Legal but Limited – Sports Gambling Opportunities for Advertisers
The state of Nevada legalized sports betting in 1949, and for a long time, all other bets for legalized fan wagers have been off the table. Reinforcing this very restricted geographic limitation were the politicians, high-profile backers, companies and agencies behind the creation of the Professional and Amateur Sports Protection Act of 1992. Also known by the abbreviation PASPA or the Bradley Act, this piece of legislation spelled prohibition of sports gambling under federal law. It gave leagues like the NCAA and all four major professional sports leagues the ability to challenge betting laws in court. It has since been overturned as unconstitutional in a 6-3 decision by the Supreme Court. Even before this landmark event, the laws and restrictions around sports gambling did little to divert the river of American money that floods every year into illegal sports wagering activities. This has been the scene up until recently, but since May 2018 the landscape is shifting to accommodate new winners, earmark the losers and confound those who desperately wish to be counted in on the profits. The invalidation of PAPSA has been largely framed up as a states’ rights issue, but the task of mapping out what happens next is a tricky one.
Legal Sports Betting Grows in US
In broad strokes, all US states are now free to legalize sports betting. New Jersey was the state that brought the action leading to a nationwide domino effect that began in May 2018. It is now one of many states where sports betting is legal or pending official kickoff. Around 20 states are still in the process with pending legislation. The remaining few states have taken no action, signaling they have no current plans to bring legal gambling to their state’s agenda. With most US states putting their cards on the legal wagering table, there’s a lot at stake. Americans bet around $150 billion illegally, so the argument for legalization has the familiar ring of the marijuana rationale. If the economic reality is that people are engaging illegally, why not redirect those activities into legal avenues that could then be regulated and taxed for the benefit of the state? For example, in New Jersey, the results of legalization of sports gambling have been positive in terms of jobs and new state revenue with the creation of 3,300 new full-time jobs and $200 million generated from a completely new funding mechanism.
The monopoly enjoyed by Nevada for decades is close to being history as New Jersey makes a credible play for the number one position in sports gaming in the US. Elsewhere the results have been dicey, with many states seeing a disappointing disconnect between projections and real numbers. In some cases, it’s not even in the ballpark as the actual revenue falls far short of expectations. Still, the promise of big gains is hard for states to ignore with analysts floating the possibility that this change in legislation may lead to a $400 billion industry.
Sports Leagues Change on Gambling
Getting in on the state-level action are America’s pro sports leagues, who feel entitled to their piece of the profits. Originally opposed to legalization, but unable to stop it in the end, the pro leagues have switched sides, drafting their own proposals for how the new system would work. Brian Seeley is a senior vice president of MLB and says gambling companies need to partner with the leagues so both sides have incentives and grow the appeal of legal betting and more importantly the profits. Along with the NBA and PGA tour, these organizations have lobbied states for direct payments, and it seems some states have included fees in sports betting bills. The NFL has not sought this sort of arrangement and instead is looking for an “integrity fee,” an unpopular measure proposed by many league leaders. Sponsors of this royalty structure have been adamant that it’s vital to the establishment by leagues of systems to maintain an active watch over gambling activities, to regulate, flag and investigate anything less than above board. Casinos and states have responded with assurances that they already have these people, systems and measures in place and as such are disinclined to reshape on what they see as overkill. Many states that had previously contemplated the “royalty” have decided against paying them, claiming that the notion of the fees was introduced into legislation as talking points and not as a commitment to go through with any payouts. They’ve noted that Nevada, where sports betting has been legal since 1949, doesn’t share revenue with leagues. The casinos are also disenchanted with the proposed royalty. American Gaming Association (AGA) senior vice president of public affairs Sara Slane points out, “At the end of the day, this is a low-margin business. Taking that money off the top hurts our ability to compete with illegal operators.” Still, the leagues are looking for a toehold. MLB and the NBA are pursuing state-by-state fees and deals, while the NHL has worked the hardest to strike deals directly with betting companies, not seeking legislation at the state or federal level. The NBA, MLB, NHL and Major League Soccer have each struck official deals with MGM resorts and the NFL has its own deal with Caesars Entertainment. The leagues clearly don’t line up on how best to pursue this opportunity, and thus far none of the laws have really given the leagues what they’re after. There is consensus that federal regulations and uniform rules are needed, but that resolution will remain up in the air until it makes its way through congress.
New Attention Means Advertising Opportunities
For now, the leagues can take a page from a recent study by the American Gaming Association reporting that legal sports betting could mean as much as $4.2 billion in new revenue not tied directly to the gaming industry. It leverages something the leagues already know how to use to their advantage; capturing eyeballs. Only now, openly betting fans may have even more compelling reasons to watch. Scott Butera of MGM said of the leagues’ attitudes towards viewership, “They see this as a way of letting fans have some skin in the game, and more reasons to watch a game now.” Leagues see gambling as a way to keep fans hooked on the game results even when their team is down. Fantasy Sports and the emergence of mobile betting will also have a huge impact on sports viewership, spawning growing advertising opportunities.
But it’s early days and like everything else around this issue, it’s unlikely that the picture will be clear for some time yet. There is a chance that there will be instances in which accepting advertising services from wagering companies may be illegal. Compliance will be critical as the FCC has levied fines against stations not seen as compliant. Due to the state-centric nature of the industry, national ad buys aren’t on the table for now. The legal green light, such as it is, is limited to the few states where legal betting is fully underway and regulated. What is clear, regardless of all else is that media moves the needle, so there is no question that sports betting companies will need acquisition strategies that work. The winners of this business are going to be the agencies investing in staying current on the issues and vigilant in monitoring the ever-changing laws and rules around ads for sports betting. Advance research and tight practices around approvals should be foundational agency procedures and tracking competitor activity will take genuine dedication. Having a firm grasp of the nuances affecting this arena will be key to client trust and campaign success. For all concerned, figuring out the benefits of legal sports betting is a work in progress but for now, states, casinos, teams, fans, and advertisers are all working overtime to cash in on their unique position.
If you are curious about opportunities to advertise in the legal sports betting space, contact us to discuss a media strategy for your brand.