Leagues use comment to plug integrity fees

The Pennsylvania Gaming Control Board offered a public comment period on the law enabling sports betting in the state.

The board got an earful.

Pennsylvania’s sports betting law, passed late last year as part of a gaming expansion package, is viewed unworkable by many. From its $10 million license fee for sports betting to an effective 36 percent tax on revenues, stakeholders from the American Gaming Association to potential operators have said they cannot make money on sports betting—a business with a slim profit margin of around 4 percent—under the law’s scenario.

Penn National Gaming, the largest operator in the state, was among the first to log a public comment, estimating that it “could lose approximately 40 cents on every $100 wagered on sporting events” under the state’s tax regime. Penn National urged the board to look to the sports betting laws enacted by New Jersey (9 percent revenue tax) and West Virginia (10 percent) as models for taxation.

“The $10 million license fee and 36 percent tax rate established in the gaming expansion legislation are the highest in the world, and may make it impossible for a casino operator to make any return on its investment capital,” Penn wrote in its comment letter.

Penn also noted Nevada as a model, asking the board to grant preliminary approval to any sports-betting platform provider already approved in Nevada.

Other operators echoed the sentiment in their contributions to a total of 14 letters offering comment on the Pennsylvania law. Greenwood Gaming and Entertainment, owner of the Parx Casino, also lambasted the high cost of sports betting in the state.

The National Football League also was among the respondents to the call for comment that criticized the state’s high taxes and fees an unworkable, and not enough to allow legal operators to compete with illegal bookmakers. “We would like to share our concerns that the statutory operator licensing fees of $10 million and 34 percent tax rate on gaming revenue may render legal market participants unable to effectively compete with those in the illegal market,” wrote Jocelyn Moore, NFL senior vice president of public policy and government affairs.

Other responses from seven professional and college sports organizations concentrated on including provisions to protect the integrity of the games. Some, such as a letter from Pittsburgh Pirates President Frank Coonelly, made a plug for “integrity fees” for the leagues to be included in the bill—a request that drew scathing criticism from the local press in the midst of a mid-season Pirates collapse, blamed on a salary dump that included trading the former face of the franchise, Andrew McCutchen.

“What Coonelly asks, basically, is for the board to hand over an unspecified amount of money for generally unspecified reasons that can best be summarized as, well, the Pirates looking to get even richer off the locals,” wrote Dejan Kovacevic on the DK Pittsburgh Sports website. “They’re the best, these guys. Just the best.”

The two largest colleges in the state, Penn State University and the University of Pittsburgh, also responded to the comment opportunity, and put in a plug of their own for integrity fees.

“We are concerned that implementation is likely to have a negative effect on the integrity of college athletics and on the health, safety and welfare of Pitt’s students,” wrote Penn State President Eric J. Barron. “Students may be more inclined to participate in gambling activities, possibly to their detriment… Further, affected colleges and universities will have to confront issues they have not faced in the past. For example, there may now be obligations or pressures to disseminate information about student-athlete injuries or playing status, which would have to be balanced with student privacy expectations and interests.”

“Pitt will have to carefully coordinate its efforts with the NCAA and its athletics conference,” wrote University of Pittsburgh Director of Athletics Heather Lyke. “All of this will add considerable financial cost to Pitt’s operations. In light of that, appropriate impact fees should be paid to affected colleges.”

A joint letter from the NBA, Major League Baseball and the PGA Tour also addressed the need for an “integrity fee,” though it doesn’t specifically use the phrase.

“When it comes to maintaining the public’s trust in the integrity of professional sports, there is no room for error,” wrote NBA Commissioner Adam Silver. “The loss of confidence in sports and the sports betting market that would result from a sports betting scandal, would harm the sports leagues, the millions of sports fans in Pennsylvania, and, in the form of lost tax revenue, the state’s treasury.”

The letter goes on to outline the leagues’ three key “areas of concern:” transparency, accuracy and safety, including control of data used by sports books, which the letter calls “official league data,” as well as addressing the ability to restrict certain kinds of betting (i.e. in-game wagering), which the leagues view as “inherently riskier.”