NBA, sports betting industry at odds over 1% 'integrity fee'

By Dave Tuley  ( senior reporter) 

January 24, 2018 04:52 PM
While we wait for the Supreme Court’s decision in the New Jersey sports betting case on the federal level, the pro sports leagues and the gambling industry have been positioning themselves on the state level.
A huge confrontation took place Wednesday morning in New York as an NBA spokesman gave the league’s approval of the state’s sports betting bill but asked the N.Y. Senate Racing, Gaming and Wagering Committee to include a 1% “integrity fee” on all bets to go to the league.
This comes on the heels of Indiana’s House Bill 1325 having a similar 1% fee after receiving input from the pro leagues.
American Gaming Association President and CEO Geoff Freeman fired back with a press release Wednesday afternoon in which he lauded the NBA for supporting the New York bill, but quickly tried to shoot down talk of the integrity fee.
“We are pleased that the National Basketball Association (NBA) today joined with the gaming industry in support of vigorously regulated sports wagering,” Freeman’s release stated. “We can all agree that the 25-year ban on sports wagering has been a failure in every regard. Now, let’s get real about eliminating the illegal market, protecting consumers and determining the role of government – a role that most certainly does not include transferring money from bettors to multi-billion dollar sports leagues.”
Dan Spillane, an NBA senior vice president and assistant general counsel, spoke before the New York senate committee and gave five key components of the proposed legislation, four of which no one is likely to argue with: the legislation should enable the detection and prevention of improper conduct including cooperation between bet-takers and the leagues (which is already taking place); the leagues should have the right to ban certain bets that would be open to manipulation; there should be consumer protection requirements including age-restrictions, self-exclusion programs and other measures to address problem gambling; and allowing wagering on Internet and mobile platforms so consumers have less reason to bet illegally offshore or through other illegal channels.
But it was Spillane’s second point that’s drawing all the criticism.
“Second,” Spillane’s prepared statement read, "the legislation should recognize that sports leagues provide the foundation for sports betting while bearing the risks that sports betting imposes, even when regulated. Without our games and fans, there could be no sports betting. And if sports betting becomes legal in New York and other states, sports leagues will need to invest more in compliance and enforcement, including bet monitoring, investigations, and education.  To compensate leagues for the risk and expense created by betting and the commercial value our product creates for betting operators, we believe it is reasonable for operators to pay each league 1% of the total amount bet on its games.  This approach draws from how sports betting is legally regulated in some other international jurisdictions, like Australia and France.”
In addition to Freeman’s blanket statement about such an integrity fee, he also listed these “Facts on NBA Proposal to Skim Money from American Taxpayers”:
A legal Nevada sports book realizes 3.5-5 percent in revenue.
A 1 percent “integrity fee” on all money wagered legally by Americans, as proposed by the NBA, amounts to 20-29 percent of total revenue.
Money that leagues skim off the top decreases the total amount of money taxable by state/other governments. These dollars fund vital community services. 
Money that goes directly to the leagues distorts the odds that legal bookmakers are able to provide and encourages Americans to continue to operate criminally in the illegal market.
Americans are currently wagering approximately $150 billion illegally on sports annually. 
All leagues have retained outside resources to track betting activity in the current marketplace (legal and illegal).
A legal market in the United States is expected to process approximately $150 billion in wagers, or the same amount that the leagues are currently confronting.
The gaming industry also had an advocate in the hearing room in Joe Asher, CEO of William Hill U.S. Asher told the committee that a 1% tax on handle is really a 20% tax on revenue, the low end of Freeman’s estimate, and stressed that it would be much harder for legal books to offer fair odds and compete with offshore books and illegal bookmakers.
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