-in-chief and leads our executive branch,” Rosenthal tells Fortune. “This is just legislative oversight of the executive branch.”

What Happens Next?

The deadline for the Trump administration to respond to Neal’s request is Wednesday–but it appears unlikely that they will comply. And technically they don’t have to. The law Neal cited has no penalties for noncompliance. Neal may send another letter to the IRS reiterating his request. It is possible, albeit unlikely, that he would issue a subpoena. The issue could also find its way to court.

But there’s one important thing to keep in mind even if Neal’s request is granted: we, the American public, might very well never see Trump’s returns. While it is within Neal’s legal purview to request the information, the Committee is required to hold this information in confidence, according to Yin. It can only be disclosed publicly if the committee submits the information to the full House or Senate–a matter that would need to be held to a vote.

And even if we were able to get our hands on Trump’s returns, the likelihood of finding anything criminal is somewhat unlikely.

While tax returns sometimes expose something marginally embarrassing, most are “far too boring for anyone to look at,” University of Iowa law professor Andy Grewal tells Fortune. They simply provide the service of allowing people to have the sense that if there’s something wrong, then someone would have said something.

“There’s comfort in knowing that they’ve been exposed to scrutiny,” Grewal says, adding that 90% of congresspeople don’t release their returns. “It can’t be the case that everyone is cheating. The fact of nondisclosure doesn’t tell me that much.”

Rosenthal, on the other hand, thinks seeing Trump’s returns could potentially provide a wealth of information, including whether he is paying his fair share of taxes, whether he is deriving income from abroad, and to what extent Trump has foreign partners and foreign accounts.

Only time will tell.

Inside the Crazy World of Sports Gambling: Term Sheet for April 10

PLACE MY BET

$8.5 billion. That’s how much Americans will spend betting on college basketball games during March Madness.

Why is this important? This was the first NCAA Tournament since the Supreme Court’s landmark decision last May to overturn the federal ban on sports betting, which for decades had largely restricted the activity to the casinos and sports books of Nevada. In other words, bettors in seven states that have subsequently legalized sports gambling haven’t had to resort to under-the-table wagers — or a trip to Las Vegas — to get in on the action.

I covered the sports betting news last year through the lens of what the ruling meant for daily fantasy sports companies such as FanDuel and DraftKings. In a feature published this morning, Fortune’s Rey Mashayekhi zooms out to provide a bigger picture of the industry.

He reports:

According to the AGA, Americans illegally wager more than $150 billion on sports every year, whether through offshore betting sites or illegal bookmakers. With that kind of money potentially up for grabs via legitimate means, it’s no surprise that there’s a debate currently taking place about what the future of the fledgling, legal sports betting industry should look like. Beyond the leagues themselves, there are numerous stakeholders to account for, each with their own objectives.

There are the casino operators that hold significant influence at the state level, where legislators are crafting the nation’s sports betting regulations. There are mobile betting operators like DraftKings and FanDuel, whose digital platforms are widely considered to be the future of the industry. And, of course, there are the sports teams themselves, many of which are either preparing to, or already taking advantage of, the commercial and fan engagement opportunities allowed by sports betting.

Through interviews with more than a dozen people from these various groups, there is a clear sentiment that all parties have a shared, mutual interest in a successful legal sports betting industry in the U.S. But that’s not to say there aren’t disagreements, currently playing out across the country on a state-by-state basis, regarding issues that could shape the future of sports gambling in America for decades to come.

Read the full feature here.

PUT A PIN IN IT: The three Pinterest founders are expected to become millionaires after the company goes public later this month–and some early investors are also poised to profit. But not everyone.

On Monday, Pinterest revealed that shares would likely be priced between $15 to $17 apiece–valuing Pinterest at as much as $11.3 billion. An impressive figure–but not for those that bought into the company in 2017 at a $12.3 billion valuation.

My colleague Lucinda Shen dug into Pinterest’s IPO filing to see who’s making money & who’s … not. Some investors including Goldman Sachs, Kleiner Perkins, the Vanguard Group, and John Hancock Investments first acquired their stakes in the online pin-board maker during the Series G and Series H funding rounds–at a time when shares were valued at $21.54 each, according to filings. If the IPO prices at the upper end of the range, that would still be 25.7% below what those firms paid, according to SEC filings and investor information from PitchBook.

See her full report here.

…AND MORE NEWS FROM IPO-LAND

Uber goes on the road: Ride-hailing company Uber will kick off its much-anticipated road show to market shares to potential investors this month and would begin trading publicly in May. Uber is reportedly seeking to raise about $10 billion. Its offering is expected to be the largest U.S. IPO this year and among the 10 largest of all time.

Slack is looking real attractive: Before Slack goes public via a direct listing, investors are paying big premiums for shares of the workplace software maker on private markets. Investors are buying stock in some cases for more than double the price of Slack’s last fundraising round in August, which valued the company at $7.1 billion, according to Bloomberg. Shareholders have sold stock to private buyers in the last two months at prices as high as $25 or $26 a share, which implies a company valuation of about $16 billion.

PagerDuty aims higher: PagerDuty, a San Francisco-based operations and analytics platform maker, raised its IPO price range Tuesday to $21 to $23 per share, up $2 from the figures it had originally reported when it filed to go public. At the high end of this range, the company would boast a market cap of $1.69 billion. The company was last valued at $1.3 billion after raising $90 million in Series D funding from investors including T. Rowe Price Associates, Wellington Management. Accel, Andreessen Horowitz and Bessemer Venture Partners.

VENTURE DEALS

[ts_bullet_primary] Expanse, a San Francisco-based internet information technology operations management platform, raised $70 million in Series C funding. TPG Growth led the round.

[ts_bullet_primary] Candid, a direct-to-consumer brand focused on oral health care, raised $63.4 million in Series B funding. Investors include Greycroft, Bessemer, e.ventures, RiverPark Funds, blisce/, Redesign Health’s limited partners, and Mousse Partners.

[ts_bullet_primary] ShopBack, a Singapore-based startup that offers cashback and consumer rewards in Asia Pacific, raised $45 million in funding. Rakuten Capital and EV Growth co-led the round.

[ts_bullet_primary] Movo, a Spain-based micro-mobility startup has closed a EUR20 million ($22.5 million) in Series A funding. Mutua Madrile?a and Seaya Ventures co-led the round.

[ts_bullet_primary] Tibit Communications Inc, a Petaluma, Calif.-based developer of access devices for passive optical networking, raised $20 million in Series B funding. Intel Capital led the round.

[ts_bullet_primary] Make School, a San Francisco-based college offering degree programs developed in partnership with tech companies, raised $15 million in Series B funding. Venrock led the round.

[ts_bullet_primary] Jebbit, a Boston-based declared data platform, raised $12 million in Series B funding. K1 Investment Management led the round, and was joined by investors including Manifest and Yard Ventures.

