As state legislatures work to enact legal sports betting as a source of revenue, sportsbooks could find restrictions in their ability to differentiate themselves.
A quick flashback to 2015
To understand where this might be headed, a look back at the DFS halcyon days could be instructive.
The buildup to that season is remembered in part for the ever-present advertising campaigns of FanDuel and DraftKings. It likely ranks as one of the more annoying campaigns in broadcast history. It also might spurred a New York attorney general’s investigation of the two major DFS players. The press release that accompanied cease-and-desist letters to both companies noted:
“[B]oth companies consistently use deceptive advertising to lure consumers into an unregulated online gambling operation that, while marketed as a game that anyone can win, in fact distributes the vast majority of winnings to a small subset of experienced, highly sophisticated players. These winners constitute roughly 1% of all players on the two sites.”
Whether the costly marketing campaign achieved its goals is unknown. The ad spree came with a plenty of unwanted attention from federal and state legislators, but both companies ultimately survived long enough to be potential players in legal sports betting. The acquisition of FanDuel by Paddy Power Betfair and DraftKings’ announcement of a partnership with Resorts Atlantic City place both companies into sports betting — maybe even inviting comparisons they once abhorred.
DraftKings bought billboards in New Jersey in anticipation of its sportsbook’s launch, but questions remain about how broad of an advertising campaign we might see for legalized sports betting.
What restrictions could exist
A 2016 article by David Sheldon points out gambling and advertising have gone hand-in-hand for centuries. Turn on soccer on Saturday morning and see the ubiquity of gambling advertisements across the chest of various European soccer jerseys. Companies like GoldenPalace.com used ambush marketing stunts like streakers or paying a woman to tattoo the company’s web address on her forehead to advertise their casino.
Restrictions do exist though. Countries like the United Kingdom imposed regulations that require gambling companies seeking to advertise to have some presence in the jurisdiction. Others like Canada and Australia have provincial regulations that dictate the time, place and manner in which gambling companies can advertise.
In the United States, the First Amendment clouds the situation. In 2003, the US Department of Justice wrote a letter to the National Association of Broadcasters regarding “Advertising for Internet Gambling and Offshore Sportsbooks Operations.” The Justice Department referred to the letter as a “public service” in stating:
“[We] would like you to be aware that the entities and individuals placing these advertisements may be violating various state and federal laws and that entities and individuals that accept and run such advertisements may be aiding and abetting these illegal activities.”
Deputy Assistant Attorney General John G. Malcolm continued:
“Notwithstanding their frequent claims of legitimacy, Internet gambling and offshore sportsbook operations that accept bets from customers in the United States violate Sections 1084, 1952, and 1955 of Title 18 of the United States Code, each of which is a Class E felony. Additionally, pursuant to Title 18. United States Code. Section 2, any person Or entity who aids or abets in the commission of any of the above-listed offenses is punishable as a principal violator of those statutes.”
Malcolm concluded by asking the association and its members to note that accepting advertising dollars from offshore gambling operators should be treated similarly to accepting advertising dollars “for illegal narcotics sales, prostitution, child pornography or other prohibited activities.”
There are limited federal laws restricting advertising. While Malcolm sought cooperation from media companies in the Justice Department’s war against offshore gambling, there are questions as to how much the government can restrict legal sports betting advertisements.
Some federal gambling statutes might remain in play for interstate transmissions, notably the Wire Act. The overall discussion becomes much more nuanced and arguments that gambling advertisements can be broadly prohibited likely will be re-examined.
How the First Amendment factors in
The First Amendment treats political and commercial speech differently. For the government to restrict commercial speech, it must show that doing so would further an important government interest, and the way they have gone about it must be “substantially related to that interest.”
In the context of gambling advertising, some restrictions might be found to serve an important government interest. In addition to a lower level of First Amendment protection, commercial speech receives no protection if it is false or misleading, which could chill certain gimmicks.
An interesting case at the Supreme Court
The Supreme Court fairly recently addressed gambling advertising on two separate instances (not sports betting.) In United States v. Edge Broadcasting, the high court dealt with an argument raised by Edge that a statute prohibiting the broadcasting of lottery advertisements for an out-of-state lottery in a non-lottery state violated the First Amendment.
The government argued:
“first that gambling implicates no constitutionally protected right, but rather falls within a category of activities normally considered to be ‘vices,’ and that the greater power to prohibit gambling necessarily includes the lesser power to ban its advertisement.”
The Supreme Court did not address this argument, instead finding there is a substantial governmental interest in “balancing the interests of lottery and nonlottery States.” The ruling found that the First Amendment was not infringed upon by the federal statute that Edge sought to overturn.
Another ban struck down
Six years later, the court reached a different conclusion in a similar case.
In Greater New Orleans Broadcasting Association v. United States, the Supreme Court dealt a blow to advertising bans. It unanimously ruled that a federal ban on television and radio broadcasts of casinos violated the First Amendment.
The decision highlighted that the challenged statutory section:
“sacrifices an intolerable amount of truthful speech about lawful conduct when compared to all of the policies at stake and the social ills that one could reasonably hope such a ban to eliminate.”
The decision in Greater New Orleans is likely to be important moving forward as sportsbooks try to brand themselves.
What to take away
Do not expect a DraftKings and FanDuel circa 2015 advertising blitz. While sports betting advertising likely remains largely protected by the First Amendment, it is important that commercial speech does not enjoy the same freedom as other speech.
There also likely are arguments to be advanced for reasonable restrictions on ads targeting children, as well as for the inclusion of warnings about or information on problem gambling.