Underdog Sports Endorses Controversial GRIT Act Weeks Before North Carolina Debut

Underdog Sports has broken from the rest of the industry by supporting the Gambling Addiction Recovery Investment and Treatment (GRIT) Act.

The GRIT Act drew criticism from sportsbooks and industry stakeholders when US Sen. Richard Blumenthal and US Rep. Andrea Salinas filed it in January.

The act would dedicate half of the US sports betting excise tax (a .25% tax on total bet spending) to gambling addiction prevention, treatment and education. Underdog Sports has championed the GRIT Act for providing the only source of federal spending on responsible gambling initiatives.

Underdog Sports will launch when North Carolina online sports betting launches on March 11.

GRIT Act incites debate about federal problem gambling initiatives

The GRIT Act immediately drew the criticism of the American Gaming Association, a national legal gaming advocacy group, for its failure to address the illegal gambling market.

AGA Senior Vice President of Government Relations Chris Cylke explained that “Congress enacted the federal sports betting excise tax in the 1950s as a tool to prosecute illegal gambling operations. Today, this antiquated policy puts the nascent legal market at a competitive disadvantage against offshore illegal operators, who do not pay any taxes and prey on vulnerable customers.”

At the same time, the National Council on Problem Gambling argued that “Despite the prevalence of gambling addiction in the United States, no federal agency is tasked with addressing it, and no federal funds are designated for treatment or research.”

Alex Kane, CEO of Sporttrade, took issue on X with the mechanism of taxing total bets, or “handle,” stating:

“So, it’s not that we at @sporttrade_app don’t support RG initiatives and funding, we absolutely do.

“We simply think that the structure should not be based on handle.”

Underdog Sports, which will debut its online app in North Carolina, has thrown its support behind the GRIT Act, citing the need for federal oversight of problem gambling initiatives.

How much Could North Carolina claim from the GRIT Act?

We don’t know yet how much GRIT Act revenue will flow to North Carolina. However, we’re getting a better picture of how to determine the allotments.

The GRIT Act would allocate 50% of the federal excise tax on sports betting for responsible gambling initiatives.

Of that allocation, 75% would be given directly to state Departments of Health and Human Services. The remaining 25% would “go to the National Institute of Drug Abuse to fund grants for research into gambling addiction.”

Federal excise tax revenue totals hard to pin down

As Cait Huble, director of communications for the National Council on Problem Gambling, tells NCSharp, figures for the sports betting excise tax for FY23 have not been easy to get. “The congressional offices sponsoring the GRIT Act have requested the official tax revenue data but have not yet received it.”

In fact, the NCPG doesn’t have exact numbers for FY22. Hubble states, “NCPG estimates the FY22 excise tax revenue to be around $274M.” Considering that Ohio, Maryland and Massachusetts all launched online sports betting during 2023, the expectation is that number will increase.

Well, Adam Hoffer, excise tax specialist at the Tax Foundation, sees it differently. He estimates the sports betting excise tax for FY23 will be lower, at $260 million.

Using Hoffer’s estimate of $260 million as an example, $130 million (50%) would go to problem gambling initiatives. That breaks down to $97.5 million for state DHHSs and $32.5 million to the National Institute of Drug Abuse.

The $97.5 million awarded to the states would not be sliced into fifty portions and divvied out to DHHSs. Huble explains that “The amount each state is expected to receive is a bit trickier. For the block grants, the Substance Abuse and Mental Health Services Association (SAMHSA) bases its state allotment calculations on the relative shares of the Population-at-Risk, Cost-of-Services, and Fiscal Capacity Indexes.”

Essentially, SAMHSA will distribute GRIT Act revenue on a needs-based basis.

SAMHSA declined to comment on North Carolina’s possible allotment based on these indexes as the legislation is still pending.

To get a sense of North Carolina’s position, here is a look at the CDC’s Social Vulnerability Index. It “shows relative vulnerability of every U.S. Census tract on 14 social factors including poverty, lack of vehicle access, and crowded housing.”

North Carolina appears to sit comfortably in the Low to Low-to-Moderate levels of social vulnerability.

Map of the Vulnerability Index, focusing on North Carolina
How best to fund problem gambling in North Carolina

The GRIT Act has engendered a debate on how to best federally address problem gambling in North Carolina and throughout the country. Bettors, operators and industry stakeholders all have vested interests while the moral argument for responsible gambling support appears beyond reproach.

While the GRIT Act and its counter-proposals generate debate, North Carolinians can rely on in-state sports betting tax revenue. Online sports betting tax revenue will raise $2 million a year for the NCDHHS. These funds can aid the prevention and treatment of problem gambling in the Tar Heel State.

About the Author

Tyler Andrews

Tyler is the Managing Editor for NCSharp.com, covering sports, sports law, and gambling for the Tar Heel State. He has also covered similar topics for PlayTexas, PlayGeorgia, PlayCA, PlayFlorida, PlayOhio, and PlayMA. Tyler’s current focus is North Carolina’s pathway to gaming legalization.