[ts_bullet_primary] Labelbox, a collaborative training data platform for machine learning applications, raised $10 million in Series A funding. Gradient Ventures led the round, and was joined by investors including Kleiner Perkins, First Round Capital, and Sumon Sadhu.

[ts_bullet_primary] Tempest, a digital-based sobriety school, raised 4.3 million in Series A funding round. Investors include Female Founders Fund, Slow Ventures, Refactor Capital and Red Light Management.

[ts_bullet_primary] Buckzy Payments, a Canada-based fintech company, raised $1.75 million in seed funding. Mistral Venture Partners led the round, and was joined by investors including Revel Partners.

HEALTH AND LIFE SCIENCES DEALS

[ts_bullet_primary] Scout Bio, a biotechnology company focused on pet medicine, raised $20 million in Series B funding. Digitalis Ventures’ Companion Fund and RiverVest Venture Partners co-led the round, and were joined by investors including GreenSpring Associates, Frazier Healthcare Partners, Adage Capital Management and Correlation Ventures.

[ts_bullet_primary] Noveome Biotherapeutics Inc, a Pittsburgh-based clinical-stage biopharmaceutical company, raised $15 million in Series D financing. The company’s investors included U.S. Department of Defense and the Commonwealth of Pennsylvania and Allegheny County.

PRIVATE EQUITY DEALS

[ts_bullet_primary] Deutsche B?rse AG agreed to buy Axioma, a New York-based provider of portfolio and risk management software solutions, for $850 million. Deutsche B?rse plans to combine the company with its index business. General Atlantic is investing $715 million. Deutsche Borse will have 78% of company, while GA will have 19% and Axioma management will have 3%.

[ts_bullet_primary] Symphony Technology Group acquired a 70% stake in RedSeal, Sunnyvale, Calif.-based cybersecurity company, in a deal worth about $70 million.

[ts_bullet_primary] Syndigo, a portfolio company of The Jordan Company, acquired Content Analytics, a San Francisco-based provider of content management and analytics to the consumer-retail and ecommerce industries. Financial terms weren’t disclosed.

[ts_bullet_primary] Stanadyne LLC, a portfolio company of Kohlberg & Company, acquired Pure Power, a Columbia, S.C.-based maker of OEM and aftermarket diesel fuel injectors, turbochargers and EGR valves for commercial and off-road vehicles. Financial terms weren’t disclosed.

[ts_bullet_primary] Behrman Capital acquired Waterline Renewal Technologies, Inc, which is a division of Triwater Holdings. Financial terms weren’t disclosed.

OTHER DEALS

[ts_bullet_primary] Vista Global acquired JetSmarter, a Fort Lauderdale, Fla.-based private jet marketplace. Financial terms weren’t disclosed. As part of the transaction, all JetSmarter investors, including Clearlake Capital and Jefferies Financial Group, will become investors in Vista Global.

IPOs

[ts_bullet_primary] Brigham Minerals, an Austin-based oil and gas firm, plans to raise $223 million in an IPO of 13.5 million shares priced between $15 to $18 apiece. Warburg Pincus backs the firm. Credit Suisse and Goldman Sachs are underwriters.It plans to list on the NYSE as “MNRL.” Read more.

[ts_bullet_primary] Network International, a Dubai-based digital payments firm, is valued at over ?2.6 billion after an IPO in London. General Atlantic, Emirates NBD, and Warburg Pincus sold roughly ?1.1 billion in shares. Read more.

[ts_bullet_primary] NetworkQSR Brands, Malaysia’s largest fast-food operator, reportedly paused plans for a $500 million IPO. Read more.

[ts_bullet_primary] Frequentis, a Vienna-based firm dealing with communications, plans to list in Germany and Austria. Read more.

EXITS

[ts_bullet_primary] YieldStreet acquired Athena Art Finance Corp, a New York-based provider of loans for the global art market, from The Carlyle Group (NASDAQ: CG) and co-investors in a transaction valued at approximately $170 million.

[ts_bullet_primary] The Stagwell Group acquired MultiView, a B2B digital marketer. The seller was Warburg Pincus. Financial terms weren’t disclosed.

FIRMS + FUNDS

[ts_bullet_primary] Energy Spectrum Partners, a Dallas, Texas-based private equity firm, raised more than $867 million for its eighth fund, according to an SEC filing. The fund’s target is $1.3 billion.

[ts_bullet_primary] Fifth Wall Ventures, a Venice, Calif.-based venture capital firm, raised more than $468 million for its second fund, according to an SEC filing. The target is $500 million.

[ts_bullet_primary] Defy Partners, a Woodside, Calif.-based venture capital firm, raised $262 million for its second fund.

[ts_bullet_primary] LiveOak Venture Partners, an Austin, Texas-based venture capital firm, raised $105 million for its second fund.

PEOPLE

[ts_bullet_primary] Morgan Higgins joined Blue Delta Capital Partners as a principal.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

Data Sheet—Why Some of China’s Hottest Tech Companies Are Cooling Off

China’s second-largest e-commerce company, JD. com, plans deep job cuts to staunch losses and reassure investors, according to a slew of recent media reports, highlighting the mounting challenges faced by Chinese tech firms as their nation’s economy loses steam.

The Information, citing investors, reported Tuesday that NASDAQ-listed JD.com is preparing to lay off as many as 12,000 people, or roughly 8% of its 150,000 person workforce. Bloomberg and Quartz also report the company is planning cuts and has rescinded some job offers.

Reports of layoffs at JD.com follow announcements of similar retrenchment at other Chinese tech companies. Tencent Holding, China’s mammoth social media and online games provider, said last month it would sack or demote up to 10% of senior and middle management. In February, ride-hailing giant Didi Chuxing said it would slash its workforce by 15%.

In some cases, cutbacks are a response to governance failures or clashes with regulators. In the case of Tencent, Beijing slapped a nine month ban on new video games licenses for the company; regulators said they were concerned about online addiction and deteriorating eyesight of the nation’s youth. Didi was chastened by the murder of two female passengers last year by Didi drivers.

JD’s woes partly reflect the misadventures of its founder and CEO Richard Liu. Liu radiated confidence when Adam interviewed him at Brainstorm Tech in Aspen last July. But on August 31, the boyish entrepreneur was arrested in Minneapolis on charges of raping a 21-year-old University of Minnesota student. In December, the Hennepin County prosector dropped the case citing insufficient evidence. Liu, who controls 80% of JD.com’s voting rights, says the relationship was consensual and denies wrongdoing. But details of the incident cast him in a nasty light, and he has since shunned public appearances.

