A closer look at the “Integrity fee” in the US

The ‘’integrity fee’’ problem arose after the US Supreme Court instituted the long-awaited law on legal sports betting in all American states and voted against PASPA (Professional and Amateur Sports Protection Act). The Supreme Court thus enabled all states to decide on their own whether they wanted to make sports betting legal or not – so African Betting Guide has taken a closer look at what’s going on in the US right now.

This decision will have a significant financial and economic impact on both the sports and the betting industries, and some reports indicate that sports betting is expected to contribute $22.4 billion to the US GDP.

Professional sports leagues, led by the NBA and MLB, have recognized the financial potential of sports betting and are claiming that their product is their intellectual property and that they should be compensated by sports betting operators.

They want 1% of the total amount of wagers on sports leagues, which would be paid to each league individually. They call this compensation the “integrity fee.” The integrity fee is basically the sports leagues’ way of saying we want a piece of the pie.

Here is what Adam Silver, the Commissioner of the NBA, had to say on the matter:

“I know all the leagues support this position, but in the case of the NBA, we’ll spend roughly $7.5 billion creating NBA basketball this season. And to the extent that product is then used for casinos, betting parlors to make money on, we feel, just in the same way a musician that receives a royalty for the music that’s being played, that we should receive some sort of royalty.”

Of course, this proposition didn’t go over that well with the betting operators. Because pro leagues want 1% of the total wagers, not the total revenue, the operators argue that they would give up 20% of their profit, since a bookmaker’s profit is around 5% of the total wager amount. The amount of money that would be given to the professional leagues if the fee comes into play could surpass $2 billion.

There are federal and state tax obligations each betting operator has to pay, and states would likely have to lower their tax rate to make room for leagues to get their cut, which further complicates the issue.

Squeezing betting operators for the 1% fee would be felt most by the users because the price of bets would go up. If prices go up, many consumers may turn to black market sports betting operators, making the integrity fee do the opposite of what it’s supposed to do. That’s why some states simply ignored the integrity fee request and passed the legislation without it.

It’s a complicated problem that currently doesn’t have a solution, and both sides have a point in the case. Also, considering each state can decide on its own, it’s hard to make a decision that would please all sides.

A solution may be copied from the English Premier League, who gets paid data rights from the sports betting operators, who use the data to set up the betting odds. US pro leagues have a similar deal with FanDuel and DraftKings, daily fantasy sports operators, who pay a fee to use data from the US professional leagues.

It remains to be seen what will happen with the ‘’integrity fee’’ problem and what solution will work best.

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