An integrity fee is a tax on legal sports betting. It goes to professional leagues or governing bodies of different sports. The fee basically transfers money from the sportsbooks to the leagues. The leagues argue that the fee helps to pay for better monitoring of legal sports betting. They first proposed the fee in Indiana in 2018.
What do leagues offer in exchange for an integrity fee?
The leagues began by asking for one percent of the total betting handle. This is equivalent to roughly 20% of the typical gross revenue for sportsbooks. They have now reduced the amount to 0.25%.
Professional leagues have started calling the integrity fee a “royalty”. They believe they deserve it because sportsbooks profit off their product, with games being the backbone of sports betting.
Lawmakers in states often see the integrity fee as just more money leaving the state. In 2018, sports betting became legal in New Jersey, and this did not include any payment for the leagues. New Jersey sportsbooks are flourishing today, with gamblers being able to make a wide variety of sports bets on games.
How much could leagues make from integrity fees?
The PGA Tour aligned with the sports leagues on sports betting regulations. Then the players’ unions for all four of the major sports leagues in the U.S. wanted to be part of the conversation. The term integrity fee was used constantly in the mainstream media. However, when the Supreme Court ruled in favor of New Jersey legalizing sports betting, it did so with or without any fee benefiting leagues.
None of the states that have passed sports betting laws have included integrity fees. The states resist the idea because they don’t see why they should enrich the leagues at the expense of using the money for the state. The leagues could make a great deal from such fees. Hundreds of millions of fees could go to the NFL as football betting is extremely popular.
Integrity in sports betting is a concern for everyone. The issue does deserve money and attention. However, there’s a distinction between paying a fee to ensure integrity in sports betting and the argument the leagues are using. They feel they should receive compensation for the risks and expenses created by betting and the commercial value the product creates for betting operators.
The downside of integrity fees
Taxing handle is not a good idea because it isn’t tied to revenue. The handle is the total amount people wager. Revenue is how much the sportsbooks hold from the total amount of the wagers. In many states, sports betting is a new industry, and a fee on top of the handle could just be too much.
The costs of sports betting in US could increase because sportsbooks that have to pay integrity fees could pass the costs on to consumers. This could make it difficult for legal books to compete with illegal offshore books. With a goal of moving betting to regulated markets, states will try to keep costs down, and integrity fees don’t do this.