The layoffs also underscore a harsher operating environment for Chinese tech firms, and have ignited a broad debate about working conditions in China’s tech industry. Until recently China’s tech workers took a kind of perverse pride in working long hours at a feverish pace; the famed moniker for Chinese tech work culture is “996,” reflecting the notion that, to succeed, you have to be willing to work from 9 a.m. to 9 p.m. six days a week. But, as Quartz notes, with more and more Chinese ventures jettisoning workers, once-prized positions at the nation’s tech companies are starting to look every bit as precarious as work in China’s factories.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

NEWSWORTHY

Learning the hard way. Layoffs aren’t just happening in China. Online education startup Udacity cut 75 people, or about 20% of its employees, TechCrunch reports.

Packing the shelves. The initial public offering boom of 2019 booms on. Next up, Uber is expected to file its registration statement seeking to raise $10 billion in fresh backing, which would make it one of the 10 largest IPOs of all time. Smaller startup PagerDuty, which helps companies maintain online sites, is going public on Thursday and could be valued at up to $1.7 billion.

Seeding the clouds. Third place is not a fun place to be, so Google is trying to beef up its corporate cloud effort under new boss Thomas Kurian. On Tuesday, Google announced a new service called Anthos to help customers run the same apps on cloud servers and internal servers. Kurian also plans a major expansion of his unit’s sales team. Elsewhere at the ‘Plex, Google shot down earlier rumors that it was abandoning development of new hardware, telling The Verge that updated laptops and tablets are coming soon. No further details were offered, however.

Amaze me. Rocket fans should get a treat later tonight when SpaceX launches its massive Falcon Heavy for the second time and then attempts to land the reusable boosters on land and sea. The launch is expected around 6:30 p.m. EDT and there’s a live webcast.

No vacation time. Will robots take the jobs people don’t want to do? That may be the case at Walmart, where some repetitive jobs like scanning shelves for inventory and mopping the floors may be taken over by what the company is calling “smart assistants.”

FOOD FOR THOUGHT

Speaking of assigning robots to tough jobs, the agriculture industry is looking at ways to automate more tasks, too. the workforce of largely migrant workers willing and available to harvest hard-to-pick crops like strawberries and apples has been shrinking dramatically. In a long and detailed profile in The New Yorker, John Seabrook gets out into the fields and describes some of the efforts to build A.I.-powered robotic pickers. Like Berry 5.1:

Whereas human pickers, who need only a few seconds per bush, use most of that time working their hands through the leaves, each robot, which spends eight seconds per plant, devoted seven and a half of them just to hovering about a foot above the bush, motionless, as though contemplating it. Two stereoscopic cameras per robot, equipped with multi-spectrum and infrared vision that can see berries through the canopy, scanned the plant in a second and a half, and made a virtual 3-D map of it. (If the harvester has encountered the same plant before, it can add this data to what it has already learned about the plant, using a high-speed link to connect with the cloud.) The system then ran all the information through its algorithms and targeted those berries at peak ripeness, based on color, size, and the amount of time that the fruit had already spent on the plant.

It was only at the very end of the eight-second window that the Pitzer wheel dropped down and–in a blur of motion that recalled Doctor Octopus, the Spider-Man villain, attacking one of his victims–the claws grabbed and picked the ripe berries in a fraction of a second, pop-pop-pop, and deposited them, apparently unbruised, on a shelf at the top of the machine’s chassis.

BEFORE YOU GO

An interesting lesson in skill and talent from the world of professional basketball this week. Magic Johnson was one of the greatest players of all time on the court. But after two years trying to run the front office operation of the Los Angeles Lakers, and having to make all of the decisions about players and coaches, he’s resigning. Johnson is hardly the first NBA star to flop as a manager, but it seems the lesson needs to sink in with team owners. There are different skill sets required to play the game, to manage the players, and to assemble the team. “I want to go back to having fun,” Johnson said. Don’t we all.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.

T-Mobile Unveils a 300-Channel TV Service, Saying Its Attack on Big Cable Has Yet to Begin

T-Mobile unveiled a piece of its new strategy to take on the cable TV industry, though the first foray probably won’t make giants like Comcast and Charter Communications too nervous–at least not yet.

Dubbed TVision, the offering is much like existing high-end pay TV packages, with almost 300 channels arriving in customers’ homes via a dedicated set top box, at a cost starting at $100 per month. Initially, the service will be available starting April 14 in the metropolitan areas of Chicago, Dallas, Los Angeles, New York City, Philadelphia, San Francisco, and Washington D.C., plus Longmont, Colo. Additional markets will be added “later this year,” T-Mobile said in a press release on Wednesday.

The service will require that customers have a broadband Internet connection, though it is designed to also work wirelessly with T-Mobile’s 5G network coming later this year.

T-Mobile CEO John Legere has been promising since December 2017, when the carrier bought startup video service Layer 3, that he would bring his unconventional and customer-friendly approach to cable. And since last year’s proposed merger between T-Mobile and Sprint, he has been talking up T-Mobile’s impending attack on cable even more strongly. “In 2019, we’ll take our first steps to take on another stupid, broken, arrogant industry–maybe the stupidest, brokenest, arrogantest industry of all: cable and satellite TV,” Legere wrote in a blog post in December.

But the initial T-Mobile


tmus



offering has a lesser aim, focusing on stealing premium cable customers, not cord cutters or other consumers fed up with high bills and an excessive number of channels. “Today’s news brings us one step closer to taking on Big Cable,” Legere said in a statement, adding he “can’t wait to launch” his bigger attack on cable later. But no additional details of that service were forthcoming.

T-Mobile’s TVision service could appeal to consumers who love what they get from cable but want more flexibility. The service costs $90 for the channels, plus $10 for each set top box to connect a TV. The service also includes many features that cable providers charge extra for, like a built-in DVR with 1 TB of storage and some 4K resolution programming. The T-Mobile set top box will also allow customers to add subscriptions to premium channels like HBO and Showtime, as well as access online streaming apps such as Google’s YouTube, Amazon


amzn



Prime Video, and–coming soon–Netflix


nflx



.

Be Heard Act, Lori Loughlin, Baltimore Mayor: Broadsheet April 10

Good morning, Broadsheet readers! Democrats introduce the Be Heard Act on workplace sexual harassment, Lori Loughlin faces a new charge in the college scam, and we take a look at a work uniform designed with women in mind. Have a wonderful Wednesday.

EVERYONE’S TALKING

[bs_bullet_primary] A kit that–finally!–fits. Last month, there was disappointment and outrage when NASA cancelled what was supposed to be a historic all-female space walk. The reason? There weren’t enough smaller-sized spacesuits for the women astronauts to wear.

That set off a broader conversation about women’s frustration with having to maneuver in a working world made for men, rather than one that’s been tweaked to also accommodate the female form. The Washington Post had a good run-down of real-life instances, which ranged from minor annoyances (duct-taped coveralls) to full-fledged safety hazards (ill-fitting bulletproof vests).

