Gambling Case

 Rashaad Moore, Dean Perez, and Aaron Rodriguez 

Dr. Mark Nagel 

Business Development and Sales in Sport

June 16, 2020

Gambling Case

 

Explain how North American professional and college sport organizations positioned themselves regarding sport gambling from 1925-2015. Describe specific rules for at least two organizations. Is there any hypocrisy in the rules they enacted and enforced?

 

Sports gambling has started in America since the late 1800s. The most popular sports to bet on were baseball and horse racing until the 1919 Black Sox scandal. After this scandal the first commissioner was installed, Judge Kenesaw Mountain Landis who was in charge of all the major sports leagues. His main job was to restore the integrity of the game of baseball and public confidence in it. He started this by banning all eight of the players involved with the Black Sox scandal. Anti-gambling legislation through the 18th amendment as well as other state laws such as the Voorheis-Bahorski anti-gambling law. In 1949 Las Vegas became the only legal place for sports betting to increase their tourism industries. These restrictions created an underground market until 1951 when the United States government legalized gambling federally and taxed sports gambling by 10%. In the 1960s and 1970s, the federal government passed a multitude of laws to dismantle the grip that organized crime had on sports betting. The most popular of these laws was the Federal Wire Act (1961).In 1974 the tax was reduced to 2% which ushered in sports betting rebirth in Las Vegas. In 1992 congress passed the Professional and Amateur Sports Protection Act (PAPSA)which bans states or governmental entities from legalizing sports wagerings. Despite all the restrictions on sports gambling states want sports gambling to continue in their state because of the revenue that it brings in from betting and it makes their states a popular tourist destination. On May 14, 2018, PAPSA was struck down in a 6-3 decision on 10th Amendment constitutional grounds stating that PAPSA was giving the federal government the ability to regulates state laws to regulate their citizens thus being contrary to the 10th Amendment. Despite sports betting being legal on a state by state case sports leagues have barred their players and personnel from participating in sports betting. Furthermore, the hypocrisy of leagues is that their players and personnel can not profit from sports betting as they are barred from participating in these activities directly or indirectly and the league can profit from it. These were established through rules such as the NFL gambling policy, the NBA constitution, and section D of the Major League Baseball Rule 21. Given all these rules there is hypocrisy in them because players and personnel can not profit from sports betting and the league profits off sports betting significantly, annually sports leagues are projected to profit $4.2 billion.     

 

Describe how sport gambling is treated (or has been treated) in at least two other countries besides the United States and Canada. Discuss any gambling partnerships sport organizations have developed in those countries.

 

In China sports betting is done through a sports lottery where Chinese nationals place pooled bets in a government-sanctioned game of chance. This is the only way that they can gamble on sports as online gambling is illegal. 

Due to sports gambling being government-sanctioned there have been no opportunities for partnerships in sports betting. 

The United Kingdom has the most developed laws when it comes to sports betting. Land-based and online gambling are both legal in the United Kingdom. The Betting and Gaming Act of 1960 legalized land-based UK sports betting operations. Then the Gambling Act of 2005 established the UK gambling commission to oversee all forms of betting. In 2014 the British Parliament passed The Point of Consumption tax which imposes an extra 15% tax on foreign-based UK bookmakers. Scientific Games has extended its partnership with William Hill until 2024. Scientific Games will continue to provide their industry-leading Open-Sports solutions to William Hill and continue their relationship which started in 2007. The extended partnership will allow William Hill to operate with a greater degree of speed and flexibility, including the capability to deploy proprietary products across multiple jurisdictions in Europe

 

What were the primary legal and practical arguments in Murphy (Christie) v NCAA. What did the court find?

The state of New Jersey attempted to authorize and legalize sports betting back in 2009 under Governor Chris Christie. When the state of New Jersey enacted the Sports Wagering Act in 2012 they were met with disagreement and were sued by the NBA, NFL, MLB, NHL, and the NCAA under PASPA (Professional and Amateur Sports Protection Act of 1992). The Sports Wagering Act allowed sports wagering at New Jersey casinos and racetracks but it was argued that the state was violating the PASPA act which outlawed sports betting and gambling in all but four states. The state of New Jersey and newly acted Governor Philip Murphy decided to act against PASPA by stating that PASPA violated the 10th Amendment. On May 14, 2018, the Supreme Court reversed lower court findings, favoring New Jersey in deciding that PASPA violated the anti-commandeering principle by a 7–2 vote, and declared the entire law unconstitutional by a 6–3 vote. The 10th Amendment prevents the federal government from compelling the states to enforce federal law, including by forcing state legislatures to enact laws of their own. By allowing 4 states the right to gamble but limiting other states from obtaining the same right made the PASPA act unclear. Any law that repeals a previously banned activity, but does not completely abolish all restrictions on it, can be described as authorization. New Jersey’s reasoning was justified as they were allowed to gamble.

 

What has been the reaction and subsequent actions of both states and sport organizations since the Murphy decision?

