The NBA's "Integrity Fee" is Ridiculous, But Not Unprecedented (Pt I)
May 7, 2018
The NBA's Proposed Fee Shows How Little the League Knows About the Legal Sports Betting Industry
In the near future, it’s likely that the U.S. Supreme Court will overturn the Professional and Amateur Sports Protection Act (PASPA). States will then have the right to legalize sports betting within their borders.
In fact, several states have already begun drafting proposals in advance of the Supreme Court’s decision. However, the NBA’s proposed “Integrity Fee” will probably be the main obstacle towards progress with legalization and regulation.
Indiana was the first state to draft a bill that would give 1% of every bet in their state to each respective sports league. This idea came from the NBA and MLB with the argument that an expanded legal sports gambling market will increase their costs associated with monitoring that activity.
In fairness, the sports leagues will need to spend more money on gambling-related staffing if more states legalize sports betting. However, those costs will be minimal in comparison to the profits generated from increased interest as result of legalized gambling. After all, Adam Silver has openly acknowledged
that legalization will definitely benefit his industry.
Simply put, the NBA’s lobbying demands are outrageous. The sports leagues don’t charge licensing fees for accepting wagers on their games. Therefore, there’s no reason to believe that the sports leagues have any legal leverage to negotiate for an Integrity Fee.
Also, a 1% fee may sound inconsequential because many people assume that it’s based on a sportsbook’s revenues or “hold.” Instead, the fee would be based on the total dollar amount of accepted wagers, i.e. a sportsbook’s “handle.”
Sportsbooks have a statistical advantage over the bettors, but the house is not guaranteed a profit. Sports gambling is a low-profit industry. Over the last 23 years, Nevada casinos have earned a “ hold
” of 4.78%. That hold percentage seems to be declining as bettors are becoming more educated about the industry. Regardless, a 1% Integrity Fee would take roughly 21% of the casinos’ sports betting revenues.
Jay Kornegay, the Director of the Westgate Las Vegas SuperBook, points out that the Integrity Fee doesn’t include the federal excise tax of 0.25% on the handle or Nevada’s 6.75% tax on the hold. Kornegay also estimates that the sportsbook’s operating costs take away roughly 60% of the revenue. Furthermore, the gaming taxes in Nevada are much lower than several other states.
Needless to say, if states pass sport gambling bills that include this Integrity Fee, it will be highly counterproductive. To compensate for the cost, legal sportsbooks may need to charge a higher “vig” or commission than illegal bookmakers. Also, those costs will deter many reputable casino operators from offering sports wagering. Therefore, only a small percentage of the existing black market will shift into the legal/regulated market.
Although the NBA and MLB are presenting this as a “fee,” this is essentially a tax that benefits private companies; it’s the perfect example of crony capitalism. Our country can learn lessons by reviewing its history with over-taxing the gambling industry. In 1951, Congress placed an excise tax of 10% on every sports wager. This was a recommendation from the Kefauver Committee that investigated organized crime.
At that time, the most popular sport for gambling was horse racing, which has a higher profit margin for the sportsbook than most traditional sports. Nonetheless, the 10% excise tax killed the legal betting market.
However, the demand for sports betting remained undeterred. Nevada hosted several sports-betting-only-facilities that were not operated by casinos. These “turf clubs” were unregulated and notorious for tax dodging. The Vegas bookmaking veteran, Jimmy Vaccaro, explained the simplicity of the scam in Art Manteris’ book, “Super Bookie.” Bookmakers and bettors often had handshake agreements to write betting tickets for small fractions of the actual wager.
Ultimately, this naïve recommendation from the Kefauver Committee resulted in a worst-case scenario. There was very little tax revenue for the government and far less transparency to root out corruption. (Decades later, Congress reduced the federal excise tax to the current 0.25% level, which is four times less than the proposed Integrity Fee from the sports leagues.)
All in all, there are many disturbing aspects to the Integrity Fee. Worst of all, it subtly negates the direct role that sportsbooks play in upholding the integrity of the game. The sports gambling industry has already absorbed the operating costs for upholding integrity. After all, a bookmaker has a vested interest to not accept bets from someone who is fixing games.
