Now that the United States Supreme Court has struck down the Professional and Amateur Sports Protection ACT (PASPA), a federal law that (with a few exceptions) prohibited state-authorized sports gambling, several states are lining up to enact legislation that allows sports wagering within their borders. And why not? There is huge money in sports betting. Last year, Nevada raked in nearly $5 billion in sports wagering. States like New Jersey, New York and others all want a piece of the action.
States are not alone in this regard. Sports leagues, many of which opposed efforts to get rid of PASPA, also have their hands out looking for a quick buck. Having sensed that they were losing the PASPA battle, the NBA, NFL, MLB and others came up with the ingenious idea that if the Court were to strike PASPA leagues could cash in on the new legal landscape by imposing “integrity fees” on those states that enact new gambling laws.
What are integrity fees? Some say it’s a nice way of saying “extortion.” The leagues and governing bodies say integrity fees are necessary to maintain the integrity and public confidence in their respective sports. The rationale goes like this: once states enact legislation, and the public begins placing sports bets in their state, leagues will have to develop comprehensive monitoring systems to ensure that games are being played on the up-and-up. Such monitoring systems will involve new hires, new offices, new technology and new systems, all of which costs money. To pay the cost of maintaining the integrity of the sport, the leagues need to impose an “integrity fee.” Pure genius.
What is the amount of the fee? Good question. Leagues are simply looking for 1% … of the handle, which is the amount of money in wagers accepted. Remember, Nevada took in nearly $5 billion in sports betting last year. A 1% integrity fee on that money is $50 million. So, let’s imagine states enact gambling legislation and handle grows to $100 billion (which some would say is extremely conservative), leagues and governing bodies could be looking at a cool $1 billion in new revenue.
Legal sportsbooks, law enforcement and state legislators view the integrity fee as a poorly camouflaged money grab and they’re in no rush to begin forking over cash to leagues that they believe did nothing to earn that kind of loot. So we shouldn’t be surprised to see some negotiation (can you say “lower percentages”?) or outright hostility to integrity fees.
Things are bound to get interesting. One thing is certain, while the Supreme Court has paved the way for the public to bet on games in states that choose to enact legislation, the highest wagers will be laid down in boardrooms and state capitols as leagues and lawmakers wage a fierce battle over a brand new pot of sports gold.