On May 14, 2018, the Supreme Court overturned the federal ban (PASPA) on sports betting, which ultimately meant that New Jersey and other individual States won this lengthy legal battle while the professional sports leagues lost. But, these leagues aren’t going down without a fight. In fact, they’re pulling together with Senators and lobbyists to fight back in the form of federal regulations and fees. Currently, the concept of an integrity fee has taken center stage in this legal battle over sports betting.
What’s an Integrity Fee?
In short, an integrity fee is like a tax or a commission on legalized sports betting. This fee, or similar ones, is being pushed by professional sports leagues to help protect the “integrity” of their games. Earlier this year, the National Basketball Association (NBA) released the following statement on why there should be an integrity fee:
“Sports leagues provide the foundation for sports betting while bearing the risks it imposes, even when regulated. If sports betting is legalized federally or state by state, we will need to invest more in compliance and enforcement, and believe it is reasonable for operators to pay each league 1% of the total amount bet on its games to help compensate for the risk and expense created and the commercial value our product provides them. This is a similar approach to legally-regulated sports betting in other international jurisdictions.”
In other words, leagues like the NBA want to get a piece of the sports betting pie for bets placed on their games, especially in states where they have teams. Additionally, the NBA and other leagues want this fee to be a part of an overall sports betting legislation, not just a onetime agreement.
Both the NBA and Major League Baseball (MLB) first approached the idea of an integrity fee with the state of Indiana in January of 2018, when the state was discussing potential sports betting legislation. From there, the NBA took a more aggressive, national approach with a set of laws that they want to see become the basis of any federal sports betting regulations.
How Much Will the Integrity Fee Be?
As of now, the NBA has been pushing for a flat fee of 1% of all bets placed on their games. This fee would be collected from every sportsbook and casino that takes bets on the NBA. Additionally, the fee will be based on the total amount of wagers regardless of whether the sportsbook or casino won the bet. For example, if Nevada sports betting entities took in $100 million dollars on NBA games then the league would want an integrity fee of $1 million dollars. However, the numbers are much bigger than that. According to ESPN, Nevada totaled more than $4.5 billion dollars in 2016 and is expected to have surpassed $5 billion in 2017. Theoretically, if all of that money was generated via NBA wagers, the league would get $45 million to $50 million in integrity fees.
Are Other Pro Leagues on Board With This?
It’s believed that all of the major sports leagues desire some sort of integrity fee, whether they call it that or not. Major League Baseball is looking to create partnerships with individual states and sports betting establishments in the hopes of protecting the integrity of their game. MLB released the following statement on this matter:
“We will use our expertise, rights and footprint to help the states that have smart and modern sports betting laws develop the country’s most successful betting markets within a regulatory framework that protects the integrity of our games, which is most paramount.”
The National Hockey League (NHL) has distanced themselves from the term integrity fee as commissioner Gary Bettman said that he’s not concerned about legalized sports betting compromising the integrity of the NHL, their games or their players. But, that doesn’t mean he’s passing on a slice of the sports betting pie. In fact, Bettman is all-in on getting some kind of percentage. According to Sportshandle.com, Bettman made the following comments about getting paid from bets on his league:
“I think, though, if you’re going to allocate for yourself to run a business on our intellectual property and the performance of our athletes and the platform that we put on for our games, we’re entitled to be involved in that.”
The National Football League (NFL) is also distancing itself from the term “integrity fee.” The country’s most popular sports league is looking for help from Congress to help regulate sports betting and to protect their league. Commissioner Roger Goodell stated that he’s hoping that Congress will include the following core principles in any federal regulations on sports betting:
- There must be substantial consumer protections;
- Sports leagues can protect our content and intellectual property from those who attempt to steal or misuse it;
- Fans will have access to official, reliable league data; and
- Law enforcement will have the resources, monitoring and enforcement tools necessary to protect our fans and penalize bad actors here at home and abroad.
Like the NHL, the NFL wants a piece of any business that will make money off their product. Right now, the NFL is trying to get a cut of sports betting revenue from anything that can fall under “intellectual property.” In the core principles above, the NFL will try to get sportsbooks and related entities to pay for official league statistical data.
Although not a part of the 4 major professional sports leagues (MLB, NFL, NBA, NHL), there are other sports leagues that want to get in on this “integrity fee” concept. The PGA Tour recognizes the potential in generating not only revenue, but expanding their fan base with the legalization of sports betting. Commissioner Jay Monahan made the following comments about this topic, according to USA Today:
“You have keep in mind that betting is happening right now, with illegal black markets and offshore betting, and we don’t have any exposure to what is happening. If it’s legalized and regulated, you get to a point where you can better ensure the integrity of your competitions. You can provide adequate protection for consumers, which doesn’t exist today. There are commercial opportunities for us, which is one of the things we’re here to do, which is to create and maximize playing and financial opportunities for our players.”
NASCAR hasn’t really given an official stance on how they can get a piece of the sports betting revenue, but they are definitely interested in anything that will grow their sport. Some pundits believe that legalized sports betting could be just the thing to improve NASCAR’s popularity, which has seen it’s a noticeable dip in recent years after top stars Dale Earnhardt Jr. and Jeff Gordon retired.
Current NASCAR drivers see sports betting as a great way to grow the sport and make it even more popular. Perhaps the best driver today, Kyle Busch, who is from Las Vegas, made the following comments about legalized sports betting and its potential impact on NASCAR according to ESPN:
“People need to be careful of betting habits and such, but I’m all for it. It’s fine. It brings and adds more attention to our sport. People will kind of take interest it and find ways to make money around it.”
Is There Any Opposition to an Integrity Fee?
In short, Yes! There is a great deal of opposition over an integrity fee or any other type of payment to professional leagues as the result of legalized sports betting. Democratic State Senate President Steve Sweeney is spearheading the opposition on a national level by flat out calling this integrity fee an act of “extortion.”
As of now, there are many states that all out oppose this integrity fee and any other payment plan. However, there are a few states that have shown a willingness to negotiate, according to ABC News, who also printed an excerpt of Sweeney’s letter that he wrote in regards to these league sanctioned fees:
“Essentially, the leagues are asking to be paid to allow games to be played fairly. Ironically, they are calling this extortion attempt an ‘integrity fee,’ even while fully aware that providing participants a stake in the volume of betting would amount to what could more accurately be called an ‘anti-integrity fee.’ And their demand begs the question of what they would now start doing to preserve the integrity of their games that they have not been doing for years.”
Pros and Cons of an Integrity Fee
After laying out both sides of the integrity fee argument, there are definitely some pros and cons to each argument:
Integrity Fee Pros
- There will be additional fees for leagues as they add security measures to protect themselves from sports betting corruption.
- With an increase in sports betting opportunities, there really should be some negotiations done to work out a financial arrangement and a collaboration on integrity measures.
- A fee could also help create new opportunities for accurate, reliable data beyond what third parties are privy too.
Integrity Fee Cons
- The fee is not on revenue.
- The leagues are doing nothing to regulate or operate sports betting.
- Takes away from local and state revenue.
- The fee could force sportsbooks and casinos to pass the extra costs onto consumers.
Final Words on Integrity Fee
Integrity of the game, for any of the major sports leagues, is definitely a priority for all parties involved. This is a battle and debate that will only get more intense as each state rushes to get their sports betting regulations in place. At some point, you can expect the federal government to get involved as they will want their cut of this massive revenue. For now, it will be interesting to watch how the different leagues maneuver their way through this “wild west” era of sports betting.