Sportsbooks are key allies to the sports leagues for detecting suspicious betting patterns. Case in point, the aforementioned Jimmy Vaccaro contacted the proper authorities in 1994 when he was the Director of the Mirage’s Sportsbook. He witnessed an unusual amount of money
bet against Arizona State, among other red flags. In the end, Vaccaro’s information eventually led to criminal charges and discovery of a major point-shaving scandal.
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That is only one of several examples in which bookmakers have acted as unofficial partners with the sports leagues. However, Nevada represents roughly 3%
of the actual betting market in this country. In other words, there stands to be far more transparency for discovering more examples of point-shaving if PASPA is overturned, thus improving sports integrity.
The question of how to properly regulate, tax, and ensure game integrity in an expanded sports betting industry represents uncharted waters in the United States. Thankfully, the international community provides several examples with blueprints for the future.
In fact, proper sports integrity regulation is conducted for only a small fraction of the price demanded by the NBA and that will be detailed fully in Part II.
Statistics, Charts, and Maps Illustrating the Murders Tied to the War on Drugs
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The US government wants to apply pressure to Horacio Cartes now that he is out of office.
The key suspects accused of organizing the assassination of Jovenal Moise had ties to the US intelligence community.
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America is using the types of strong-arm tactics that the Chinese government uses on a regular basis.
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A lengthy history of Epstein's crimes, evidence of connections with the intelligence community, and protection from the US government.
For the last two decades, while U.S. forces occupied the country, Afghanistan has been the epicenter of the world’s opium production with roughly 90% of global supply. After American troops withdrew from the country, and with the Taliban in charge, Afghan opium production drastically declined. There were an estimated 6,200 tons produced in 2022, as opposed to 333 tons in 2023, according to the United Nations Office on Drugs and Crime (UNODC). That may surprise some readers as the Taliban have been credibly linked with the heroin trade. The UNODC estimated in 2009 that the Taliban generated $155 million per year from Afghan opium. They weren’t traffickers but they forced traffickers and farmers to pay a “tax” in their territories. Even though those were handsome profits, the Taliban were relatively a minor part of a massive black market worth then roughly $3 billion annually. History shows that the Taliban’s policy on opium has shifted from time to time depending upon their circumstances. An opium ban in Afghanistan seems to fall in line with the Taliban’s tyrannical fundamentalist Islamic modus operandi. However, it also benefits those in power. Several Afghan warlords derive much of their authority as a result from black market profits. Hence, whoever controls the opium trade, or lack thereof, in Afghanistan holds all the cards in a country where the average annual income is 378 US dollars. After the Taliban gained control of Afghanistan in 1996, they struggled to find international recognition. Therefore, the Taliban killed two birds with one stone when its former leader, Mullah Omar, issued an opium ban in July of 2000. That edict was beyond effective. According to UNODC estimates, Afghan opium production dropped from 3,276 tons in 2000 to 185 tons in 2001. The U.S. State Department even approved $43 million of humanitarian assistance for the Afghanistan government just months before 9/11 due to its strong counternarcotics efforts. After 9/11, the Taliban’s power decreased but didn’t cease. America installed a deeply corrupt transitional government. In turn, opium production escalated exponentially. America sided with militias entrenched in the opium trade who opposed the Taliban, such as the Northern Alliance. But, the Western media has only reported in drips and drabs about the U.S.-allied politicians/warlords who have been far more prominently involved in heroin trafficking. The corruption ran to the top. There are too many flagrant examples to list concisely, but notably, a man carrying 183 kilos of heroin was released by the police because he was carrying a signed letter of protection from Afghanistan’s drug czar, General Mohammad Daud Daud. Wikileaks revealed that former President Hamid Karzai once pardoned five police officers who were captured with 124 kilos of heroin. Even Hamid Karzai’s half-brother, Ahmed Wali Karzai, was a known drug smuggler who had been on the CIA payroll for years. Practically the entire Karzai administration was on the CIA’s payroll all while the agency knew these officials were drowning in drug money.
The long-lasting effects of the Cold War and the War on Terror has fueled rampant global violence.