Did New Jersey State Lawmakers Initiate Integrity Fee?

As the Murphy vs NCAA case awaits a Supreme Court decision, pro leagues have been busy lobbying for sports betting legislation on their own terms. Though state legislators and casino operators have been staunchly against an “integrity fee” proposed by the leagues, it may have been New Jersey lawmakers that suggested the idea in the first place.

What Is An Integrity Fee?

An integrity fee is a percentage of the money wagered on sporting events that would go the pro leagues. The NBA and MLB have been floating around “model legislation” that requires a one percent integrity fee to be paid at least once a quarter, which is estimated to be about 20% of an operators’ revenue.

Leagues argue that integrity fees will cover the costs of data monitoring and implementing new safety protocols, however, many proponents of legal sports betting believe that the tax is excessive.

“We can all agree that the 25-year ban on sports wagering has been a failure in every regard," said AGA President and CEO Geoff Freeman.

"Now, let’s get real about eliminating the illegal market, protecting consumers and determining the role of government – a role that most certainly does not include transferring money from bettors to multi-billion dollar sports leagues."

The AGA also expressed that the tax could cause legal bookmakers to offer less attractive odds, driving Americans to continue to use offshore online sportsbooks such as BetOnline.

The New Jersey Memo

While it has been assumed that the integrity fee was the brainchild of the NBA, it turns out that the concept may have originated with two NJ officials.

In a story released by NJ.com in 2014, former state Senator Jim Whelan and current Assemblyman Vincent Mazzeo suggested that the major sports leagues receive some sort of compensation.

An excerpt from the memo reads the following:

“While we strongly support the legalization of sports betting in New Jersey and the economic benefits it will bring to Atlantic City, we are cognizant that sports leagues like the NBA need the necessary resources to protect the integrity and fairness of games,” wrote Whelan and Mazzeo.

“This could be a national model for sports betting. Given your openness to sports betting, we hope that the NBA and other sports leagues can come to an agreement with casino and racetrack operators on the collection and distribution of this surcharge.”

The memo came after NBA Commissioner Adam Silver released one of several statements regarding the inevitably of regulated sports betting in the United States.

Though Whelan and Mazzeo did recommend the surcharge for the leagues, their proposal was for 0.25 percent – not the one percent that the NBA and MLB are using in their model.

Will States Have To Give Leagues A Cut?

There is no inclination that states will have to provide a one percent tax should the Supreme Court lift the federal ban on sports betting. At this point, it seems as if the leagues are trying to maintain some sort of leverage out of fear of the Court ruling in New Jersey’s favor.

Some states, such as Kansas and Indiana, have introduced sports betting legislation that does include the one percent fee. Others, like New York, have proposed terms with a lesser tax going to the pro leagues. West Virginia passed S 415 without the inclusion of any integrity fee, and Connecticut has also vocalized their intention to do the same.

The leagues most recently took their lobbying efforts to New Jersey, which seems odd considering that the MLB, NBA, NHL, and NCAA are litigants in the sports betting case to prevent the state from legalizing sports betting in New Jersey.

With six years and millions of dollars in legal costs, it seems unlikely that NJ would all of a sudden fold and meet the demands of the opposing parties.

The decision on the New Jersey sports betting case is expected within the next two months, with the announcement to be potentially made on any of the following dates:

• April 30
• May 14, 21, or 29
• June 4, 11, 18, or 25

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