Underdog Sports Backs GRIT Act That American Gaming Association Opposes

Underdog Sports

Underdog Sports made news last week when one of its top executives publicly expressed support for a bill in Congress that would dedicate a share of the federal excise tax placed on sports bets toward problem gambling treatment and research. The gaming industry’s leading trade group opposes that measure.

It’s believed Underdog Sports, a Brooklyn-based fantasy sports operator, is the first gaming company to back the Gaming addiction Recovery, Investment and Treatment (GRIT) Act. U.S. Rep. Andrea Salinas, D-Oregon, and U.S. Sen. Richard Blumenthal, D-Connecticut, filed the proposal in their respective chambers last month. Their proposal would take half of the 0.25% levy that the federal government charges on each legal online sports betting wager placed in the U.S. and use it to award grants to states and nonprofits involved in addiction prevention and treatment.

“There is a need for dedicated federal resources to aid problem gambling prevention, research, and treatment,” said Adam Warrington, Underdog’s vice president for responsible gaming, in a statement sent to several outlets, including U.S. Betting Report. “The GRIT Act would direct existing tax dollars paid by legal operators to be utilized to fill the current funding gap. As there are currently no federal funds allocated for problem gambling, we at Underdog support directing existing tax dollars as online sports gaming and wagering grows in the United States.”

Underdog Launching Sportsbook In March

Underdog’s endorsement comes as the company prepares to debut next month as a sports betting operator in North Carolina, where legal sports betting apps are launching on March 11.

Underdog was created nearly four years ago. Co-CEO Jeremy Levine founded the company to develop and offer innovative fantasy contests on the Underdog Fantasy website. Levine has more than 15 years of experience in fantasy sports, with the previous companies he started being acquired by DraftKings and Paddy Power Betfair (now known as Flutter Entertainment).

Last October, Levine announced Underdog would fund a $1 million effort to invest in new companies that propose innovative ways to help people practice responsible gambling. The initiative, called GuardDog, also offers connections to advisors who have worked in the industry or served as gaming regulators.

Council Hopes Others Follow Underdog Sports Lead

Many groups and advocates dedicated to raising awareness of problem gambling issues, and providing support and treatment for those with addictions, have come out in support of the measure.

“We appreciate Underdog Sports being an industry leader and coming out in support of the GRIT Act and hope to see others in the industry follow suit,” said Cole Wogoman, the National Council on Problem Gambling’s senior manager of government affairs and league partnerships. “The federal excise tax is projected to bring in $250 million this year in federal tax revenue, and as things stand, none of that money would go towards prevention, research, or treatment of gambling addiction. The GRIT Act would change that.”

AGA Opposes GRIT Act Proposal

On the other side of the issue is the American Gaming Association. The AGA has been an ardent proponent of doing away with the tax altogether. In a statement, the AGA calls it an “antiquated policy” that puts licensed operators at a disadvantage against offshore and illegal operators that do not pay the tax.

Congress enacted the excise tax in 1954, and for more than 40 years, the rate has stayed the same – operators pay a quarter for every $100 in wagers they accept. In addition, the federal government assesses a $50 occupational tax yearly on any employee who accepts wagers.

Chris Cylke, the AGA’s senior vice president of government relations, told U.S. Betting Report in a statement that there never has been more awareness of, or money directed toward, problem gambling issues as there is now. He adds that nearly all of the funding used to pay for that comes from taxes on brick-and-mortar casinos, sportsbooks and online gaming operators.

“We look forward to working with Sen. Blumenthal, Rep. Salinas and other stakeholders to combat illegal gambling and address problem gambling in ways that do not further enshrine bad tax policy and give criminals a leg up,” Cylke said.

DFS Single-Player Fantasy Games Under Review

While it seeks to promote responsible gambling practices, Underdog has its share of critics, including online sports betting operators such as FanDuel Sportsbook and its primary rival, DraftKings. Those companies have raised concerns about the single-player proposition pick ‘em contests that Underdog and others offer across the country.

Some states have drafted gaming rules to bar single-player fantasy contests. Underdog, PrizePicks and Betr Picks received a cease-and-desist letter last fall from the Florida Gaming Control Commission. However, in that case, one Sunshine State lawmaker has asked the agency why neither DraftKings nor FanDuel received such a notice.

The single-player games, critics claim, are no different than sportsbooks offering parlay wagers. However, they say DFS operators do not pay the same taxes as sports betting operators (such as DraftKings Sportsbook and FanDuel) do in some states.

In 2020, the Internal Revenue Service issued a memorandum that said operators of all daily fantasy contests – not just single-player pick ‘em games – must pay the sports betting excise tax. The memo also said that operators who accept DFS entries in states where such games are not authorized must pay a 2% tax and a $500 per employee occupational tax.

For the past couple of years, DraftKings has acknowledged on its quarterly financial reports that the IRS is auditing filings from previous returns regarding the excise tax. A message Tuesday to the Boston-based company seeking comment was not immediately returned.

An Underdog representative declined to comment about the excise tax.


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Steve Bittenbender

Steve is an accomplished, award-winning communicator with over 20 years of experience in journalism, public relations/public affairs, marketing, and business development. He currently covers a diverse set of beats for several publications focusing on legislation, litigation, government regulation, and oversight. This includes commercial and tribal gaming, commercial fishing, and state and local government reporting.

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