The integrity fee made it in, but it might not stay there

Bill Sponsor Calls Integrity Fee ‘Moving Part’ In NY Sports Betting Legislation

Integrity fee

New York Senator Joseph Addabbo, Jr., told Legal Sports Report he isn’t sold on including a royalty or integrity fee to sports league in legislation, though the sports betting bill he introduced this month includes one.

Addabbo took over from retired Sen. John Bonacic as chair of the Senate Racing, Gaming and Wagering Committee, and he pre-filed the bill Bonacic pushed at the end of last session as S 17. That bill requires casinos to pay 0.2 percent of handle to the state, to be disbursed to the relevant sports governing bodies.

“I introduced the Bonacic bill as it is without delving into changes I may want to do,” Addabbo said. “The integrity fee – sports entities do not get it in Nevada, don’t get in New Jersey, and they’re looking toward our state. It’s one of the moving parts we will have to discuss.”

History of the integrity fee

The NBA and Major League Baseball began pushing for an integrity fee early last year in Indiana. The NBA then went to New York and asked the state Senate for a 1 percent integrity fee from handle.

Bonacic obliged, including the 1 percent to leagues in the sports betting bill he introduced last year following the PASPA decision.

There was immediate public and industry pushback on the league needing to protect its integrity from regulating an activity that already is widespread.

As other states such as New Jersey, Pennsylvania, West Virginia and Rhode Island rejected an integrity fee, making it happen in influential New York became paramount for leagues to turn the tide and establish a precedent.

NY is leagues’ best hope for integrity fee

At the end of the New York legislative session in June came the best chance for leagues to get a cut of sports betting in a bill.

Given the resistance to an integrity fee, including from New York Assemblyman Gary Pretlow, the NBA changed the terminology and structure of its ask to a royalty for profits generated by sports betting on its games.

When Pretlow introduced the Assembly sports betting bill, he included 0.25 percent of handle as a royalty to leagues, a big drop from the 1 percent tax on handle that industry representatives contend equates to approximately 20 percent of operator revenue. It was lowered to 0.2 percent in the final push.

Pretlow told Legal Sports Report that he will include the royalty in the Assembly bill he introduces this session, but Addabbo isn’t convinced that New York should be giving the leagues a cut that they aren’t getting elsewhere.

“I’m a sports fan, especially a baseball fan, and I want to protect the integrity of sports as well,” Addabbo said. “But we seem to be protecting their integrity so far in Nevada and New Jersey without an integrity fee. That should be a good litmus test of sports betting interacting with our leagues.”

Fee failing elsewhere

State-regulated sports betting industries are currently operating in seven states without providing the leagues an integrity fee or royalty.

In addition to New York’s legislation, Kansas, Massachusetts and Missouri still have such fees in active sports betting bills.

However, momentum for the fees isn’t positive. The District of Columbia Council removed a royalty fee from a bill signed by the mayor last week. New York doing the same could be the death knell for the integrity fee.

Even if New York keeps the integrity fee in legislation, it appears that Gov. Andrew Cuomo would veto any bill to include mobile gaming without a constitutional amendment, which is a three-year process.

The only sports betting happening in New York anytime soon could be at the upstate commercial and tribal casinos. Draft rules and regulations obtained by Legal Sports Report ahead of today’s New York State Gaming Commission meeting do not include a royalty.

Matthew Kredell
- Matthew began writing about legislative efforts to regulate online poker in 2007 after UIGEA interfered with his hobby of playing small-stakes online poker while working as a sportswriter at the Los Angeles Daily News. Covering the topic for Bluff Magazine, PokerNews and now Online Poker Report, he has interviewed four U.S. Congressmen and 20+ state legislators. His poker writing has been cited by The Atlantic, Politico.com and CNN.com. A freelance writer based in Los Angeles, Matt has written on a variety of topics for Playboy Magazine, Men's Journal, Los Angeles magazine, LA Weekly and ESPN.com.
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