UFC threatens lawsuit against Oklahoma

March 9, 2012

MMA Worldwide reported that Oklahoma is being threatened by litigation from the UFC for imposing a 4% tax on PPV in the state.  As a result, the Oklahoma state athletic commission is not taking on any new applications for licenses from MMA promoters.

Via MMA Worldwide:

Unfortunately, after March 31st of this year, combat sport competitions will come to a grinding halt in the state of Oklahoma. The state is under a threat of a lawsuit by none other than the UFC. It seems the UFC wants the state to drop a 4% pay-per-view tax imposed by the state, but without it… they will no longer have the funds necessary to regulate any boxing or MMA events held in Oklahoma.

The article states that over 200 events happen each year across the state. If the state loses out on MMA, the events could remain in the state but on tribal grounds and casinos. It also provides a copy of the letter. Click on the image to read it.

Payout Perspective:

An interesting strong arm tactic by the UFC and it would be interesting to see on what grounds the UFC would sue the state.  If you are in Oklahoma, the impact of viewing live MMA might not be harsh considering that the events could move to tribal casinos in the state where federal law trumps state. The state is in a bad position as it claims it needs the revenue from the PPV tax but wants to keep in the good graces of the UFC (and stay away from a potential lawsuit).

10 Responses to “UFC threatens lawsuit against Oklahoma”

  1. Matt C. on March 10th, 2012 1:43 AM

    Is this a surcharge tax on every cable/TV billing statement?

    It would be a $2.00 tax added to every billing statement along with the charge of the $50.00 PPV?

    I’m a bit confused by this. So Oklahoma would be getting $2.00 for every PPV purchased by a resident of Oklahoma?

    That doesn’t seem fair to me. I mean if a PPV event is actually taking place in Japan why would Oklahoma be adding a $2.00 tax to it?

    Or am I misunderstanding this and Oklahoma wants to tax any PPV event that takes place in Oklahoma? Which wouldn’t make sense to me either because then promotions would choose other states to hold their PPV events.

  2. Matt C. on March 10th, 2012 1:50 AM

    To add one more thought on this statement from the piece:

    “An interesting strong arm tactic by the UFC and it would be interesting to see on what grounds the UFC would sue the state.”

    Again unless I’m misunderstanding how this tax is going to work I’m confused on how this is a strong arm tactic by the UFC. I mean considering the UFC is the largest PPV seller they seem to be the target of this tax and their business will be directly effected by this tax. Are they supposed to just sit back and let it happen? Then it could set a precedent that every state would start taxing PPVs.

  3. Mcmax3000 on March 10th, 2012 9:40 AM

    This tax already exists. It has since 2004 according to other articles I’ve read. The UFC is trying to get it repealed.

    It apparently costs the UFC about $80,000 per year.

  4. BrainSmasher on March 10th, 2012 5:18 PM

    I believe the tax would only be in effect when the UFC runs a event in Oklahoma. The UFC would then have to payy 4% on their total PPV revenue for that event. Which for the average UFC PPV would be 300-500,000. That is if the fee is based on the UFC cut rather than the amount before the cable opps cut. The commissions i believe already take a huge cut of gate prices.

    I think it is interesting their excuse for the tax. They claim they cant afford to govern the sport without it. Yet there has only been 1 UFC event in the state and it wasnt a PPV. So how have thet funded the commission thus far? Clearly the UFC will never book a PPV in the state as long as the tax exists. So again how do they think they will get this money? Why does the commission depend so heavily on a tax that they are not sure will ever be collected? It seems the commission needs more state funding or higher fees from the 200 events in the state through ticket sales and licenses.

    I think the UFC is sueing out of principal more than anything. I doubt they will ever NEED to run a PPV in that state. But as we can all see the tax seems extreme and pointless but just as we have seen with the UFC and getting regulation in states they likely have no intentions of going. They put in a lot of time and money to make sure the sport is treated properly all over the country. I believe Hawaii had/has a similar tax to PPV when they started their commissions and sanctioning MMA. Not sure if it still exists or not. The UFC voices tyheir concerns at the time saying they would never run in Hawaii as long as that tax existed.

  5. Matt C. on March 11th, 2012 11:03 AM

    I guess I am completely confused on how this works. I see this bit of an interview from Joe Miller the head of the Oklahoma State AC and I’m even more confused on how this is working.

    From MMA Valor here: http://mmavalor.com/2012/03/09/oklahoma-state-athletic-commission-halts-combat-sports/

    “Without this tax the commission would no longer have the funds to operate. In an email to MMAValor, Miller laid it out thus:

    “It takes approximately $360K for the Commission to provide regulation for the approximately 275 events per year we regulate. The Oklahoma State Athletic Commission does not receive any state funding. We are funded solely from license fees, assessment on live events, and an assessment on pay-per-view events. We receive approximately $137K per year through license fees and assessments on live events. Receipts from Pay-per-view are approximately $240K per year. About $80K per year comes from UFC PPV. The UFC has threatened a law suit against our PPV law unless our legislature repeals our PPV law during this legislative session. The Commission loses either way. OK has been collecting on PPV since 2004 and this is the first time the issue has been brought to light. For the Oklahoma Commission to survive and for Combat Sports to continue in Oklahoma it will be up to the Oklahoma legislature to come up with a solution to the funding shortfall. You can do the math.” ”

    The UFC hasn’t held a PPV in Oklahoma every year since 2004 so how are they getting $80k per year in taxes from UFC PPVs?

