UPDATE 1-US court says Delaware sports betting plan illegal

* Leagues said plan would encourage game-fixing

* Judge concerned about integrity of sports

(New after fifth paragraph)

By Jon Hurdle

PHILADELPHIA, Aug 24 (Reuters) - A U.S. appeals court ruled on Monday that a plan by Delaware to allow sports betting violates federal law, siding with major sports leagues who argued it would promote game fixing.

A three-judge panel on the U.S. Court of Appeals for the Third Circuit ruled against the state which wanted to allow betting on single games in all the major sports from Sept. 1 at its three racetrack betting locations.

Delaware, which is seeking additional revenue to overcome an $800 million budget deficit, would have been the second state after Nevada to allow betting on sporting events.

Attorneys for the U.S. professional leagues for football, baseball, basketball and hockey had sought an injunction against the plan on the grounds that sports betting would encourage game fixing and violate a 1992 federal law that sought to prevent the spread of sports betting.

Circuit judge Theodore McKee said the Delaware plan would violate the 1992 law.

"They clearly have ruled that what the state plans is illegal," Kenneth Nachbar, an attorney for the leagues. "The court may well issue a permanent injunction."

Nachbar argued during a two-hour hearing that the plan would have undermined the integrity of the games by raising questions about whether results were influenced by gambling.

"The closer you get to single-game betting, the more you call into question the integrity of what happens on the field or on the court," Nachbar told the court.

In the National Basketball Association, the promise of money led one referee to bet on games and pass along inside information to bookies. Tim Donaghy was sentenced last month to 15 months in prison after admitting to federal fraud charges.

The leagues plus the National Collegiate Athletic Association argued Delaware sports betting would violate the federal Professional and Amateur Sports Protection Act of 1992, which banned single-game sports betting in most states.

Exceptions were granted to Nevada, Montana, Oregon and Delaware because they already operated some forms of sports gambling. Delaware briefly allowed "parlay" betting, or gambling on multiple games, during 1976.

Judge McKee ruled Delaware's plan does not qualify for an exception and said there may be a risk that if a player suddenly and unexpectedly makes a move that turns the outcome of a game on which betting is allowed, the integrity of that game may be called into question.