NEW JERSEY SPORTS BETTING BILL

New Jersey Sports Betting Bill Does Not Pay Minimal Integrity Fee to Leagues

As casinos, racetracks, card rooms, state legislatures, and sports fans around the United States wait for the U.S. Supreme Court’s decision on the Professional and Amateur Sports Protection Act of 1992 (PASPA), New Jersey is preparing itself. The state which is directly involved with the court case at hand has now seen a bill to legalize sports betting introduced in the state Assembly. And the bill looks like an elongated middle finger directed straight at the major U.S. sports leagues.

For eons, the major professional sports leagues in the U.S. – NBA, MLB, NFL, and NHL – as well as the NCAA have pretended they were against sports betting because it threatens the “integrity of the game.” And to be fair, there have been betting scandals where a player or referee took money to influence the outcome of a game. But realistically, such scandals are extremely rare and the leagues benefit greatly from gambling, as it generates interest in the sports.

In an effort to both keep up appearances and just simply grab money, the NBA and MLB have met with lawmakers in some states to pitch something called an “integrity fee,” a one percent fee on all wagers, with that money going to the leagues. One percent doesn’t sound like much, but when it is on total wagers, not on gross gaming revenue, it equates to a massive chunk of an operator’s profits. Professor I. Nelson Rose did the math on his blog back in January and determined that just a one percent integrity fee would take about a 25 percent bite out of an operator’s gaming profits, and that’s before all other operating expenses.

The American Gaming Association said of such integrity fees, “….handing sports leagues 20 percent of what’s left over after winnings are paid out, undercuts its economic viability. Doing so will ensure the illegal market continues to thrive in the state, and gut the tax revenues available to fund essential public services.”

So does the New Jersey sports betting bill include an integrity fee? Yes, but it’s not at all what the leagues want. Sections 10 and 11 of A3911 detail a “Sports Wagering Integrity Fund,” into which each operator in the state will an annual fee of the lesser of $7.5 million or 3 percent of sports wagering gross gaming revenue. That gross gaming revenue equals the total wagers accepted minus winnings paid out. In reality, the amount will be 3 percent, as it will require gross gaming revenue of $250 million for an operator to hit that $7.5 million threshold.

So there is an integrity fee and it’s not insanely punitive like the one the leagues want. On top of that, the money won’t go the leagues. According to Section 11.b of the bill, here’s what the Sports Wagering Integrity Fund is for:

Moneys deposited in the “Sports Wagering Integrity Fund” shall be used by the division and any other law enforcement agency delegated by the Attorney General to recoup the costs and expenses of any investigation regarding the integrity of sports events upon which wagers are placed through a New Jersey sports pool or online sports pool. Eligible expenses shall include, but not be limited to:

(1) integrity monitoring expenses;
(2) public relations expenses associated with integrity issues;
(3) personnel costs associated with the establishment of a sports wagering integrity unit within the division; and
(4) any other eligible expenses approved by the Attorney General.

There actually was an integrity fee of sorts in an early draft of the bill which read, “A sports governing body whose sports events are wagered upon in New Jersey casinos or racetracks may seek reimbursement for expenses incurred relative to ensuring the integrity of its sports events with respect to sports wagering operations in New Jersey by submitting a claim for such compensation to the Attorney General.”

While that would not have been good, at least it wouldn’t have been as bad as a one percent fee, as that would have just been another way for the leagues to profit and profit from doing literally nothing except existing. Fortunately, someone thought better of it and decided not to give the leagues anything. I imagine the conversation going something like this:

Assemblyperson A: “Ok, the draft is done. The leagues aren’t getting an integrity fee, exactly, but they can still get money from sports betting, so it’s a decent compromise.”

Assemblyperson B: “You know what? Don’t send it to the printer yet. I need to make a change.”

[furious typing]

Assemblyperson A: “Wait…you just added a real integrity fee, but it won’t go to the leagues?”

Assemblyperson B: [leaning back contentedly] “Yup.”

Assemblyperson A: “But they’re going to be pissed.”

Assemblyperson B: [puts on headphones and revs up Fortnite]

Now we just need to wait to see if the Supreme Court does its part.

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