| During the hoopla around the recent Super Bowl LVI, the relationship between sports betting and fan engagement has never been clearer. In 2021 alone, 11 states either legalized or launched sports betting in some form, with seven going online at or near the start of the NFL season. And the developments have gone both ways: In April of last year, the NFL announced three new “Official Sportsbook Partners,” with another four “Approved Sportsbook Operators” being named in August. As more jurisdictions have legalized sports betting in some form—the number currently sits at more than 30 states, and New York launched mobile sports betting in early January, just in time for the playoffs—the data suggests a strong correlation between sports betting and pro football viewership. The 2017-18 season marked the nadir of the NFL’s popularity in the last decade, as viewership dropped from 16.5 million per game in 2016-17 to 14.9 million per game the following season, a 10-percent dip. That season, the NFL struggled with negative press on multiple fronts, as political issues came to the fore and rulebook changes led to longer, slower contests. But just months after that season, the U.S. Supreme Court struck down the federal ban on sports betting, opening the door to an industry that now sees billions of dollars wagered each year—and to the embrace of sports betting by the NFL and other sports leagues. Since the legalization of sports betting, NFL viewership has risen every year, other than the pandemic-influenced 2020-21 season. This year, regular-season NFL games attracted an average of 17.9 million viewers, marking a 20-percent increase from 2017 and a return to the ratings successes of the early 2010s. Of course, confounding factors abound—from the aforementioned political issues to rule changes incentivizing more offense, and from the dilution of game channels to experiments with new types of offerings (like the Nickelodeon games). But it can hardly be disputed that the NFL is banking on a productive relationship with the top sportsbooks, and thus far, the bet appears to be paying off. The Legalization of Sports Betting: The Murphy Story The story of how sports betting became legal (or, more specifically, not illegal) under federal law is well-trodden ground, so let’s do the short version. By the 1990s, casino gaming and lotteries had become increasingly prominent, but various stakeholders—elected officials, the National Collegiate Athletic Association (“NCAA”), and the American professional sports leagues—continued to strongly oppose sports betting out of concern that it could corrupt the integrity of the games. In 1992, Congress passed the Professional and Amateur Sports Protection Act (“PASPA”), which made it “unlawful” for any state or subdivision (i.e., cities, counties, etc.) to “sponsor, operate, advertise, promote, license, or authorize by law or compact . . . a lottery, sweepstakes, or other betting, gambling, or wagering scheme” based on sporting events. The law did not directly make sports betting illegal, but it allowed the U.S. Attorney General and amateur and professional sports organizations to bring suit to block violations of the statute. A small handful of jurisdictions were “grandfathered in”: sports gambling continued to be legal only in Nevada, and sports pools and lotteries continued to be legal in Delaware, Montana, and Oregon. By the 2010s, New Jersey sought to revitalize Atlantic City (facing more competition in light of the proliferation of legal casinos in other states) by repealing its prohibition on sports betting. In two successive cases, the NCAA and the professional sports leagues—the NFL included—sued under PASPA to block New Jersey’s legislative efforts. When the second case reached the Supreme Court, New Jersey argued that through PASPA, Congress had improperly “commandeered” the state government by requiring it to retain its prohibitions on sports betting. In a 2018 opinion in Murphy v. National Collegiate Athletic Association, the Court agreed, concluding that because the Constitution does not permit Congress to tell state governments what to do, PASPA’s approach to restricting sports betting was unconstitutional. With that decision, PASPA was no longer in effect, and regulatory discretion over sports betting returned to the states. The NFL and Legal Sports Betting The sports betting landscape shifted rapidly following the Murphy decision. By the end of 2018, more than 10 states had either legalized or gone live with sports betting, and professional sports leagues (and individual teams) had begun to enter into exclusive partnerships with casinos and sportsbooks. The NFL’s relationship with the legal sports betting market has evolved, too. In 2018, the Dallas Cowboys became the first NFL team to enter into an exclusive agreement with a casino, the Winstar World Casino in Oklahoma, and the NFL announced that the 2020 draft would take place in Las Vegas. The following year, the league announced a formal partnership with Caesars Entertainment—the NFL’s first casino partnership—and it reached a deal for Sportradar to become its exclusive data provider, establishing a bridge between sportsbooks and the league. And in 2020, the NFL informed teams that they could partner with sportsbooks, which began with an official deal between FanDuel and the Denver Broncos. Last year saw further key developments in the NFL’s embrace of sports betting. In April 2021, the league announced “Official Sportsbook Partnerships” with Caesars Entertainment, DraftKings, and FanDuel, granting them exclusive rights to use NFL trademarks in retail and online sports betting products and to advertise during games and related TV shows. And in August, the NFL took a further step by adding four more “Approved Sportsbook Operators,” FOX Bet, BetMGM, PointsBet, and WynnBET, giving these companies added advertising access. Perhaps nothing demonstrates the symbiotic relationship between professional leagues and legal sports betting than the viewing experience itself. Beyond the range of betting advertisements appearing during NFL broadcasts, commentators now regularly discuss money lines, over/unders, and point spreads on the air. And NFL.com itself now advertises odds on each game, including feature articles describing prop-bet odds ahead of Super Bowl LVI. The Daily Fantasy Sports Bump The legalization of sports betting tells only part of the story. Fantasy sports has a long history: When I was a kid, we drafted our teams and my brother tallied each player’s score on Monday mornings by consulting the newspaper box scores. So when Congress sought to limit interstate gambling in the mid-’00s, it expressly carved out an exception for fantasy sports under the Unlawful Internet Gambling Enforcement Act of 2006. This law underscores a critical distinction: daily fantasy sports are not the same as sports betting. Under federal law, fantasy sports are not regulated as betting if they: Offer prizes that are predetermined and not dependent on the number of players participating; Depend on the knowledge and skill of the participants and are determined predominantly by statistical performance of athletes in multiple real-world events; and Are not based on the score, spread, or performance of any single real-world team or combination of teams or any single athlete. While leaving the lid on sports betting (at least until the Murphy decision), the law left open the possibility that companies could develop real-money fantasy games on a scale smaller than the typical season-long arrangement. But it wasn’t until the tail end of that decade that daily fantasy sports (“DFS”) began to proliferate. Although not without predecessors, FanDuel was the first major player to break into the industry, in late 2009. The following years saw the launch of numerous competitors (including DraftKings in 2012), but even if DFS seemed to comply with federal law, several states questioned whether it constituted (and should be regulated as) gambling. The most prominent dispute arose in New York, where the state attorney general, legislature, and courts all offered competing views on the legality of DFS in light of the state’s constitutional ban on gambling. New York’s highest court finally ruled in March 2022 that daily fantasy sports constitute a game of skill, not gambling. Still, DFS is currently active in more than 40 states across the country. And just as the NFL has begun to capitalize on sports betting as a fan engagement tool, it has also reached into the DFS market. In 2019, the NFL named DraftKings its official daily fantasy partner, and DFS offers another avenue for the league to enable the fans to have skin in the game. The Super Bowl and Beyond In the long term, the sports betting market is hardly saturated: Maryland, Nebraska, and Ohio have all legalized sports betting, and each state is likely to launch in the near future. This article was originally published on Forbes.com in February 2022. |