So it was downright refreshing to read about a work uniform that was designed with women in mind. Nike recently unveiled its first-ever bespoke women’s soccer (or football) jerseys that will be worn by its partner teams at this summer’s World Cup. Previous kits (as they’re called in Europe) have been men’s hand-me-downs or female versions of a men’s design.

Soliciting female players’ input revealed a few interesting preferences: women want a looser fitting kit than men, they opt for a crew neck over a v-neck, and they need a top that’s easy to pull over ponytails (Amen to that!). Then come the shorts: they must accommodate women’s developed glutes and be long enough for appropriate coverage but not to the point that they restrict movement. “It’s like the Goldilocks of shorts: it has to be just right in terms of where it fits on the leg,” Cassie Looker, Nike’s senior apparel product manager in global football, told The Guardian in a new interview.

Women’s sporting goods is reportedly a $7 billion business for Nike; in the second quarter of this fiscal year it made up nearly a quarter the brand’s total revenue. Nike unveiled the uniforms for 14 national teams ahead of the women’s World Cup, to be played from June 7 to July 7 in France, and as it announced a three-year promotion deal with the women’s division of the Union of European Football Associations.

Nadine Kessler, UEFA’s head of women’s football, told Reuters that the partnership sends “a powerful message that the game is now being judged and supported on its own merits.”

And now, finally, it has its own kits.

[ceo_attribution author=”Claire Zillman” email=”claire.zilllman@fortune.com” twitter=”clairezillman”]

ALSO IN THE HEADLINES

[bs_bullet_primary] Be Heard. Sen. Patty Murray and Rep. Katherine Clark introduced what they hope will be Democrats’ signature legislation on #MeToo. The Be Heard Act–short for Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination in the Workplace–would extend civil rights protections to low-wage workers, end mandatory arbitration agreements, and increase the amount of time workers have to file federal lawsuits after experiencing harassment. [bs_link link=”https://www.huffpost.com/entry/congressional-democrats-unveil-answer-to-me-too_n_5cacc4f0e4b02e7a705e222d” source=”HuffPost”]

[bs_bullet_primary] Charged up. Lori Loughlin, her husband and 14 other parents were indicted on new charges in the college scam yesterday. The new charge–money laundering conspiracy–arrives after 13 other parents, including Felicity Huffman, pled guilty to their original charges yesterday. Netflix postponed a film featuring Huffman after she pled guilty. [bs_link link=”http://fortune.com/2019/04/09/college-admissions-indictment-lori-loughlin-mossimo-giannulli/” source=”Fortune”]

[bs_bullet_primary] Ruling out the gag rule. The Trump administration’s opposition to abortion rights stateside extends to its input on international development agreements. But U.K. international development secretary Penny Mordaunt confirmed her commitment to countering those kinds of “global gag rules.” “Leadership means not shying away from issues like safe abortion when the evidence shows us these services will save women’s lives,” she said this week. [bs_link link=”https://www.theguardian.com/global-development/2019/apr/09/penny-mordaunt-says-uk-will-defend-abortion-rights-amid-global-pushback-trump” source=”Guardian”]

[bs_bullet_primary] Warren’s double bind. Remember when Hillary Clinton was running for president, and everyone wanted Elizabeth Warren to run instead? Well, now that Warren is running–with less enthusiasm from some onetime supporters–her charisma didn’t just disappear. Rather, this Atlantic piece argues that she’s facing the same problem that plagued Clinton for years: that she’s deemed likable and inspiring only when she’s not running for office. [bs_link link=”https://www.theatlantic.com/ideas/archive/2019/04/elizabeth-warrens-charisma-didnt-suddenly-disappear/586690/?utm_source=feed” source=”The Atlantic”]

MOVERS AND SHAKERS: Goldman Sachs’s Leigh Farris joins the Carlyle Group as managing director, global head of corporate communications. Danone North America hired Anheuser-Busch’s Gemma Hart as VP of communications and community affairs. Katrina vanden Heuvel steps down as editor and publisher of The Nation.

IN CASE YOU MISSED IT

[bs_bullet_primary] Too far-right for Facebook. You may have seen some buzz about Facebook banning prominent white nationalists from the platform. One of those figures was Canada’s Faith Goldy. The 29-year-old ran for mayor of Toronto last year, is a proponent of “white genocide conspiracy theory,” and was fired from a far-right news outlet after she appeared on a podcast from the neo-Nazi website Daily Stormer directly after the 2017 Charlottesville white supremacist rally. [bs_link link=”https://www.nytimes.com/2019/04/08/world/canada/facebook-ban-faith-goldy.html” source=”New York Times”]

[bs_bullet_primary] The MMIWG crisis. There’s a crisis of Missing and Murdered Indigenous Women and Girls. It’s been going on for decades, but local, state, and federal governments are finally paying more attention, forming task forces and completing studies. Inside the movement, there’s some tension, too, over the inclusion of two-spirit and trans women and girls. [bs_link link=”https://splinternews.com/inside-the-fight-for-missing-and-murdered-indigenous-wo-1833325455″ source=”Splinter”]

Today’s Broadsheet was produced by Emma Hinchliffe. Share it with a friend. Looking for previous Broadsheets? Click here.

ON MY RADAR

Kirsten Gillibrand speaks Mandarin, but all anyone can talk about is Mayor Pete [bs_link link=”https://www.refinery29.com/en-us/2019/04/229236/kirsten-gillibrand-speaks-mandarin-pete-buttigieg-norwegian?” source=”Refinery29″]

The Royal Baby: Frequently asked questions and answers to everything you ever wanted to know–and some things you didn’t [bs_link link=”https://www.nytimes.com/interactive/2019/style/royal-baby-meghan-markle.html” source=”New York Times”]

I’m $10,000 richer thanks to my ‘whisper network’ [bs_link link=”https://www.glamour.com/story/whisper-network-made-me-10000-richer” source=”Glamour”]

Erin Lee Carr remembers her late father–and finds her own voice–in All That You Leave Behind [bs_link link=”https://www.vogue.com/article/erin-lee-carr-all-that-you-leave-behind-memoir-interview” source=”Vogue”]

QUOTE

[bs-quote link=”https://www.nytimes.com/2019/04/08/us/chicago-mayor-lori-lightfoot.html” author =”Incoming Chicago Mayor Lori Lightfoot on the city’s political machine”]I’m ready to fight.[/bs-quote]

Uber Kicks Off Its Road Show to be 2019’s Biggest IPO

Investors could get their first look at hundreds of pages of detailed information about Uber Technologies Inc. as soon as Thursday, as the ride-hailing giant gears up to publicly file for an initial public offering.

The global ride-hailing company will kick off a road show to market shares to potential investors this month and would begin trading publicly in May, said people familiar with the matter, who asked not to be identified because the information is private. Uber is seeking to raise about $10 billion, one of the people said.

