Over the course of his 19-season Major League Baseball career, pitcher Al Leiter had a number of great performances. Leiter’s performance before the New Jersey State Legislature last month, where he used his time to fearmonger about the chances of athletes fixing games, will not be remembered so fondly.
Leiter spoke at a hearing on legislation to legalize sports wagering in New Jersey, following the state’s successful push to get the U.S. Supreme Court to strike down the Professional and Amateur Sports Protection Act, which prohibited sports gambling outside of Nevada. Leiter appeared on behalf of MLB, which was joined by the National Basketball Association and the Professional Golfers’ Association, to urge state lawmakers to consider adding an extra cost to each sports wager placed in the state that would be paid to the leagues. Without regard for the cynical irony, the leagues coined this proposal an “integrity fee.” The sports leagues argued that they need this additional money to increase monitoring to protect against cheating and game-fixing.
New Jersey Senate President Steve Sweeney (D) was not impressed with the leagues’ argument, calling the proposed fee an “extortion attempt.” Sweeney is right. This is nothing more than a poorly PR-disguised shakedown by leagues looking to get a piece of the action — this after spending millions of dollars over many years trying to defeat attempts to legalize sports gambling. If MLB, the National Football League, PGA, and other sports leagues are worried about the integrity of their product, there is no better way to improve it than by bringing sports gambling out of the shadows.
Less than 18 months after PASPA became the law, a point-shaving scandal rocked the Arizona State University men’s basketball program. Player Stevin (Hedake) Smith had gotten into $10,000 in debt to an illegal bookmaker on campus. In order to work off his debt, he agreed to enlist teammate Isaac Burton to help him make sure their team didn’t win by enough points to cover the point spread.
The fix successfully went on for a few games, before the people involved inevitably started bragging about it and tipping off more people to the opportunity to win big. The massive amount of action wagered legally with sportsbooks in Las Vegas set off alarm bells, because it turns out bookmakers don’t like taking action on a rigged outcome. Sportsbook operators informed the Federal Bureau of Investigation of the suspicious betting activity, which led to the arrest and prosecution of those involved in the scam.
Preventing Americans outside of Nevada from legally betting on sports did nothing to improve the integrity of sporting events. It only served to drive sports wagering money – estimated to be more than $10 billion in 2016 – to offshore operators that are illegally accepting wagers from customers in America. These illegal operators are not jumping at the chance to contact U.S. law enforcement officials to report suspicious gambling activity.
Aside from the intellectual dishonesty of claiming these fees are about safeguards, at face value, an integrity fee is no more than a tax on the “purchase” of a bet. And that is bad for both sportsbooks and bettors.
Sportsbooks are a business, and businesses are not in the habit of eating the cost of government-imposed fees. These fees will be passed onto bettors by increasing the “vig” or “juice” a sportsbook takes on each bet. For a standard wager, a bettor must bet $110 to win $100. The extra $10 is how a sportsbook turns a profit.
If states include an integrity fee, you can expect sportsbook operators to increase the vig on bets to cover the cost of the fee. In sum, the leagues’ proposed integrity fee is flatly anti-consumer, and book operators and casinos should work with consumer watchdogs and other public interest organizations to shine a light on these hijinks.
Integrity fees will not only add an extra cost to customers who choose to gamble legally, it may also open an opportunity for offshore operators to lower their vig to entice bettors to resist betting at new legal sportsbooks run by American companies. This would defeat the entire purpose of expanding sports gambling beyond Nevada and should draw the ire of the powerful business lobby in Washington, D.C. and in state capitals nationwide.
A better solution is for sports leagues to make sponsorship deals with sportsbook operators like they did with daily fantasy sports sites like DraftKings Inc. Sportsbooks could pay to have signage in stadiums or make deals to be the exclusive sportsbook of a certain team or league, making it the only site you could use to wager in that stadium or arena.
There are plenty of creative ways sports leagues could get their cut of the action without placing burdensome fees on sportsbooks and bettors. And more importantly, such a position would foster a public policy environment where new laws are driven more by facts than fear.
On June 11, New Jersey Gov. Phil Murphy signed the state’s sports betting bill into law without an integrity fee. This is good news for bettors in New Jersey, and the rest of the country should follow the Garden State’s lead. Of course, establishing the fairest system for both operators and consumers may rely on a concerted effort to expose the sports leagues’ dubious public and government relations tactics.
Aaron Saunders is the CEO of Drumfire Public Affairs in Washington D.C., and in his free time, he writes about a number of sports-related topics, including sports controversies, wagering and analytics.
Rob Sawicki is a speechwriter and media consultant for Drumfire Public Affairs.
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