Leagues Continue to Pursue Integrity Fees

While initial states such as New Jersey outright refused to include so-called “integrity fees” to sports leagues in recognition of legal wagering on their games, New York has included such a fee in its new bill.

As the first states implement legalized sports wagering in the wake of the U.S. Supreme Court’s striking down the Professional and Amateur Sports Protection Act (PASPA) and its federal ban on sports betting, one of the most contentious issues remains the “integrity fee” or “royalty fee” being sought by the major sports leagues.

Sports betting is already under way in Delaware, where Governor John Carney made the first post-PASPA wager two weeks ago, and New Jersey, where NBA legend Dr. J made the first bet at the Borgata Race and Sports Book last week.

Neither of those states has included fees to the sports leagues, which, led by the NBA and Major League Baseball, has been lobbying the 20-odd other states considering sports-betting legislation to include a fee for the “intellectual property” of the games for each league. The NBA initially pushed for 1 percent of all wagers on its games; lobbying efforts have since settled on a request of 0.25 percent of wagers.

Sports books in Nevada have never paid any fees to the leagues, and officials there say they will not start now. Sports-book revenues are taxed at 6.75 percent in the state, with an additional 0.25 percent of revenues going to the federal government as an excise tax. After those fees and taxes, profit margins are typically 3 percent – 5 percent. Fees to the leagues would cut into that to the extent that books would not be profitable, and would not be able to compete with illegal bookmakers.

New York might be the first post-PASPA sports betting program to give the leagues a slice of the action. State lawmakers are expected to vote by later this week on House and Senate bills that would give the leagues 0.25 percent of wagers on their games.

Meanwhile, the leagues are not slowing down their effort to get a piece of the sports betting action. Brian Steeley, a former federal prosecutor who is Major League Baseball’s head of investigations, said in an interview with Reuters last week that states should not follow the regulatory model of Nevada, which he said is outdated. The American Gaming Association and other proponents have advised new states to follow Nevada as a regulatory model or sports-betting laws, pointing to decades of success in regulating the industry.

“We should adopt regulations that fit 2018,” Seeley said, noting that not enough protection exists against game-fixing because data would not be shared across state lines. “Sophisticated manipulation is going to cross state lines and people are likely to place bets in different states, particularly if they know that no one is aggregating data across states and looking at it,” Seeley said.

Seeley instead put forth Australia is a world benchmark for the sports betting regulation, because “there is the most cooperation and coordination between sports leagues, the regulator and bookmakers.”

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