1 percent of winnings equals 20 percent of revenues

By Hoppy Kercheval, WV Metronews

A meeting of representatives of the Justice administration and the state’s casinos planned for Thursday concerning the controversial integrity fee was postponed until early May. The governor’s office reportedly pushed back the meeting in hopes that higher level decision makers from the casinos would be present.

Justice and the casino operators are at odds over whether the state should pay an “integrity fee” to the sports leagues if West Virginia gets into the sports betting business.

The Legislature this year approved legalizing sports betting here if the U.S. Supreme Court strikes down a federal law prohibiting its expansion.

The West Virginia law does not include an “integrity fee.” However, Justice is open to the idea. He said last month on “Talkline” that he would “absolutely” call a special session to add the fee to the law if the U.S. Supreme Court clears the way for sports betting.

The leagues have proposed a fee of 1 percent on the handle, or total amount wagered. That doesn’t sound like an awful lot, but 95 percent of the amount bet is returned to gamblers in winnings, so 1 percent of the handle translates into 20 percent of the actual revenue.

That will cut into the bottom line of the casinos as well as the state. The Lottery Commission projects the state would make only $5 million the first year of operation, so it’s not a huge revenue generator.

Casino operators see sports betting as more of an additional amenity than a significant revenue source. They believe the margins are already going to be tight before the “integrity fee.”

Joe Asher, CEO of William Hill U.S. Race and Sports Book, one of the leading betting and gaming companies in the world, believes the fee is unnecessary.

“Nevada (which has legalized sports betting) doesn’t pay any fee to sports leagues,” he told me on “Talkline” on Wednesday. “There’s plenty of money for sports leagues in legalized sports betting, but an integrity fee or a method of diverting money from the taxpayers and shifting to sports leagues is not necessary.”

The fee is less about “integrity” than it is about data. Precise and real-time information is vital to sports betting, especially for in-game wagering. The sports leagues promise to provide that data in return for the fee. Gov. Jim Justice apparently believes that is part of the value of partnering with the leagues.

There’s also the possibility that the state/casinos would have to pay for the data as well as an integrity fee.

Justice, who owns the Greenbrier Resort, has a history of building relationships with professional sports. The Greenbrier has hosted NFL and NBA training camps. Of course, the Greenbrier also has a casino. (Justice said he allowed the sports betting bill to become law without his signature because of his conflict).

Asher says accurate data are critical, but he says that can be negotiated between companies that collect the game data and the companies that run sports betting. “That’s something that private parties should be able to negotiate amongst themselves.”

The casinos are in a tight spot. They want sports betting, but don’t believe they should have to pay the integrity fee. However, they also don’t want to push back too hard against the administration since they are regulated by the Lottery Commission.

Additionally, Justice would have to get the Legislature to approve the integrity fee, and lawmakers have already made it clear they don’t want to do that. They even shut the sports leagues out of discussions of the bill during the legislative session.

The new meeting is on May 9. Top officials from the three companies that own and operate four of the casinos in West Virginia — Delaware North (Wheeling Island and Mardi Gras), Penn National (Charles Town) and Eldorado Resorts (Mountaineer) — will gather for a presentation from professional sports representatives.

The pro sports reps will try to convince the casino operators that the integrity fee (and perhaps a fee for data as well) would be in the best interest of all involved. We’ll have to see how that goes.

Hoppy Kercheval is a MetroNews anchor and the longtime host of “Talkline.” Contact him at hoppy.kercheval@wvradio.com.

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