On May 14, 2018, the Supreme Court declared the Professional Amateur Sports Protection Act (PASPA) unconstitutional, which allowed states to legalize sports betting. As of September 17, 2019, thirteen states have legalized sports betting (ESPN). Five more states have passed legislation that has yet to take effect (CBS). However, many of these state laws regulate sports betting in different ways, and federal lawmakers are preparing legislation of their own (CBS; ESPN). Within this legal landscape, there appear to be three trends in the sports and gambling industry. First, sports leagues are acting to protect the integrity of their sport. Second, sports leagues are simultaneously brokering deals and adapting their businesses to take advantage of profitable business opportunities related to betting. Finally, other firms, including institutional gambling corporations and startups, are venturing into the emerging sports betting industry.
Sports leagues seek to protect their integrity
Both professional and amateur sports leagues have a lot to lose when it comes to sports betting. Traditionally, sports leagues have opposed betting legalization because it could hurt the integrity of the sport if it appeared that athletes or officials fixed games (see, e.g., Tim Donaghy). This was one motivation for the leagues to enjoin New Jersey from legalizing sports betting in Murphy. The NBA and MLB are trying, so far unsuccessfully, to curb corruptive behavior by pushing for a 1% integrity fee on all revenue from sports betting (USA Today; ESPN). In theory, sports leagues can use those fees to regulate integrity by keeping an eye on athletes and officials. In the collegiate context, the National Collegiate Athletic Association continues to oppose sports betting legalization specifically for college athletes (ESPN). Besides problems with integrity, the NCAA alleges that legalized sports betting is especially harmful to the welfare of student-athletes (NCAA, AP). The NCAA’s concerns primarily deal with current student-athletes gambling and the possibility of athletes, either knowingly or unknowingly, providing information to gamblers (NCAA). Following legalization, the NCAA launched educational efforts to help curb possible corruptive behavior and prevent negative impacts on the integrity of collegiate sports (NCAA).
Sports leagues cautiously take advantage of profitable opportunities
However, this does not mean that the leagues have no interest in sports betting – they are indeed interested in capitalizing on the considerable revenue opportunities that betting presents. In fact, if every state in the U.S. were to legalize sports betting, annual revenue could reach $15.8 billion by 2023 (Morning Consult). The National Football League (NFL) and the National Basketball Association (NBA) expect to gain the most revenue, while Major League Baseball (MLB) and the Professional Golfers Association (PGA) may experience substantial viewership increases (Id.). Thus, some professional sports leagues, although remaining cautious, have acted to take advantage of sports legalization. The NBA inked an exclusive deal with MGM Resorts, making it the NBA’s only gaming partner (ESPN). Although the NFL has been more cautious, it also signed a deal with Sportsradar to exclusively provide data to sportsbooks and casinos, and so in that way the NFL is benefitting from legalization as well (NYT).
Large and small betting ventures take both traditional and new approaches to capitalize on market opportunities
Gambling behemoths, such as MGM, as well as smaller casinos and sportsbooks will likely all benefit from legalization (ESPN). Since the legislation that has passed is changing the shape of the entire industry by deregulating sports betting, firms operating in that field can generate revenue by providing new products and entering new markets. This is what MGM seems to be doing via its NBA deal and expansion into new states (Id.). On the other hand, in the time since Murphy was decided, several firms have taken advantage of electronic or mobile platform opportunities as well (NYT). In New Jersey, roughly 80% of sports betting goes through mobile apps (Id.).
However, other types of businesses also benefit from legalization. Data analytics firms that do not necessarily focus on gambling as a central part of their business model are also benefitting. For example, Sportradar’s deal with the NFL allows it to gather data, including through the use of NFL cameras and small devices placed in shoulder pads, to track player movement in real-time (NYT). Sportradar can then take this data, use it to build predictive models, and then sell them to casinos and sportsbooks (Id.). Buffalo Wild Wings (BWW), one of the largest sports bars in the U.S., entered a deal with MGM to bring live sports betting to its restaurants (ESPN). While BWW has no intention of turning into a sportsbook, it plans to increase engagement and improve customer experience by integrating sports betting into its business model (Id.).
The Big Picture
Although we do not have definitive evidence of what the sports industry will look like in the future, there seems to be cautious optimism that sports betting is here to stay. Although federal lawmakers are preparing legislation following PASPA’s repeal, they are unlikely to pass laws that prohibit it, especially considering the degree to which the industry has grown and the significant opposition it would face from states that have legalized or plan to legalize sports betting. Instead of another prohibition, federal legislators seem more concerned with protecting consumers and regulating the market (ESPN).
Professional sports leagues are looking for ways to protect their game from corruptive practices while also taking advantage of new opportunities to generate profit. Firms seeking to capitalize on available market opportunities, such as gambling providers and startup companies, stand to benefit substantially from legalization. Additionally, even firms that do not see gambling as central to their business models are also incorporating sports betting into their offerings.