The offering is expected to be the largest U.S. IPO this year and among the 10 largest of all time.

While Uber has released partial financial results for years, its IPO filing with the U.S. Securities and Exchange Commission will provide the first complete look at its numbers and operations. Prospective investors are hungry for the minutiae, and they’re now armed with ride-hailing rival Lyft Inc.’s March listing as a reference point for picking apart Uber’s business and value.

“The main thing is going to be the ride-sharing metrics versus Lyft,” said Wedbush Securities analyst Dan Ives. “I think in the view of many investors Lyft is the little brother to Uber.”

Uber said in February that it generated $50 billion in gross bookings last year, up about 45% from 2017. But the figures show slowing growth. Of the $11.4 billion of net revenue in 2018, only $3 billion came in the last three months of the year, up only 2% from the previous quarter. While that number gave the San Francisco-based company a year-over-year quarterly growth rate of 25% — high by most standards — it fell well short of the 38% rate for the third quarter.

Shares of SoftBank Group Corp., a leading Uber shareholder, reversed losses and gained as much as 1.9% in Tokyo trading on Wednesday.

Investors will want an explanation for Uber’s flattening trajectory, a possible signal that its core ride-hailing business may be stalling. They’ll also want to know where the money is coming from as the company expands into food and freight delivery and scooters and bicycles, as it also eyes driverless and even flying vehicles.

Breaking out Uber’s U.S. ride-hailing business from its global operations will be a particular focus for those parsing its IPO to compare it to Lyft, which operates in the U.S. and Canada. A key point of inquiry will be whether Uber has already saturated the U.S. market.

“I don’t know if they’re going to give us enough to get to that level of specificity but the U.S. is the oldest, most mature market,” said Tom White, a senior analyst at D.A. Davidson & Co. “I think some investors think it has slowed significantly.”

The ride-hailing business is years ahead of food delivery, so prospective investors will likely be less forgiving of losses in the former than the latter.

Comparing Lyft

Contribution margins, a measure that’s meant to show which businesses can operate profitably, will be one tool provided for digging through its spreadsheets. Uber calculates its contribution margin by tacking on more costs than Lyft does, according to people with knowledge of the matter. Uber’s more conservative metric may give investors a better sense of its business, even if it makes direct comparisons with Lyft more difficult.

How the company defines active users will be critical. Lyft counts each person who took “at least one ride on our multi-modal platform through the Lyft app during a quarter” for a total of 18.6 million active riders in the fourth quarter. With its more global and diversified business, Uber’s active user calculation could be more complicated.

Uber submitted its IPO filing to the SEC confidentially on Dec. 6, the same day that Lyft Inc. announced that it had made its confidential filing.

IPO Hopefuls

A wave of IPO hopefuls followed, with digital scrapbook company Pinterest Inc. and food-delivery company Postmates Inc. moving toward offerings. Other soon-to-be-public companies include messaging startup Slack Technologies Inc., which is planning a direct listing, and Zoom Video Communications Inc.Lyft told prospective investors early on in its well-attended road show that its IPO was oversubscribed. Its shares jumped in their debut, but fell below the $72-a-share offer price and closed at $67.44 Tuesday.

Lyft’s IPO was the largest by a tech upstart since Snap Inc. went public two years ago, and the biggest U.S. listing since the partial government shutdown dampened first quarter listings’ momentum. Twelve companies raised more than $5 billion in IPOs on U.S. exchanges in the past three weeks, more than three times the total raised by 22 companies in the first 11 weeks of the year, according to data compiled by Bloomberg.

High-growth technology stocks often have rocky first weeks in public markets — Facebook Inc. dropped below its IPO price on its second day of trading before taking off.

Uber Valuation

Uber was last valued at $76 billion on the private markets when Toyota Motor Corp. invested in 2018. Last year, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO.

Details on the number of shares to be offered and the intended price range likely won’t come until an later filing.

Like many high-growth upstarts, Uber has pushed growth over profit. Its losses for 2018 were $1.8 billion, down 15% from 2017. Racing Lyft to an IPO may have added to Uber’s expenses, with the two trading salvos in a price war.

Potential investors might be undeterred by Uber’s losses. Lyft lost $911 million last year and investors valued the company at billions of dollars above its last private market valuation. Like Lyft, Uber will do its best to spin a compelling narrative of world-changing disruption.

The offering, planned for the New York Stock Exchange, will be led by Morgan Stanley as well as banks including Goldman Sachs Group Inc. and Bank of America Corp.

Google’s New Cloud Search Tool Can Find Data Stored With Salesforce, SAP, and SharePoint

Google enterprise customers can now use one tool to search through all of their data, regardless of where it’s stored.

The company announced on Wednesday that it’s extending its Cloud Search tool to work with third-party services like Salesforce, SAP, and SharePoint. Previously the search tool, which debuted in February 2017, only crawled data that companies stored in G Suite and on local servers.

“Alleviating the problem of finding the right information at the right moment is a place we think we’re uniquely positioned to do well,” said Julie Black, director of product management at Google. “Looking forward, it all comes down to A.I. driving competitive advantage.”

Google says it abides by a contractual commitment to its business customers that states it will not use their data for any other purpose than to deliver the service or to help with a support request. That means Google doesn’t track customer data for advertisement purposes or product improvements, Sadowski said.

“Generally all of that is considered user data,” said Rob Sadowski, Google’s trust and security marketing lead. “We have very strict rules around user data.”

In addition, to ensure security and privacy, Google also stores G Suite and customer data in isolation from each other.

To double down on its privacy promises, last year Google Cloud rolled out a product called Access Transparency, which logs when administrators access customer data, and Access Approval, which allows companies to approve or deny Google’s requests for access. Access Transparency is currently being tested on G Suite.

Google Cloud’s new search tool is designed to help the company compete with dominant rival Amazon Web Services, which released its own cloud search tool in 2012. The tool also follows a commitment Google made in 2017, when it partnered with Salesforce and promised to provide tools that work with the sales service.

The announcement was part of a series of updates Google announced during its annual conference Google Cloud Next, which is geared toward informing current and potential business customers, IT professionals, and developers.

Along with the extension of Cloud Search, Google announced three other G Suite updates. Google Assistant now connects with the G Suite calendar, letting business customers ask the virtual assistants for information about their day. The Hangouts chat feature is also coming to Gmail, combining all communications in one place.

Finally, Google has extended Voice to cover a customer’s entire employee base, giving them access to transcribed voicemails and the ability to block spam calls. Voice also provides text-to-speech capabilities that can be used for recorded greetings.

G Suite, which serves more than 5 million business customers, will continue to roll out products focused on improving the work environment for the mobile workforce, Black said.

“More and more data is created every day, and enterprises that make really good use of that information are well-positioned to have a competitive advantage,” she added.