 

In anticipation of the Murphy decision, several states have begun setting legislation in place to allow for legal sports gambling, contingent on the results of this Supreme Court case. By June 5, 2018, Delaware became the first state outside of Nevada to legalize sports gambling in wake of the Supreme Court decision. Delaware, Mississippi, New Mexico, New Jersey, Pennsylvania, Rhode Island & West Virginia have now authorized legal sports betting. Many other states are soon to follow as 50% of the U.S. population will live in states that have some form of sports betting by the end of next year. The expansion helped boost total industry-wide revenue from legal and regulated sports betting. Gambling Compliance projects that the legal sports betting market in the U.S. could be worth as much as $7.9 billion in total annual revenue by 2024. New Jersey has already transformed the easy access to sports betting by utilizing apps such as FanDuel Sportsbook and DraftKings Sportsbook. These apps are popular among sports gamblers, making the transition relatively simple. Many states will begin to take advantage of the revenue sports betting can produce and use that revenue to fund state organizations or budgets. States plan to tax that revenue in hopes of economic growth. Many general managers and owners of professional leagues have softened their stances. The new commissioner of the NBA came out in favor of legalizing sports betting. The NHL became the first major professional sports franchise to place a team in Las Vegas, the main city in which sports gambling currently occurs. The Oakland Raiders have moved to Las Vegas as well. 

 

What do you see happening in North American professional and college sport in regards to gambling in the next 3-5 years? Will every major organization likely maintain the same rules regarding gambling? Why or why not? What issues must individual teams consider? What must leagues consider?

 

Within the next 3-5 years, we will see a rise in gambling in North American professional sports. After New Jersey's Supreme Court victory in May 2018, any state that wishes can legalize sports betting. Online sports betting will be the true winner once states begin to legalize gambling as consumers will be able to place bets directly from their phone instead of having to visit the sportsbooks to place bets.  

Regarding professional sports, as gambling becomes legalized across the U.S fans will be able to place bets directly at arenas and stadiums. Recently, the NBA signed a deal with MGM to be the exclusive official gaming partner. MGM casinos can use league and team logos on odds boards at sportsbooks. This partnership is a representation of a dramatic shift in the way American sports leagues look at sports wagering. The league will need to consider how it will maintain and preserve the integrity of the game, the fan experience, how sports betting will help catapult the NBA’s presence globally.

Although you can place wagers on collegiate sporting events in Vegas, the NCAA will never consider playing sports betting acceptable as it will continue to violate NCAA regulations. To protect the integrity of college athletics contests, NCAA regulations prohibit student-athletes from betting money on any sporting event (college, professional or otherwise) in which the NCAA conducts collegiate championships. Violations of this regulation can result in a student-athlete losing his or her athletics eligibility, which has clear negative repercussions for the individual and his or her team and school.

Professional sports will continue to expand sports gambling in North America as it will continue to prove to be a profitable revenue stream for all parties involved. Within the next 3-5 years, not too much seems to be possible to change as the creation of online gambling rules is on a state by state basis. This slow adoption will cause leagues to maintain the same rules regarding gambling and provide limited access to fans. This maintenance is due to the lack of federal legislation regarding the issue and without that there can’t be an expansion in gambling in North America. The issues that teams and leagues must consider is what rules there are in each state. This will create a complex problem for teams and leagues which will most likely result in lobbying on the federal level for change in federal gambling. Once states understand the tax revenue that online gambling will generate, they will decide to be onboard. 

How do North American professional and college sport organizations view alcohol? What are some of their specific rules? Have they altered any of their rules over the last 10 years?

North American professional and collegiate sports organizations have previously had a voluntary ban on the endorsement of alcohol. However, in the last 10 years, some league’s views on alcohol have changed and it has become something they are willing to endorse. Despite this, they don’t want their athletes to be seen as partaking in the consumption of alcohol or holding alcoholic products. Alcohol brands are allowed to show themselves in a sports setting, attach the league’s logo, as well as the teams in that league’s logos on their products as well as, and, have athletes speak directly to the camera to endorse their product. For the NFL only active players can be used for endorsements and if alcohol brands want to use more than one player they must use a minimum of six. Furthermore, brands interested in signing only one player for an endorsement must sign a contract with their respective team as well. In the 2018-2019 season, the league loosened rules on liquor and wine by allowing brands to bill themselves as the official product of clubs while wine companies can have similar relationships with teams. Liquor companies for the first time will be able to use team logos on their materials on primary and secondary packaging with some restrictions. Wine brands now have the freedom to put club marks on bottles without having to commemorate a significant club event such as an anniversary of a championship or a team’s founding. This shows their willingness to show that alcohol is part of the sports culture. However, it is not part of what the athletes of their games do and does not contribute to their success as an athlete and athletes can not be shown consuming or holding the beverages.

 

What do you think the rescinding of some recreational drug laws will mean for the sport industry? What would you advise sport leagues and teams do regarding marketing activities involving recreational drugs? [Note – this question is designed to focus primarily on the team/league – fan relationship but you can certainly also discuss the impact upon players]

 

Largely, recreational drug laws will not affect the sports industry. Smaller organizations may seek these opportunities such as the Portland Olympic Beer Cycling Team. However large organizations such as the NBA, NFL, and the MLB most likely will not participate in recreational drug sponsorships. I would recommend that leagues such as the NFL and the MLB do not seek these types of sponsorships as their fan bases are older and more conservative. These individuals tend to not support the use of recreational drugs. However, the NBA should consider a sponsorship with recreational drug companies due to their fans being younger and having an interest in recreational drugs. I would recommend sponsorships to be only for certain teams as recreational drugs are not legal in all states and sponsorship by leagues does not make sense because it would only target a select group of states. In the end, I believe smaller organizations in areas where recreational drugs are legal should participate in sponsorships. However, larger leagues, as well as the teams in those leagues, should not participate, as their fans will not be interested in that as well as the complications of sponsorships having to be on a state by state case.