Last updated on: June 20th, 2023
Integrity Fees For Legal Sports Betting – Paying Sports Leagues For Betting
Following the repeal of PASPA, major sports leagues like the NBA, NFL, and MLB came together to enforce sports betting rights and integrity fees that would see sportsbooks in regulated states pay pro leagues that will be wagered on. The argument from the leagues is that they are providing the product and thus should be compensated for such. The leagues also believe that the integrity of the sport is at increased risk and that the leagues would require the fees in or to pay to aid in monitoring the integrity of sporting events as sports betting became regulated, thus the term ‘integrity fees’ is used.
Sportsbooks, naturally, are opposed to these fees. Additionally, sportsbooks and major leagues, teams, and athletes already have individuals’ partnerships with one another. Sportsbooks pay leagues to use their official league data, hence why sportsbooks do not see the need for integrity fees. Since legal sports betting has continued to grow across the country, the integrity fees argument has also continued to be raised.
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What Are Integrity Fees?
Integrity fees are fees applied by sport leagues to the sports betting market in exchange for allowing wagering on their product. Effectively, they’re a way for the leagues themselves to get a cut. The justification for them is that the leagues will need to ratchet up enforcement and investigations of gambling incidents when legal sportsbooks become widespread, and thus will need further income with which to do so.
Recent News Regarding Integrity Fees
There have been very few major developments in terms of the state of play with regards to integrity fees as sports betting expands in the United States. Currently, states can regulate sports betting as they please, which means that if the leagues want integrity fees, they need to acquire them on a state-by-state basis. There are plenty of states with legal sports betting that do not have integrity fees applied to them.
How Integrity Fees Got Their Start
Even before PASPA was repealed by the Supreme Court, leagues like the NBA and the MLB were asking for these integrity fees. PASPA was repealed in May 2018 and the first mention of integrity fees was in Indiana HB 1325 where leagues were asking for 1% of the total betting handle from sportsbooks. In the years following integrity fees have evolved, and today leagues are asking for less, only 0.25% as recently as 2019. No conclusion has been set to this issue, however, as professional leagues and legal sportsbooks continue to disagree on the need for integrity fees.
How Much Could Leagues Make From Integrity Fees?
Leagues can stand to cash in big with integrity fees due to the nature of the fees. The professional leagues would be receiving payment without the need to provide any services, essentially being paid for the existence of sports betting. Based on how much Americans bet on sports, the 1% tax on a betting handle would lose sportsbooks a lot of money from paying leagues. The betting handle fluctuates in states, and the handle does not equate to the revenue sportsbooks are actually receiving. 1% of the total sports betting handle could equate to 20%-25% of the total gross revenue received through sports betting for sportsbooks. While sports leagues are asking for less now, paying integrity fees could still become a major bill for sportsbooks.
How Integrity Fees Are Collected
Similar to how sportsbooks pay taxes to the state they operate in monthly, integrity fees would be paid the same way. The difference being that integrity fees would be paid from percentages of sports betting handle as opposed to the revenue which where states collect taxes. One of the primary reasons behind sportsbooks being opposed to integrity fees. Under this system, if someone were to bet on the NFL and win big, the sportsbook would not gain any revenue from the wager, and would still need to pay a percentage of said wager to the NFL.
States That Pay Sports Betting Integrity Fees
Currently, only Tennessee and Illinois have mandated sportsbooks to pay integrity fees to major leagues. Other states have not pushed legislation for sports betting integrity fees and major leagues have been focusing more on curating deals with sportsbooks than pushing integrity fees. In support of integrity fees for legal NBA sportsbooks online, the NBA still has focused on the fan engagement side of sports betting rather than integrity fees. As more regulated sports betting states join in on the gambling markets, the conversation surrounding integrity fees will continue. For now, however, no other state has focused on the integrity fees side of things.
Why Integrity Fees Are Good
The argument in favor of integrity fees is that the product of major league sports will be protected with programs specifically designed to support the integrity of the sport. The leagues will use the extra funds to investigate games and sporting events to make sure that players, staff, coaches, and everyone surrounding the sporting event is not compromised by sports betting. There was an initial fear that sports betting would see an increase in point-shaving for those betting March Madness and/or college football. The integrity fees would fund efforts into having better control over negative factors created by legal sports betting.
Why Integrity Fees Are Bad
Sportsbooks are opposed to integrity fees due to the nature of the fees themselves. Essentially, sporting leagues would be getting paid without providing anything. While the leagues argue that since it is their products being wagered on, they deserve royalties from sportsbooks, sportsbooks argue that this is not needed. For one, leagues and sportsbooks already have multiple partnerships where leagues see millions annually from these deals. Sportsbooks use official league data, so they pay the leagues for this service. The integrity fees in this case would just be extra money sportsbooks would have to pay to leagues and is widely viewed as a cash grab. A potential repercussion of these fees would be seen in sports betting taxes, as there may come additional cost for simply placing a wager at regulated sportsbooks.
FAQs About Integrity Fees With Legalized Sports Betting
Which Leagues Would Get Integrity Fees?
It really depends on which leagues lobby for it and what the lawmakers end up passing. The NBA, NFL, NCAA, NHL, and MLB all have lobbied for integrity fees in the past. If lawmakers decided to legalize sports wagering and implement an integrity fee, it would all depend on which leagues the lawmakers decide to put down on the sports betting bill.
Would Integrity Fees Actually Work?
At the moment, it is hard to say. None of the states that have implemented sports wagering have actually included integrity fees. Integrity fees would allow sports leagues to monitor data within sportsbooks to find trends that could indicate match-fixing. But the regulation of sports betting in the US already shows the data that the leagues are looking for. The difference is that the leagues currently do not have the ability to access or profit from that data.
How Would Integrity Fee’s Affect Customers?
Sports bettors are likely going to be the ones who suffer the cost of integrity fees. Because the integrity fee would cut into profits for the sportsbooks, they would likely rely on customers to offset the cost of the integrity fees. That could mean increased prices or lower payouts for winners. Both could be harmful for the customers and the sportsbook in general and that is why no state has implemented integrity fees yet.
Why Are Many Professional And Collegiate Leagues Pushing For Integrity Fees?
When legal sports betting first became a blip on the radar, professional and collegiate sports were very much opposed to any involvement for the most part. They have since warmed up to the idea, so much so that they are now publicly speaking out in favor of an integrity fee being a part of legal sports betting laws. The reasoning behind wanting these fees added to sportsbook wagers is to have the additional funds needed to keep the integrity of their games intact. More money will be required by these organizations to educate their athletes and personnel on the sports betting industry and in helping with the compliance of all rules and regulations to maintain the integrity of the games when gambling has now become a legal component.