Sports Betting and Gamification

During the Spring of 2018, the US Supreme Court, in a 6–3 decision, decided that the Professional and Amateur Sports Protection Act of 1992 (PASPA) was unconstitutional in Murphy v. NCAA, No. 16-476, 584 U.S. ___ (2018). The Act forbids states in the Union from seeking to obtain sportsbook gambling licenses and betting businesses within their borders. There were only a few exceptions, namely the State of Nevada and Native American reservations, Delaware, Oregon, Montana, and dog and horse racing. However, the court found that PASPA commandeered the states not to do something, which was previously unconstitutional and pursuant to the very important final Bill of Rights participant, the Tenth Amendment to the US Constitution, which states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Many have opined on that decision, but many in the entertainment, media, and sports industries declared it an illegal restraint on the states to conduct business and lauded it as an opportunity. Much like during Prohibition, there was a black market before and a boom after. Even though Prohibition did not outlaw consumption, people consumed mass quantities of beer, wine, and liquor the day it was lifted. Similarly, right after the Supreme Court decided to lift the prohibitions of PASPA, states and businesses flocked to the legislatures to pass laws that would create a scheme and threshold for creating and regulating sportsbooks to place bets.

The Increase of Sports Gamification

Sports gamification increased once PASPA ended, and states began passing laws to create and regulate sportsbooks. Gamification is being used as a strategy or tool to increase interest in sports. The obvious example being that when someone bets money on sports matches, their interest in watching increases. Gamification is, therefore, a motivator to increase interest and engagement in an outcome.

Post-PASPA, a couple of statistics demonstrate the massive growth in sports betting: 30 or more states have passed or are considering sports betting legislation. Revenues in states that now have legal sports betting have jumped from $0 or fewer than $10 million dollars in May/June 2018 to more than $300 million and nearing $600 million in several states by the Summer of 2021. The tax revenue, licensing, and business development opportunities are beyond substantial.

Before the Murphy decision, teams in the NFL were called out for having ownership stakes in fantasy sports companies like DraftKings and FanDuel. They were asked to divest their interest immediately. Those relationships were only a tiny percentage of the sportsbook pie to come.

A Billion-Dollar Industry

Today, sports leagues, teams, and athletes sign sponsorship and endorsement deals with sportsbooks and betting companies. DraftKings and FanDuel are full-fledged sports-betting applications beyond fantasy sports. Some states allow online betting. The value of the deals is in the billions of dollars. Arguably, a new sports betting partnership is announced daily.

Each state that has passed legislation must provide a regulatory scheme for sportsbooks. However, like many “sin industry” businesses, there may be abuse and excess. Much like the regulatory pushback occurring in Great Britain related to impropriety in sports betting among leagues, teams, and players, there will be a reckoning when it comes to addiction and ethics. During the pandemic, unsurprisingly, sports betting became a more significant addiction problem. Now with college sports entering the name, image, and likeness era, there are opportunities, but more problems, too.