    I’m really confused by Joe Miller’s math of only collecting $137,000 from license fees and assessments on 275 live events per year. That means they are only collecting on average about $500 per event. That sounds incredibly low. It sounds like to me there is plenty of room to raise the license fee on live events if the average payout is only $500 to the state AC.

  6. Bruce on March 11th, 2012 9:33 PM

    In Texas:

    “The tax is three percent of the gross receipts obtained from the sale of tickets to the event, plus three percent of gross receipts received from sales of broadcast rights or $30,000, whichever is less.”

    So a 30k limit is somewhat reasonable, however, is 4% that much more? Is Texas next on UFC’s list?

    I would just guess the basis of such a cause of action would be the “dormant commerce clause,” which is basically a claim that there is unjustified discrimination against some particular business attempting to conduct its activities within a state which makes it difficult or impossible to do so. In this case, since UFC is possibly the largest PPV seller in OK, they may claim the Athletic Commission/legislature has singled them out for the tax making their promoting of fights in OK excessively burdensome.

    States are not permitted to unduly burden the flow of interstate commerce by passing laws which directly or indirectly force a business or industry to take unreasonable steps to comply with those laws. In this case, I would hesitate to say a 4% tax would be deemed discrimination against interstate commerce, especially when TX, a neighboring state has a similar tax, or even higher at 6% actually, albeit with a cap.

  7. BrainSmasher on March 11th, 2012 11:39 PM

    Matt C

    That is strange. I guess OK has been charging a fee to everyone in the state who buys the UFC PPV. Before i felt the UFC was just going after them because the fee was excessive even though it didnt impact the UFC much. But is OK is really adding the fee on to the UFC PPV product that does directly effect them. Om raising the already high price of the UFC PPV could arguable cost them PPV buys. It is also an unjest tax. How can you tax someone watching something on tv and use it to regulate live events those people may not even be attending? OK is on some very shaky ground here. I do understand their position. The money has to come from somewhere. But i think they need to look at rasing fees or get state funding. But taxing the UFC and its fans to cover the cost of other promotions running events is not the way to go. I actually have never heard of this type of tax.

  8. Jake on March 12th, 2012 7:52 AM

    In the long run, this type of lawsuit could hurt the UFC’s bottom line.

    Most of the events monitored by ACs (OK or elsewhere) are very small. They have small gate receipts and no pay per view. These events cannot afford to have the fees doubled or tripled. Then fighters in these events cannot afford to have their license costs significantly increased – many cannot afford the costs now.

    These small events are the training and development grounds for new fighters, its another way to attract & retain MMA fans, and its an easier way to identify figher talent for the UFC. It is probably cheaper for them to pay the $80k tax then get into the business of developing brand new fighters.

  9. BrainSmasher on March 12th, 2012 4:02 PM

    I see what you mean Jake. But i doubt the UFC will be effected at all. People will still watch in that state. I guess one has to ask if there are so few events and the attendance is so small and with no gov funding. Should there even be a commission in the state? You cant charge the UFC because there is a lack of demand for live events in the state.

    I also find the commissioners numbers highly suspect. He says “do the math” and i have and it brings up more questions. UFC accounts for 80K and 137K comes from live events in state. He claims they need 360K to opperate. That leaves 143,000 gap that he says is filled by the 160,000 Tax on non UFC PPV.

    Here are my questions. Who are the other non UFC PPVs? Is it boxing or WWE? It isnt MMA, there isnt any on PPV. Why does their income just happen to be about the same as their opperating cost? Sounds like someone doesnt want to give up any money. Also why does it cost 360K per year? If they find it so hard to get revenue maybe they should reduce costs? This is typical of todays government. Spend more than you have and make someone else pay for it. If the money isnt there they need to cut positions, or cost or something. I dont see how they need to spend 360K. Some state commissions are basically volunteers. these are not position that have to be highly paid if it isnt in the budget. My state commission is horrible. But they dont get paid hardly anything and they never saw fit to go and charge random people and companies to fit the bill.

    To give an example look at West Virginia. The commission has a buget of 20K per year. They run on just Licenses fees. There is no fee for gate, no event fee or tax of any find. Now im not saying this is ideal. WV commission sucks. But i use it to show that the 360K OK has to work with is a lot of money and it can be done much cheaper. So this guy can squirm all he wants about needing the money. I dont buy it. The fact there is a commission without gov funding means they are supposed to opperate within the revenue they make. If this PPV tax is deemed unjust. Then their job will be to opperate within the budget of 137,000 or try to get state funding.

  10. Josh @ MMAValor on March 14th, 2012 12:23 PM

    Matt C

    I asked that same question regarding the UFC not holding a PPV there and well that’s where the interview stopped. The numbers don’t add up to “do the math” and only leave move questions, which Mr. Miller decided not the get back to me and answer them.

    It’s an unfortunate situation though

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