From Saturday morning’s editorial (“Get Integrity Plan in Place”) about West Virginia sports betting:
One defect in the Mountain State law is the absurdly low cut of proceeds from sports betting that will go to the state — a paltry 10 percent. Pennsylvania, one of the few other states with sports betting statutes in place, sets its rate at 36 percent.
Most states have set their rate at 10%. Nevada uses 5%. Pennsylvania is at 36%. The editorial writer (I presume it’s the editor, Mike Myer, since he has also dealt with this in his own columns) wants us to be like Pennsylvania.
Except that gamblers will not support it because, unlike slots and table games where the house’s take is hidden, sports wagering clearly posts it. In Nevada, the basic bet (for example, on the results of a match that has been made close to even by adding or subtracting points) is for the customer to bet $11 to win $10. My math indicates that West Virginia (with a slightly higher rate) will require $12 to win $10 and Pennsylvania will require $17.20.
Okay, let’s bet on a coin flip. We’ll both start with $100. Using Nevada's approach, you bet $11 and I’ll bet $10 and I’ll even let you call it. It will take a while at $11 a flip but I will eventually get all your money. With a fair coin toss, you can expect to lose $5 for every $100 that you bet and you'll approach $0 somewhere around your 200th bet given a normal distribution. Using West Virginia’s rate, it won’t take as long. With that same coin, you will likely lose $10 for every $100 that you bet and you'd be expected to get to zero around your 100th bet. In Pennsylvania, you are quickly doomed; you'll be bankrupt around your 30th bet. Most importantly, would anyone bet $17.20 to win $10 on anything that has only a 50% chance of winning? The editorial seems to think so but I think, with those odds, most bettors will pass and those who do play will quickly run out of money.
I’m not alone in my analysis and that’s what particularly bothers me – the editorial writer did no research. Here’s Thursday’s USA Today, for example, citing a casino official from Pennsylvania:
“We haven’t made a final determination on whether to pursue sports betting in Pennsylvania,” Jeff Morris, vice president of public affairs and government relations at Penn National Gaming, said in an email to USA TODAY Sports. “In addition to the high application and annual licensing fees, the challenge will be trying to make the 34% tax rate work – this would be the highest tax rate in the world on sports betting. For comparison, West Virginia recently passed a sports betting law at a 10% tax rate, which is the range most states are considering.”
And BillyPenn talked to a Philadelphia bookie who wasn't worried about Pennsylvania giving him competition:
“Thirty-six percent?!?! No way,” offered Jerry in Delco, a local bookmaker with a sparse-yet-dedicated client base. . . . "You can’t win if you’re giving away 36 percent of your money.”
If they keep their 36%, Pennsylvania is doomed – who’s going to play with those terrible odds? (My hunch is that they will go back to the legislature to significantly lower the rate -- making it close to West Virginia's 10%.)
Hey, but the Intelligencer, ignoring the math and the evidence, thinks WV should be closer to Pennsylvania's much higher rate.
Additionally, the editorial supports an integrity fee:
From a gambler’s standpoint, however, the worst failing in West Virginia’s law probably is the lack of reliable, timely verification. How will the sports books judge whether bettors win?
Not by links with professional sports leagues and the NCAA, as matters stand.
Professional sports leagues have sought a connection with betting. In exchange for a minimal integrity fee, they would provide honest, speedy information on what is happening in sporting events.
Again, did our writer do any research?
Nevada pays no such fees – they only pay for the information. Nor is it a part of any state legislation on the books. And is this a "minimal fee"? Hardly, as Joe Asher, CEO of William Hill, explains:
Along with taxes, another complicating factor is a 1% integrity fee the sports leagues are seeking in many states. That would come out of the “handle,” the total amount taken in by a sports book for a bet -- not on the revenues generated. No state has so far passed legislation that would include such a fee, although bills under consideration in Illinois, Kansas, Indiana and New York do include it.
“I’ve been trying to get the word out because 1% seems like a nice, small number,” Asher said. “Really, that 1% would equate to about 20% of the revenues.”
The end result could be that states seeking higher taxes and agreeing to integrity fees could end up with the same tax revenue on sports gambling as they had before the Supreme Court ruled: None.
But why have integrity fees become an issue in West Virginia? According to the editorial:
Last week, recognizing the importance of cooperation between sports organizations and the casinos, Gov. Jim Justice attempted but failed to broker an integrity fee agreement.
Justice, who owns The Greenbrier, has tried to stay out of the matter. He let the Legislature’s bill become law without his signature. Clearly, however, the governor understands the need for an integrity arrangement. It needs to be hammered out quickly — and it needs to be done by the Legislature.
The governor is pushing this? In seeking to placate the professional sports leagues who are pushing for the integrity fee, doesn’t Justice have a major conflict of interest? As WV Metro News points out:
His family owns The Greenbrier Resort, which has a casino. And the resort hosts West Virginia’s only major professional sporting event, The Greenbrier Classic PGA tournament, as well as practice visits by NFL and NBA teams.
For the average West Virginian, it might appear that the governor is trying to lure training camps and golf matches to his Greenbrier resort by pushing an integrity fee. For Ogden Newspapers, however, the term "conflict of interest" doesn't apply -- Jim Justice is a Republican.
For obvious reasons, this editorial has been included in the “worst editorial of the year” competition.