Boeing Orders, Uber IPO, IMF Warning: CEO Daily for April 10, 2019

Good morning.

In this year of unicorn IPOs, we wouldn’t normally take note of a mere $750 million acquisition. But ed-tech company 2U’s deal this week to acquire Trilogy Education Services deserves some attention, mostly for what it says about the future of education.

For its first decade of existence, 2U has had a mission of providing online degree programs in partnership with some of the world’s top universities–Harvard, Georgetown, and my own alma mater, UNC. But the Trilogy acquisition takes it in a new direction. Trilogy offers skills training–mostly in tech–designed to “prepare adult learners for careers in the digital economy.” And Trilogy partners directly with big companies like Salesforce and GE to help train employees. In short, it’s about life-long learning.

I talked yesterday with Chip Paucek, co-founder and CEO of 2U, who emphasized the imperative to not only “future proof the college degree” but also “future proof the person.” “The average millennial will have 14 jobs,” he says. To survive, that person needs not just a degree, but continuing access to training in new skills. “Where I’d like it to go over time is to have one price for everything.” A Netflix for learning–“to support someone through life.”

For those who don’t want to reskill, of course, there’s always gambling. Fortune‘s Rey Mashayekhi has a fascinating story out this morning about the explosion in sports betting that’s coming in the wake of the Supreme Court’s landmark decision last May. The big four professional sports leagues–NFL, NBA, MLB and NHL–are looking to bring in an additional $4.2 billion a year, and boost fan viewership and engagement in the process.

You can read Rey’s story here. More news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Boeing Orders

Boeing took zero 737 orders last month–the first time this has happened in nearly seven years. Deliveries also fell, though that’s because Boeing suspended them after the Ethiopian Airlines crash. The manufacturer recently said it was cutting 737 production to 42 a month, from 52 previously. The question now is whether these troubles are temporary. Wall Street Journal

Uber IPO

Uber’s IPO roadshow is about to commence, and Bloomberg reports the ride-hailing firm is looking to raise around $10 billion. That would make it this year’s biggest IPO in the U.S., and one of the largest in history. Uber’s IPO filing will give prospective investors their first good look at the company’s numbers and operations, and they will be able to compare details with those in rival Lyft’s recent filing. Bloomberg

IMF Warning

The IMF’s new chief economist, Gita Gopinath, does not foresee a global recession, but she does warn of “many downside risks.” The fund reckons global growth will be 3.3% this year–a 0.2 percentage point downgrade from earlier forecasts–and 3.6% next year. Particular weaknesses are seen in the U.K., Germany, Italy, Latin America, the Middle East and North Africa. BBC

Netanyahu Win

Benjamin Netanyahu’s Likud party has pretty much tied with Benny Gantz’s Blue and White party in the Israeli elections, which means Netanyahu is all but certain to stay prime minister–Israel has a coalition system and Netanyahu should easily be able to strike a deal with other religious-rightist parties. That means he will become Israel’s longest-serving PM in July, unless he gets hit by corruption charges that force his removal. Reuters

Around the Water Cooler

Brexit: Endgame

Today’s the special summit of the Council of the EU, where leaders of the bloc’s other 27 countries will decide what to tell U.K. Prime Minister Theresa May about her request for another short Brexit extension. The most likely outcome is that she can take or leave a long extension of a year or so. If she takes it, her Conservative Party will descend into outright civil war. If she leaves it, that probably means a no-deal Brexit on Friday–unless the U.K. suddenly cancels Brexit altogether. CNBC

EU and China

The EU and China produced a joint statement at the end of their trade summit yesterday, in which they talked about strengthening cooperation and committing “to build their economic relationship on openness, non-discrimination, and fair competition, ensuring a level playing field, transparency, and based on mutual benefits.” Also, “substantially improved market access” and no more forced technology transfers for EU investors in China. Sounds a lot like what the U.S. has been after–and the fact that the U.S. has been making an enemy of both the EU and China probably helped draw them closer together. Politico

Microsoft and China

Microsoft has been conducting A.I. research in conjunction with a university run by the Chinese military, and critics say the work is being used to build surveillance systems and repress people in the western Xinjiang region. Financial Times

5G Complaint

Deutsche Telekom CEO Tim H?ttges has complained about the amount his company has had to bid for a 5G license in Germany. The amount of total bids in the German 5G spectrum auction is now over $5 billion, and H?ttges pointed out that such cash could be used to build tens of thousands of mobile sites. Reuters

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.

Inside the Battle for the Future of Sports Betting

This spring, Americans will spend $8.5 billion indulging in a time-honored vice: wagering on college basketball games.

March brought with it “March Madness,” the three-week-long avalanche of upsets and buzzer-beaters that is the NCAA Men’s Basketball Tournament. And with March Madness comes bets, brackets, office pools, and, of course, lost employee productivity–up to $13.3 billion worth of it, according to outplacement firm Challenger, Gray & Christmas.

But this year, things have been a little different. It was the first NCAA Tournament since the Supreme Court’s landmark decision last May to overturn the federal ban on sports betting, which for decades had largely restricted the activity to the casinos and sports books of Nevada. Which means that for the first time, bettors in seven states that have subsequently legalized sports gambling haven’t had to resort to under-the-table wagers–or a trip to Las Vegas–to get in on the action.

The nation’s major sports leagues and associations recognize just how epochal this shift is. After years of opposition to the notion of sports betting, they’ve virtually all now come around to its economic potential. While the NCAA continues to officially oppose “all forms of legal and illegal sports wagering”–which NCAA president Mark Emmert said in January “threaten[s] the integrity of college sports in many ways”–America’s professional sports leagues are almost entirely on board with this new state of affairs.

Buoyed by the commercial possibilities, the likes of the NBA, MLB, NHL, and Major League Soccer have each struck official partnerships with MGM Resorts, while the NFL announced its own deal with Caesars Entertainment. But these commercial agreements represent only a piece of the larger sports betting puzzle for the leagues. Ask them, and they’ll you that much more significant is the opportunity to use gambling as a vehicle to draw in, engage and interact with millions of sports fans across the country.

Prop bets for Super Bowl LIII are on display before the start of the game at the Westgate Superbook sports book in Las Vegas.John Locher–AP/REX/Shutterstock

“We always saw, and we still see it, as a fan engagement opportunity,” Keith Wachtel, the NHL’s chief revenue officer, tells Fortune. “That’s the holy grail of sports betting; it’s not the short-term [gambling] revenue.”

Simply put, more betting on sports means more eyeballs watching and paying attention to those sports, and that equals more money flowing into the leagues’ coffers. According to an October study commissioned by the American Gaming Association (AGA), legal sports betting could result in an additional $4.2 billion in annual revenues for the four major North American sports leagues (NFL, NBA, MLB and NHL)–with the majority of that influx resulting from increased fan engagement with the product, rather than revenue coming directly from the gaming industry.

