US Sports Betting

MLB Exec Thinks Sports Betting Integrity Fee is Only Fair

Baseball has been my favorite sport for my entire life. I lived and breathed it when I was a kid, dreaming about playing for my hometown Milwaukee Brewers. Needless to say, I’ve been having trouble concentrating on work today with the first game of the National League Championship Series coming up tonight; it’s just the third time in five decades that the Brewers have made it this far. But as much as I love the sport, I can’t help but be frustrated with Major League Baseball over the league’s insistence on getting a cut of legal sports betting revenue in the form of an integrity fee.

An integrity fee is simple: it’s just a fee that the leagues want state legislatures to impose on sports books (or have the sports books hand it over willingly) to funnel money from betting to the leagues. The leagues that have been the primary advocates of the fee – MLB, NBA, and the PGA Tour – claim that they need the dough in order to pay for the extra monitoring and what-not they say will be needed with expanding sports gambling in order to make sure the “integrity of the game” is not harmed.

As a few states have gotten their sports betting industries off the ground without the integrity fee, talk on the matter has died down a bit in the last few weeks. But according to a report this week on ESPN.com, a Major League Baseball representative drummed up the topic at a panel discussion at the Global Gaming Expo, held at the Sands Expo & Convention Center and The Venetian in Las Vegas.

MLB’s executive vice president of gaming Kenny Gersh said that the league is looking for a 0.25 percent fee. He explained the league’s side of things:

The state is going to designate these three, four, five very specific licensed entities: You guys get the right to make money from sports betting. From a fairness perspective we think, if you are going to designate someone to be able to make money off of what at the end of the day is our sport and our events because if the Yankees weren’t playing the Red Sox last night, you are not betting on the Yankees and the Red Sox … we think we should be involved in that.

An interesting take away from that quote is that he did not bring up “integrity,” saying rather that having the sports books pay a fee is just the fair thing to do. Perhaps MLB realizes that nobody took the integrity angle seriously?

Now, a quarter of a percent fee doesn’t sound like much, but considering the leagues have wanted the integrity fee to be based on the amount wagered on sporting events rather than the books’ net profit, it’s a big deal. The leagues had originally wanted one percent, which would have rendered sports betting virtually unprofitable. Taking the fee out of total wagers is a major chunk of change and with what is leftover, the firms still need to pay employees, income taxes, insurance, property taxes, building expenses, and more.

MLB and the other leagues are being disingenuous when they say that they need the money to help pay for monitoring to protect the integrity of the game because they should be, and likely are, doing this already. Sports betting has existed in a Las Vegas and in jurisdictions around the world for a long time now, not to mention in black markets. Legalization and regulation in the U.S. should theoretically be good for the leagues from a security standpoint, as it will allow for more transparency, tracking, and collaboration to detect and prevent funny business.

As far as “fairness” goes, there is nothing unfair about sports books making money off of the games. The leagues are in the business of running the games, the sports books are in the business of taking bets. What the leagues will not admit is that sports betting drives interest in their sports dramatically. Sure, there are millions of sports fans like me who watch the games because they enjoy sports and love their teams, but there are millions more around the world who couldn’t care less about the teams – or even the sport – and are just interested because they have money riding on the games.

Sports bettors at the very least create an increase in television viewership, resulting in more lucrative broadcast deals. Many people who only watch because they are betting on the games or have fantasy players involved eventually become fans, too, and end up watching more games, buying team gear, etc.

Without sports betting, the popularity of the professional sports leagues would be lower – and likely significantly so – than it is right now.

Sara Slane, senior vice president of public affairs of the American Gaming Association, made a great point during the panel discussion, saying:

I mean, look, you want a cut of the revenue without any of the risk that’s associated with it. That’s why we have to go through the regulatory process. We invest billions of dollars in buildings, in our licenses that cost us millions of dollars to go through. You want us to take that risk, pay you and then you are going to benefit on the back end as well….What you guys are proposing is not financially viable.

MLB wants to have their cake and eat it too. The gaming companies and state legislatures to this point are having nothing of it.

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