Integrity Fees in Sports Betting Markets.

Abstract

Sports leagues have requested state legislatures to pass so-called integrity fees or taxes on the entire amount bet on their games, ostensibly to provide resources to protect against game fixing and other corrupt behavior. These fees might just augment league revenues. Integrity fees have different consequences if they are placed on a sports book's handle or hold. We model one possible consequence of an integrity fee placed on the handle, that sports books might be motivated to avoid pushes, after which they have no hold but face a tax liability. One approach moves to half-point lines which eliminate pushes but might be second best in terms of betting market efficiency. As a case study, we describe the characteristics of recent betting lines in four North American sports. Based on predicted pushes, actual pushes, half-point lines, and the intertemporal correlation between the annual number of pushes and the annual number of half-point lines, it appears that sports books already actively set lines that avoid pushes and could easily adjust to half-point lines motivated by integrity fees.