“I think [the leagues] absolutely view this as something that’s going to increase fan viewership and engagement,” says Scott Butera, MGM’s president of interactive gaming, who is spearheading the company’s sports betting strategy. “They see this as a way of letting fans have some skin in the game, and more reasons to watch a game now.”

According to the AGA, Americans illegally wager more than $150 billion on sports every year, whether through offshore betting sites or illegal bookmakers. With that kind of money potentially up for grabs via legitimate means, it’s no surprise that there’s a debate currently taking place about what the future of the fledgling, legal sports betting industry should look like. Beyond the leagues themselves, there are numerous stakeholders to account for, each with their own objectives.

There are the casino operators that hold significant influence at the state level, where legislators are crafting the nation’s sports betting regulations. There are mobile betting operators like DraftKings and FanDuel, whose digital platforms are widely considered to be the future of the industry. And, of course, there are the sports teams themselves, many of which are either preparing to, or already taking advantage of, the commercial and fan engagement opportunities allowed by sports betting.

Through interviews with more than a dozen people from these various groups, there is a clear sentiment that all parties have a shared, mutual interest in a successful legal sports betting industry in the U.S. But that’s not to say there aren’t disagreements, currently playing out across the country on a state-by-state basis, regarding issues that could shape the future of sports gambling in America for decades to come.


The (State) House Always Wins

Last year, the NBA, MLB, and PGA Tour teamed up on a lobbying effort targeting state legislatures across the U.S. The three pro sports organizations share ideas that they believe should govern sports betting and stand in contrast to the NFL and NHL, which have taken a more lax approach toward the regulatory environment. (Wachtel said the NHL does not consider it “a winning battle at this point” to dictate sports betting regulations, while the NFL is not pursuing a similar lobbying effort and did not return multiple requests for comment for this story.)

“There’s no question that the world changed after the Supreme Court decision,” says NBA senior vice president and assistant general counsel Dan Spillane, who is leading the league’s lobbying effort alongside the MLB and PGA Tour. “We saw that there is an opportunity to engage with the [gaming] industry, not just from a commercial standpoint but an integrity aspect as well.”

Some of the leagues’ positions are in line with casino industry groups like the AGA, including an embrace of mobile betting and support for cooperation between the leagues and bookmakers on detecting irregular betting patterns that could signal “integrity issues” with certain games and contests.

Other proposals have been flatly shot down by the gaming industry. Perhaps no stance has been less popular than the notion of an “integrity fee,” which would see the leagues get a cut of the revenue from each bet placed on one of their contests. While the NBA, MLB, and PGA Tour initially floated the idea of a 1% fee, they’ve since revised their stance to 0.25% of every bet.

“There is no betting on Major League Baseball unless we put on the games and invest a lot of time and effort, as our players do, on putting on compelling contests,” says MLB senior vice president and deputy general counsel Bryan Seeley. “They should have to pay us something for that.”

Seeley also cites the costs of the league’s gambling oversight efforts, and the risks inherent to embracing sports betting, in justifying MLB’s position.

“If we have a scandal regarding the integrity of our game, that could cost us hundreds of millions of dollars,” he says. “Baseball has a long history of fighting against issues related to sports betting. Anyone who’s followed baseball knows about Pete Rose and the Black Sox scandal.”

Pete Rose, a former player and manager, was barred from the MLB in 1989 following allegations of gambling. (He later admitted to them in a 2004 autobiography.) The “Black Sox” refer to eight members of the Chicago White Sox who were banned for fixing the 1919 World Series.

Pete Rose, a former Reds player and manager, was barred from the MLB in 1989 following allegations of gambling.Karl Gehring–Denver Post via Getty Images

But that position garners little sympathy from the gaming industry, which cites its own low-margin business model in ruling out the leagues getting any cut of betting revenues. Sara Slane, the AGA’s senior vice president of public affairs, says that the originally proposed 1% integrity fee on each bet would amount to bookmakers effectively sacrificing up to 20% of their profits–given how bookmakers pay out 95 cents in winnings for every every $1 that is bet, according to Slane.

She also shoots down the notion of a more limited 0.25% fee on bets. “At the end of the day, this is a low-margin business,” she says. “Taking that money off the top hurts our ability to compete with illegal operators.” So far, it appears that the casino lobby is winning on this issue. While integrity fees have been included in several proposed pieces of sports betting legislation across the country (most recently in Connecticut earlier this month), they’ve yet to make it into law anywhere.

Then there are other issues that relate to in-play betting–a massive and ever-growing piece of the sports betting market that’s enabled by the vast amount of data collected by the leagues and sports data partners like SportRadar and Genius Sports.

“At the end of the day, this is a low-margin business.” –Sara Slane, AGA

On the first count, the NBA, MLB, and PGA Tour want bookmakers to be required to pay for their official, league-sanctioned data streams. They claim this is important to provide the most accurate, up-to-date betting data for wagers, and also to protect the proprietary data collection operations that they’ve spent millions of dollars to establish.

“We capture data from every single [golf] shot at a PGA Tour event–on a Thursday and Friday, that’s 10,000-plus shots a day,” according to David Miller, a vice president and assistant general counsel for the PGA Tour. “We don’t think it’s fair, in a regulated market, for someone to be able to use a tracking tool or web-scraping device and turn around the data we collected to bookmakers for a fraction of the cost.”

Additionally, as part of their efforts to protect the integrity of their games, the leagues want to see restrictions on certain kinds of wagers. “We want to make sure that, as we get into more granular bets, we don’t encounter integrity issues,” Seeley says. “It’s very difficult for an individual to fix a nine-inning baseball game. It’s a lot easier to fix the next at-bat; a batter is in complete control of when he strikes out.”

Miller says the PGA Tour agrees with that stance when it comes to “negative bets,” such as “a bet that [a golfer will] miss a putt or drive it less than 300 yards”–and particularly “at the lower levels of our sport,” where the winnings are smaller and players are potentially more prone to manipulation. (Likewise, Seeley said MLB is against sports betting at the minor league level.)

Unsurprisingly, the casino lobby is at odds with both a mandate on where bookmakers can buy their data from and what kinds of bets they can take. Slane says such a mandate “enables [the leagues] to have a monopoly over data rights,” while restricting the types of wagers that operators can offer would simply “drive [bettors] to offshore, illegal [gambling] websites” to find certain bets.

She adds that the gaming industry has “just as much invested” in ensuring that the integrity of the contests it takes bets on are not comprised. “When we’re paying out to winners who have insider info, that hurts us just as much,” she notes. “If there’s something suspicious happening, it’s bad for the leagues but it’s also bad for us.”

