MLB Commissioner Rob Manfred

How Much Is New York’s Proposed Sports Betting ’Integrity Fee’ Worth to Leagues?

By Brett Smiley | Published: March 8, 2018 at 9:35 am

On Wednesday, New York state senator John Bonacic introduced a New York sports betting bill (S 7900) that looks like a serious effort to advance legislation that would legalize sports wagering in New York. (Pending a change in federal law through Congress or through the repeal of the federal ban, PASPA, via Murphy v NCAA in the Supreme Court of the United States.)

We called the bill a “win” for the sports leagues. That’s because S7900 would give them some money as an “integrity fee,” which the NBA and MLB lobbyists, league officials and even commissioners have referred to as a royalty or intellectual property fee. But in light of reactions to this fee and a desired “monopoly” on sporting event data, getting some of their asks written into a serious piece of legislation is a win. Bonacic is chairman of the Senate’s Racing, Gaming and Wagering Commission and has the clout to move this bill along.

But let’s focus on this quasi- “Integrity Fee,” which would be one-quarter of one-percent of all wagers placed on games, capped at no more than 2% of an operator’s gross gaming revenue. This won’t be a windfall by any stretch. But let’s take a look at what it might be.

In a Recently Proposed New York Sports Betting Bill, The Capped ‘Integrity Fee’ Gives the Leagues Something, But Just How Much?

Here’s the breakdown for one for one month of prospective New York sports betting, making some assumptions/projections.

(1) Let’s says the total handle (volume of wagers) in New York in Month One of full-fledged sports betting is $500 million, which is about what Nevada has recently achieved recently. We can debate this number but let’s say it gets there as a by- product of a much larger population and the novelty of it.

(2) Let’s say that all the operators finish the month with a 5% hold (the amount the books keep after paying out winners). The operator revenue for this month is $25 million.

(3) At 0.25% for the “integrity fee,” that’s $1.25 million of the total handle for the leagues (to divvy up based on which wagers came on which leagues’ events). Not a ton of money considering Yankees relief pitcher Tommy Kahnle is earning $1.31 million in 2018.

(4) But the leagues would not get $1.25 million — because 2% of the $25M operator revenue (the cap) would be $500,000.

(5) So the leagues would come away with $500,000 in what’s a pretty good month for the books.

Clearly, this is not a windfall for the leagues. And that sum is directly tied to, and compensate leagues for, integrity monitoring services, investigations, even public relations efforts in connection with integrity issues.

So with this integrity clause, the lawmakers apparently seek to appease the leagues’ concerns over “risk” that legal wagering would pose to their games, as discussed at the January 24 hearing. (And by the way, this concern is a farce because they say illegal wagering is the greater risk).

Do the leagues really want the estimated $500K divided between them for integrity services? No. They do not. That’s roughly in the territory of Yankees backup catcher Erik Kratz, a lifetime Mendoza Line-ish .203 hitter.

While the leagues got other key concessions they want/wanted in this bill, with any fee they want a no-strings attached royalty with many more zeroes that. If the cut were 1 percent of all wagers with no limitation: based on the estimated $200 billion wagered illegally in the U.S. every year, the number would be $2 billion.

In just one year, that would be enough money to finance the to-be Las Vegas Raiders roughly $2 billion stadium in, yep, Nevada – the Mecca of Sports Wagering.