One does not have to look very hard to see that sports betting is now legal in much of the country. Turn on virtually any sporting event (even in states that have yet to legalize in a post-Murphy universe) you are likely to see sports betting advertising.
This is of course not America’s first rodeo with the ubiquity of gambling, or gambling-adjacent, advertisements. The daily fantasy sports advertising blitz of 2015 stands out as likely the most prominent example.
In an episode of deja vu all over again, it appears that the industry is going down a very similar path to the 2015 experience. The advertising spending in 2015, undoubtedly, contributed to daily fantasy companies facing increased scrutiny from regulators, and it is likely that the current sports betting spending are likely to result similarly.
The simple solution would be for everyone in the industry to tone it down a notch, be really careful with promos, be sure that every promotion has clear terms, and is only targeted to people who should be receiving the information. But that seems unlikely to happen.
Sports betting ad fines are here
In response to violations of state (and provincial) rules, some states have punished operators for not complying with advertising rules. An example would be mailing promotional materials to excluded or prohibited individuals.
There has been significant disparity in the fines handed down. They range from four figures, which seems unlikely to have much of a deterrent effect, to six-figure punishments, with Ohio and Ontario seemingly being the most aggressive in slapping wrists. But, at the end of the day, we continue to see violations over and over again.
Do the fines matter?
With companies receiving fines across jurisdictions the question is: do the fines have any effect? It appeared that Massachusetts was giving close scrutiny to companies’ behavior and sanctions in other jurisdictions.
At the end of the day, state regulators still approved even the companies that they scrutinized most, even if only temporarily.
Is it the same everywhere?
Stripping a license or authorization to operate is extreme. Even the United Kingdom, which has a lot more experience regulating sports betting and more stringent regulations related to advertising, has shied away from extreme punishments.
While it is uncertain what recommendations will come if the UK white paper detailing a suggested advertising overhaul is ever released, if the North American market continues down its current path, it is likely that they too will face calls for intervention.
The elephant in the room on sports betting advertising
In the U.S., the First Amendment presents a challenge for regulators looking to rein in sports betting advertising. But while the First Amendment might take a blanket ban off the table, it does not present a total bar to tailored restrictions.
The Supreme Court has struck down gambling advertising restrictions that went too far, but the government still has fairly significant latitude to restrict commercial speech, provided:
- Step one is establish that the speech is legal, illegal speech is not protected;
- Advance a government interest; and,
- Be narrowly tailored to advancing that government interest.
How decisions translate to states
What this translates to is a significant ability to rein in certain types of advertising. At the state level, regulators may have even greater authority to impose restrictions given the permissive nature of sports betting licenses.
We already see state regulators impose various requires surrounding sports betting advertising and sanctions for violations. Through the licensing process, states may have more ability to impose advertising restrictions than the federal government.
While the First Amendment will mean that a federal ban on sports betting advertising is likely not in the future, it does not foreclose on the possibility that the federal government could attempt to regulate sports betting. The reality is that states could likely (without even addressing federal issues of getting anything done) much more easily craft stricter guidelines around advertising to better protect vulnerable groups.
Alcohol and tobacco as sports betting advertising model?
While many in the gaming industry cringe at comparisons to the alcohol industry and even moreso the tobacco industry, lawmakers are unlikely to have serious qualms about treating gaming in a similar fashion to how that advertising is restricted, should there eventually be a legislative consensus.
Many tobacco advertising restrictions have come as a result of most states signing onto the master settlement agreement with the tobacco companies, which as one of the terms saw the companies agree to significant advertising restraints. The Federal Trade Commission (FTC) has fairly extensive power to put reins on advertising that it finds unfair or deceptive, which as former Commissioner Roscoe Starek III described in 1997, “an unfair act or practice is one that causes or is likely to cause substantial injury to consumers that is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or competition.”
While Starek was discussing tobacco advertising, specifically the Joe Camel campaign, it is conceivable to see how some might argue that the standard could extend to some gambling ads.
What to make of potential ad ban?
Sweeping changes to regulations do not appear imminent, but the increased attention on sports betting advertising has undoubtedly raised a number of questions among all levels of government as to whether something needs to be done.
Sports betting ads continue be an unavoidable part of television and radio, to the point that they are annoying even many sports bettors. While annoyance is one thing, compliance failures such as mailing promotions to those on restricted lists are eventually going to add up to legislative action if the industry cannot shape up itself.