Carsten Koerl, the founder and CEO of SportRadar, tells Fortune that while it’s “very understandable that [the leagues] want to protect the sport,” the idea that they can dictate where gambling operators can obtain their data from “is not going to work in a free market.” Having provided betting data to sports books around the world over the past two decades, SportRadar now has similar partnerships with most of the major American sports leagues.

Crucially, the company also helps leagues and authorities monitor potential integrity issues, such as betting irregularities that may indicate a contest is fixed in some way. “I understand the leagues have an interest, but betting operators have the same interest that the sport stays clean and nobody is using these small side bets to influence it,” Koerl says.

He adds that the debate over the use of official data “is not very positive, because it will slow down the process” of getting sports betting up and running in many states. “I would like to see that [the leagues and gambling operators] are both lobbying in the same direction.”

Like the integrity fee issue, the leagues’ efforts to mandate the use of official data and restrict certain types of bets have yet to gain much traction at the state level. But they did make it into a bill, proposed in the U.S. Congress in December, by Sen. Charles Schumer (D-NY) and then-Sen. Orrin Hatch.

That bill would represent the first piece of federal legislation governing the legal sports betting industry in the U.S. While the gaming industry appears to be against such legislation–Slane said it would “add another level of bureaucracy” for gaming operators already heavily regulated at the state level–the idea is met with virtually unanimous approval among leagues, data providers, mobile betting operators, and other industry participants.


Double or Nothing

At Prudential Center in Newark, N.J., fans attending a New Jersey Devils game can visit the William Hill Sports Lounge, buy a drink, and survey several screens that list the most up-to-date betting odds for any number of sporting events. While there are no betting windows available to take wagers in person–New Jersey law still restricts where you can establish a brick-and-mortar betting operation–all one has to do is flip open bookmaker William Hill’s mobile sports betting app (or any other sports betting app, if they like) and place a wager with the tap of a finger.

“We’ve made it a priority to make sure that when our fans come to the games, they are getting a unique and connective experience, and we saw sports gambling as additive to that,” says Hugh Weber, the president of Harris Blitzer Sports & Entertainment (HBSE), the company that owns both the Devils and the Prudential Center (as well as the NBA’s Philadelphia 76ers and the English Premier League’s Crystal Palace F.C.). As Weber notes, his patrons don’t even have to visit the lounge if they want to place a bet; they can “actually place bets from their seats in the arena.”

Harris Blitzer Sports & Entertainment President Hugh Weber speaks at William Hill Sports Lounge opening at Prudential Center on December 14, 2018 in Newark, New Jersey.Dave Kotinsky–Getty Images for William Hill

While sports betting is now legal in Pennsylvania, mobile sports betting is not, which means that similar offerings are not yet on the cards for the 76ers at their home in Philadelphia. But HBSE, which has also struck commercial deals with Caesars and FanDuel at Prudential Center, is among American sports team owners who are ahead of the curve in embracing the possibilities of sports betting, wherever and whenever they’re available.

Ted Leonsis, who owns both the NHL’s Washington Capitals and the NBA’s Washington Wizards, recently announced that he will open a physical on-site sports book at the arena his teams share in downtown Washington, D.C., after the District’s city council voted to legalize sports betting in February. The Sacramento Kings–owned by real-time trading software entrepreneur Vivek Ranadiv?–have offered fans predictive gaming platforms on the team’s official app. Meanwhile Major League Soccer, as a relatively fledgling enterprise, has perhaps the most to gain from sports betting as a fan engagement tool. It’s currently “developing a free-to-play game” with new partner MGM, according to MLS deputy commissioner Gary Stevenson.

Despite opposition from state gaming lobbies across the country, most people in the sports betting industry agree that mobile sports betting is the way of the future, if not the present. While some gaming operators have expressed reservations about whether mobile betting will drive traffic to their casinos, the consensus is that it’s necessary should the legal market wish to capture the bulk of the illegal, black market’s share.

“We are largely aligned with the leagues around this–they realize that mobile is the future,” says Kip Levin, the president and COO of FanDuel. The fantasy sports company recently opened a retail sports book location at the Valley Forge Casino Resort, located a half-an-hour’s drive outside Philadelphia. Levin says he expects Pennsylvania to be “the next big state with combined retail and mobile” sports betting.

“Mobile is the future.” –Kip Levin, COO, FanDuel

Both FanDuel and DraftKings have dominated the mobile sports betting market in nearby New Jersey, and mobile betting itself has come to represent a majority market share of the overall sports betting market in the Garden State. Yet, in order to do business there, both companies are required by law to agree licenses, or “skins,” with existing casino operators–Atlantic City’s Resorts Casino Hotel, in DraftKings’ case, and Meadowlands Racetrack and Casino, in the case of FanDuel.

For both companies, which made their names as daily fantasy sports operators, it’s simply the cost of doing business in a regulatory environment that has long been dominated by the brick-and-mortar casinos.

“There’s no firm reason why any state has to run licensing through the casinos,” according to Matt Kalish, the CRO and co-founder of DraftKings, who noted that the company’s home state, Massachusetts, has proposed a sports betting law allowing mobile operators “direct licensing [that] wouldn’t run through a casino.” But Kalish notes that, in New Jersey, the company is “pretty happy” with the state’s sports betting regulations and is “making it work with whatever framework” is provided.

Like FanDuel, DraftKings has also established a physical sports book presence, in its case at Scarlet Pearl Casino Resort on Mississippi’s Gulf Coast. But both companies are also looking to be ahead of the curve as far as opening up the national mobile betting market; DraftKings recently announced a deal with Caesars that could allow it to acquire licenses in states where the gaming company has a presence, while FanDuel struck a similar agreement with casino operator Boyd Gaming last year.

For each daily fantasy sports-turned-sports betting operator, the issues surrounding the debate over what legal sports betting should look like are not black and white. Though each operator has partnerships with professional sports leagues, it is not tied to the notion that sports books should be mandated to buy data from those leagues (“We don’t think it should be written in a statute; we think it should be a commercial negotiation,” Levin says) or required to hand over a percentage of their revenues via an “integrity fee” (“I don’t think anyone loves the idea,” Kalish notes).

But these companies do believe that, along with all the various parties that are having a say in how sports betting should operate in the U.S., they have a shared interest in bringing the industry out of the darkness and into mainstream.

“They’ve realized that if the illegal market is as big as it is, the integrity issue actually exists today, and it’s actually worse,” Levin says of the sports leagues’ embrace of sports betting. “They have access to the data; if they think there’s something is weird, they can pick up the phone and call us. If they have an issue or a concern, they can reach out. We’re all aligned.”

Nonetheless, the debate will rage on: There are active sports-betting bills pending in 22 states.

“I think it’ll be really interesting to see what happens at the closeout of the [state] legislative sessions in June,” says Slane. “Then we’ll really see what the map looks like.”

Rey Mashayekhi is a staff writer at Fortune. Email him at feedback@fortune.com.