Integrity is a buzzword you simply cannot escape in the burgeoning US sports betting industry as operators bid to turn wagering into a mainstream pursuit. Sports leagues like the NBA and MLB have long been steadfast in calling for the industry to pay them an integrity fee, which is essentially a euphemism for a cut of their profits. This week MGM chief executive Jim Murren said he likes the word integrity, but he finds the concept of an integrity fee “disturbing”. In Washington D.C. legislators just voted to axe a proposed integrity fee as they prepare to unleash sports betting in the nation’s capital.
Yet operators remain keen to prove their integrity, so they have teamed up to launch the Sports Wagering Integrity Monitoring Association. The list of members is a who’s who of industry titans: MGM, Caesars, William Hill, DraftKings, Paddy Power Betfair’s FanDuel, 888 Holdings, Bet365, Golden Nugget, Hard Rock International, Resorts Casino Hotel and Tropicana Atlantic City. SWIMA is a non-profit organisation and instead of a chief executive it will be led by a chief integrity officer. That man is George Rover, a former New Jersey assistant attorney general and gaming regulator, while MGM and Caesars each have a seat on the board.
SWIMA is modelled on ESSA, a European sports wagering watchdog, and it aims to pool resources and work together with the relevant authorities to stamp out any nefarious skulduggery from unsavoury forces. The American Gaming Association said SWIMA will uphold the industry’s integrity and cut out the need for heavy regulation. “The formation of SWIMA serves as another important milestone toward realising the benefits of a legal, regulated sports betting market in the US, which provides robust consumer protection, increased transparency and additional tax revenues for state and local governments,” said Sarah Slane, senior vice-president of public affairs. “The announcement comes at a critical time as dozens of states and sovereign tribal nations are poised to pursue legal sports betting in 2019.”
Washington D.C. One Step Closer
Legal sports betting is now up and running in Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania and Rhode Island, which have joined Nevada in authorising regulated sportsbooks since the Supreme Court struck down PASPA earlier this year. Meanwhile, tribal laws permit sports wagering at the Santa Ana Star Casino in New Mexico, and many states will soon join the party. West Virginia casinos are marketing their wares to Washington D. C. residents, and city councilman Jack Evans wants to put an end to that by rolling out sportsbooks in the American capital.
Evans was keen to introduce the integrity in order to benefit the major sports leagues, but his colleagues voted against it. The news represented another snub to the likes of the NBA, which claim the sportsbooks are cashing in on their intellectual property. The leagues were initially asking for 1% of total handle and it has been routinely rejected. Handle is not to be confused with revenue: the leagues wanted 1% of all the money wagered, not just what the sportsbooks won. The books typically hold onto around 5% of the money wagered, so the leagues were essentially trying to seize a fifth of their profits for doing no work.
The demands for 1% have since been dropped to 0.25%, but the leagues have had no luck. The D.C. council unanimously voted against a 0.25% integrity fee this week. “I actually want to see the removal of this royalty fee,” said councilmember Vincent Gray. “It’s called – depending upon who you talk to – an integrity fee, which seems to me ought to be inherent in these sports leagues’ operations anyway. And I’m assuming it is. So I just don’t understand why we have to invest another quarter per cent of the revenue from this which is not done anywhere else in America. This is not something I want to find a compromise on. I believe these sports leagues are very well heeled. They do very well.”
That sentiment is likely to be music to the ears of MGM supremo Mullen. He was in New York this week and he said he is “offended by the concept” of an integrity fee being included in the state’s sports wagering regulations as it moves towards a legal sports betting industry. “I like the word integrity, but I believe we are paying for that already, in the relationships we have, the money we are paying for data and the money we are paying for sponsorship,” he said.
NFL Profits and Virginia Verges on Legalization
He has a point: MGM has just struck a multimillion-dollar deal with MLB to become its official data partner, following identical deals with the NBA and NHL. A Nielsen study estimates that the NFL alone will benefit to the tune of $2.3 billion a year thanks to the advent of sports betting, as gaming operators spend more on advertising and sponsorship, while ticket sales, merchandise and media rights deals soar. “Legal, regulated sports betting will create huge new revenue opportunities for sports leagues – and the NFL could be the biggest winner of all,” said Slane at the AGA.
Recent developments have highlighted what a low margin business sports betting is, which is why the books are so keen to resist demands for these integrity fees. NFL bettors in the US have been having a great time of late, ensuring that the sportsbooks have made very small revenues. Nevada has just reported its October figures and sports betting revenue stood at $28.7 million, down from a record $56.3 million in September. The books did not fare too badly when it came to basketball, but on football they held just 3% of revenue, as a number of favourites won and popular teams performed well. That mirrored a trend seen in New Jersey and Mississippi, which both suffered badly due to NFL results in October as results largely went the bettors’ way.
Yet many states are still queuing up to launch sports wagering, safe in the knowledge that the house always wins in the long-term. One such state is Virginia, where Senator Mark Sickles has filed a bill to permit sports betting and “keep Virginia’s money in Virginia”. The state would charge $250,000 for licences and take a 15% revenue tax, which is very reasonable compared to the likes of Pennsylvania and Rhode Island. Right now legislators like Sickles are watching the state’s residents head to West Virginia in order to place bets, while the advent of sports wagering in Washington D.C. would exacerbate the issue. Many states are now faced with the same problem – the need to keep their residents’ money in the state – and that will inevitably cause sports betting to spread quickly across the country. All with a great deal of integrity, of course.
Kristian heads up the content and SEO team at Digital Fuel having worked in digital marketing for ten years. He’s as passionate about creative content as he is about Brighton & Hove Albion FC and when he’s not following football he’s writing about Brighton’s bustling pub scene