HomeThe ShuffleStates Push Back Against ‘Integrity Fees’

States Push Back Against ‘Integrity Fees’

Kentucky appears set to join West Virginia in rejecting any sports betting regulation scheme that carves out a piece of the action for the country’s major pro sports organizations.

The West Virginia Lottery Commission has approved permanent rules that don’t include the so-called “integrity fees”; while across the border in Kentucky, a joint House-Senate committee working on a bill to establish legal bookmaking in the Bluegrass State doesn’t contemplate them either.

Looking ahead to an expected wave of state legalizations, the NFL, NBA, Major League Baseball and the PGA Tour are shopping the idea to lawmakers and members of Congress that their game data is intellectual property which they own exclusively. Betting operators therefore should pay them for it—a royalty, of sorts, which essentially is what the fees are.

It’s a novel idea—considering that Nevada, which has been booking bets legally for more than 60 years, has never recognized any such obligation—and a controversial one, because bookmakers need the data to settle wagers, but they contend their business model is based on such narrow revenue margins, generally in the range of 5 percent, that they can’t afford to pay for it and still make a profit.

John Cavacini, president of the West Virginia Gaming and Racing Association, warned that casinos will consider taking legal action if any such fee is imposed.

“Emergency rules can only be amended to include the legislative intent of the statute that was put in place and passed by the legislature,” Cavacini said, according to the WVNews.com website. “The real argument is between the casinos and major league sports as to whether major league sports can charge us statutorily as a part of the rules and regulations, for information and data. But we don’t believe the emergency rules can contain anything in them that is not authorized with legislative intent when the bill passed.”

Lawmakers feel the same way. “The legislature clearly chose not to include integrity fees in the authorizing legislation or some of the other provisions you’ve mentioned,” said West Virginia Del. Paul Espinosa, according to the site.

“It’s absolutely the same as integrity fees,” added Cavacini. “It’s a money grab by major leagues ports to try to confiscate from casinos, or the state of West Virginia or somebody.”

Opponents of the fees also argue that the leagues don’t need the money because they’ll be raking in plenty of new revenues from a legal nationwide betting market in the form of expanded advertising and sponsorships and increased fan engagement resulting in greater demand for media rights and increased sales of tickets and merchandise. The American Gaming Association, the commercial casino industry’s federal lobbying arm, has released a study commissioned from Nielsen Sports that projects a $216 million revenue bump for the National Hockey League alone. For the NFL it could top $2 billion, according to an earlier Nielsen study also commissioned by the association.

In Kentucky, where legislation is expected to be introduced as soon as January, lobbyists are already tussling over the issue.

“The first words out of my mouth were ‘You’re not getting an integrity fee,’” state Rep. Alan Koenig, who chairs the joint committee, told Sports Handle, an internet handicapper. “Vegas has been taking sports bets since 1949 and they don’t pay an integrity fee, so does that mean that they were not on the up and up?”

In an interview with the Lexington Herald Leader, Rep. Jason Nemes, a member of the committee, echoed Koenig’s position. “If we provide sports leagues with that fee, what will Kentucky get in return? Can you say ‘nothing.’”

“They want a piece of the action, which means a piece of the money,” former Gov. Julian Carroll, a state senator and also a member of the committee, told Sports Handle. “The consensus of legislators is no way.”

The committee, which has met twice, is expected to take testimony again this Wednesday in what Koenig intends as an educational session for lawmakers.

No representatives from the major sports leagues have been invited, he said.

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