It looked like integrity fees were dead. But like The Undertaker from a coffin, the concept of integrity fees have risen from the grave in the sports betting bills from Missouri.
None of the states that have legalized sports betting yet have agreed to integrity fees. Missouri would be the first to implement such. In mirror bills from the Missouri House and Senate, both HB 119 and SB 44 include integrity fees, indicating that it will be happening.
So what are integrity fees? The basic concept is that states will take a small portion of money wagered in sports betting and give it back to the leagues in which the money is being bet on. It’s bounced back and forth between being a fee on revenue and handle overall.
In the case of Missouri, the tax is set to be levied on the overall handle of various leagues. It changes depending on which league one is betting on and where the money goes. In the bill, it’s referred to simply as a commission, but the concept remains the same. The breakdown is as follows:
Beyond that, the overall tax proposed in Missouri would be 6.25% would fall on the overall revenue of sports betting, which would go to the “Gaming Proceeds for Education Fund.” Administrative fees from initial licensing and renewal would go to a new fund, the “Sports Wagering Fund.”
Until now, integrity fees have not caught on in the slightest. While they were a major theme back when sports betting originally, New Jersey rejected the idea and the idea of integrity fees quickly faded into the background.
The biggest sticking point for a lot of places was the fact that integrity fees are little more than giving the leagues a piece of the action, which could have the opposite effect of making sure leagues maintain integrity. Especially how Missouri has things set, leagues make more when betting is heavier.
Leagues stand to make more money on more intriguing matchups, especially during the playoffs. The NBA scandal revolving around Tim Donaghy highlighted how one rogue referee could affect a game. It’s not comforting thinking what could happen if an entire league conspires.
Beyond that, advocates of sports betting and sportsbooks themselves are generally not fans of giving out money for free. While sportsbooks might accept giving out a percentage of wagers for taxes, a percentage of the handle is far different.
For those unfamiliar, a company is in no way guaranteed a handle on a game, because a portion of the bets will be given as payouts to betting winners. Even assuming betting is dead even on both sides with an identical payout, a 0.75% tax on the handle is closer to a 1.5% tax on revenue.