The 2020 legislative session in Missouri could be of historical importance for regulated gambling. Two new bills for sports betting have been pre-filed for the session, both of which include a provision for paying royalties to professional sporting leagues.
A provision for integrity fees
Sporting leagues have historically been opposed to the idea of legalized sports gambling. However, when PASPA was struck down, they started advocating for “integrity fees.” The leagues demanded a small percentage of the gross gaming revenue (GGR) by operators in the name of official data. However, to date, none of the 13 states that have operational sports betting markets have approved such a fee. Six other states alongside the District of Columbia have also approved sports betting in their respective markets but have made no provisions for an integrity fee.
However, lawmakers in Missouri are now trying to add integrity fees into their laws. The first bill, SB 567, was introduced by Republican Senator Denny Hoskins which allows a sports betting license to the 14 riverboat casinos in the state. It demands a licensing fee of $25,000 and an additional fee of $25,000 for partnering with a digital sportsbook. The bill suggests a 9% tax on the GGR of the operators. It also suggests a 0.25% royalty for pro sports leagues whenever punters bet on their game.
The second bill, SB 754, is filed by Republic Senator Tony Luetkemeyer which allowed riverboat casinos to obtain a license for $10,000 and an additional $10,000 for mobile operations. The bill will also introduce a tax of 6.25% on operator GGR along with a 0.75% royalty for the leagues.
Is an integrity fee worth it?
According to some experts, an integrity fee may seem small but could become a huge burden for gambling operators who are already working on slim margins. It would create a very cumbersome business model for gambling operators, which could make it extremely difficult for them to be profitable.
The state has four active professional sports franchise- St. Louis Blues for NHL, St. Louis Cardinals and Kansas City Royals in MLB and Kansas City Chiefs in NFL. With four major leagues, the operators may find it hard to sustain in the city. According to a study commissioned by the American Gaming Association (AGA) to Oxford Economics, the integrity fees is not a healthy addition to sports betting.
The study noted that the league fee is calculated on the betting handle and not on the actual revenue earned by the operators. Because of this, the fee is unsustainable and increased the effective tax rate by 16.7 percentage points.