Last updated on: September 11th, 2024
Integrity Fees For Legal Sportsbooks – Paying Sports Leagues For Betting
Major sports leagues like have come together to enforce sports betting Integrity Fees in legal sportsbooks. This would see sportsbooks pay pro leagues a percentage of their revenue. The league argues they are providing the product and thus should receive compensation. With integrity issues more present by the day, the fee would aid in monitoring betting irregularities. Sportsbooks oppose these fees, as most don’t have the extra revenue to spend. Additionally, sportsbooks partner with data providers and leagues paying to use official data. Since legal sports betting has grown, the integrity fees argument has also.
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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Even before the PASPA repealed, the NBA and the MLB were asking for integrity fees. But, the first mention of integrity fees was in Indiana HB 1325. Here, leagues were asking for 1% of the total betting handle from sportsbooks. In the years following, integrity fee requests lowered, with leagues asking for 0.25%. No conclusion has been set to this issue. But, legal sportsbooks continue to disagree on the need for integrity fees and don’t pay any.
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 pro leagues would be receiving payment without the need to provide any services. Essentially, they would receive payment 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. Outside of DraftKings and FanDuel, most wouldn’t even be able to survive by our estimates. While sports leagues have asked for less, a 1% tax could look something like this versus US sportsbooks’ revenue.
- In 2023, over $123 billion was bet on sports in the USA. If a 1% integrity fee was implemented federally, sportsbooks would have paid $1.2 billion to sports leagues. While that may not seem like much compared to the US betting handle, the revenue from sportsbooks in 2023 was $11 billion, before paying yearly taxes. After setting just the tax portion, sportsbooks made over $2.1 billion in 2023. This means the $1.2 billion paid to sports leagues would have represented over 56% of the sportsbooks’ revenue (with many expenses left to go: payroll, overhead, licensing fees, etc.)
How Integrity Fees Are Collected
No states with sports betting pay integrity fees. But, they would be similar to how sportsbooks pay state taxes. The difference is integrity fees are a percentage of the betting handle, not the revenue. Only Tennessee sportsbooks pay taxes based on their handle, which can be a major issue. If someone bet on the NFL and won, the sportsbook would still pay a percentage of the wager to the NFL, despite losing.
States That Pay Sports Betting Integrity Fees
No states passed a law requiring sportsbooks to pay integrity fees. But, Tennessee and Illinois are the closest, as they mandated sportsbooks to pay data fees on live betting odds. 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 oppose integrity fees due to the nature of the fees themselves. As the league searches for royalties from sportsbooks, they provide no added service. The integrity fees are extra money to pay on top of an industry that sees a total hold near 7%. Viewed as a cash grab, added fees to pay means the bettor loses in the end. This could result in worse odds, less sportsbooks bonuses, or fewer sportsbooks in general as they stay unable to turn a profit.
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.