Governor Jim Justice says he would “absolutely” call a special session of the legislature to revise a sports betting law in West Virginia to consider an “integrity fee” to professional sports leagues if the U.S. Supreme Court clears the way for states to get in the sports gambling business.
The high court is expected to rule soon in a New Jersey case that could remove the federal restriction on state-run sports betting. The West Virginia Legislature approved sports betting during the just-completed session and Justice allowed the bill to become law without his signature.
Justice said on Talkline Monday that it was “a little inappropriate for me to sign it because the first thing everybody is going to say is, ‘Well, Justice has got a casino at the Greenbrier.’” Justice owns the Greenbrier Resort, which operates one of the five casinos in the state that would be eligible for sports betting.
Representatives of major sports have lobbied the Governor hard to consider imposing an “integrity fee” that would be paid to the leagues. Larry Puccio, who served as Justice’s campaign manager, has helped the pro sports representatives get meetings with Justice administration officials to make their argument on the fee and other issues.
Initially, the sports leagues wanted one percent of the total amount wagered. However, Justice says they have compromised downward. “They have come down from a one percent integrity fee all the way down to where they are willing to take a quarter of a percent,” Justice said.
The state Lottery Commission estimates about $1 billion in legalized sports betting in West Virginia the first year. At .25 percent, the state would pay $2.5 million to professional sports leagues.
Justice believes that’s a reasonable fee that would establish a relationship between the state and big time sports. Representatives of professional sports also argue that they have done months of research on how to effectively run a sports betting operation and they can help West Virginia avoid pitfalls associated with starting up a new enterprise.
“If we could bring in substantially more revenue if we partner with the major leagues, then absolutely I’m going to call a special session where we can really drill down deep enough to know if it’s a really good deal or not a good deal,” Justice said. However, he cautioned that there’s no point in having that session before the U.S. Supreme Court decision.
(Brad McElhinny has more here on the sports betting issue.)
It’s important to keep in mind that West Virginia does not stand to gain significant additional revenue from sports betting. Ninety-five percent of the amount wagered goes back to the betters in winnings. On $1 billion wagered, that leaves $50 million in adjusted gross.
Take out the considerable operating costs and the casinos’ share and the Lottery estimates the state would make only about $5 million the first year. The tight margins have sports betting experts warning against states imposing too heavy a tax burden.
A Massachusetts Gaming Commission report this month advised, “Understanding the economics of a sportsbook and the relatively small margins involved in their operation, taxes and fees should be carefully considered. The active black market operators pay no taxes and no regulatory fees so they already enjoy an advantage over any legal operator that would only be compounded by a high tax rate on legal operators.”
This is a critical component. Just because West Virginia, or any other state, legalizes sports betting does not mean everyone currently betting on sports in the black market will move to a legal operator.