Integrity Fees – an Unnecessary Tax?

As Sports Betting continues to expand across the U.S., the proposed introduction of Integrity fees has been raising questions in the states looking to legalize sports gambling.

‘Integrity’ and ‘gambling’ were words we would have never expected to see together in the black market world we lived in just a year ago, but as the legalization of sports gambling becomes more widespread, the two have become inexorably linked in statehouses across the nation.

What are Integrity fees?

Integrity fees are a royalty fee that both the MLB and NBA are demanding from the industry. The leagues claim they should be included in all proposed sports betting legislation so they can utilize the funds towards comprehensive monitoring systems to ensure the outcomes of games played under their banner are free of any sports betting influence.

The Integrity fees are essentially another tax on legal sports betting, and would transfer money from sportsbooks directly to sport governing bodies.

States are free to regulate sports betting, and despite the leagues’ heavy lobbying efforts, states are passing sports betting laws that do not include integrity fees payable to sports entities. Whether or not Integrity fees are necessary depends on who you ask. It is important to note however, they are not necessary based on the Supreme Court ruling.

Handle vs. Revenue

Handle is the amount of money flowing through a sportsbook, in other words, the total amount wagered by bettors. Revenue would be the total amount sportsbooks hold out of the total amount wagered after operating expenses.

Are Integrity fees a good idea?

Although the leagues play no true direct functional role in the gambling industry, their demand indicates they believe they should be compensated for providing the product that bettors are attracted to in the first place. The product casinos and sportsbooks make money on. Call it an intellectual property fee or royalty, much like we see in music, the leagues or ‘creators’ want a piece of the pie to offset the costs of creation and the costs that come along with data monitoring and integrity protocols.

Are integrity fees a bad idea?

Integrity fees are essentially a tax. Some taxes are a ‘necessary evil’ that we all must abide by, but having to pay for them when they are not essential, for example – when they don’t fund roads, schools or essential services, might deter individuals from opting for legal gambling.

Taxing handle instead of revenue will allow for a large portion of the money wagered going to the leagues, which will lower the revenue states take in and make it more expensive for sportsbooks to operate. This, in turn, will make it more difficult for them to compete with offshore books that already serve U.S. customers illegally.

If the goal is to move all sports wagering to legal platforms and allow for states to truly reap the benefits of legalizing sports betting, then integrity fees may be a deterrent.

The outcomes will be determined state by state, and until we see more widespread decisions the debate will continue. Wherever you stand on this issue, make sure you’re taking advantage of all of the tools out there to make your betting experience the best yet, like online sportsbooks, betting payout cards, and betting data websites.

EML Payments has been working with sportsbooks in Australia and Europe for a number of years. We are excited to share the lessons learned with our new partners in the U.S. so they can offer their customers a better user experience and easier access to their winnings. To learn more about our gaming solutions, contact EML Payments.