The Alliance of American Football might be dead, but MGM Resorts doesn’t want to see its sports betting technology buried alongside it.
As part of its Chapter 7 bankruptcy proceedings, the defunct league would agree to surrender its intellectual property to MGM. The AAF spent millions of dollars developing a proprietary in-play betting app that never materialized, partially with funding from gambling partner MGM.
Now MGM wants its money back, and the tech it invested in too.
MGM moves to acquire AAF sports betting assets
The two companies have agreed to settle at least a portion of the claim in lieu of squabbling in court. Under the proposed agreement, MGM would pay $125,000 for the AAF sports betting assets and reduce its total claim from $7 million to $5 million.
Trustee Randolph Osherow submitted the settlement agreement to the court Wednesday. The agreement must be approved by a bankruptcy judge before it goes into effect and likely will require a waiting period for competing claims.
MGM invested a total of $7 million in the AAF dating back to September 2018, protecting itself with a secured lien against its assets. The league relied on such third-party funding to finance its operations and develop its technology, and the two parties began negotiating a deal as soon as the AAF entered bankruptcy in April.
The filing also mentions MGM’s plans to further develop the platform, as its “value will likely dissipate” over time otherwise.
What is the AAF intellectual property?
We hardly saw any sports from the AAF, let alone any legal sports betting.
The league did offer a glimpse of real-time player tracking via its official app, but the technology had insufficient time to mature into a betting option. Plans to add biometric data into that stream never came to fruition, nor did the predictive game for fans without access to legal wagering.
The end goal was to integrate betting and broadcasts within a single platform, relying on MGM’s license for access to state markets. Just as the league itself hoped to disrupt the established sports landscape, AAF stakeholders hoped their betting product would transform sports gambling.
Perhaps time would have revealed a polished and dynamic product, but the sneak peek underwhelmed.
The filing notes that the parties are aware of competing claims to the IP, possibly from former investor Tom Dundon. At the time of his funding in February, some suspected that his primary target was the league’s gambling technology.
Dundon recently filed his own claim as a creditor, seeking to recover his $70 million investment.
Did MGM make a good deal?
Whatever that technology actually looks like right now, MGM is on course to obtain it for an effective cost of $2.125 million.
The company currently offers online sports betting in both Nevada and New Jersey, having forged a major alliance with GVC to expand elsewhere. MGM’s family of partners most notably includes league-level deals with the NBA, MLB, and NHL.
The AAF technology might find some use as a complement to the existing MGM Sportsbook platform. Still, it’s not clear which components are finished, or which would even be useful for betting.
Back in February, MGM executive Scott Butera told USA Today that the product was “not fully functional, but it’s almost there.” He briefly explained the concept of the app for gambling purposes:
“What it will do, which is very important to us from a sports betting standpoint, is it will allow almost immediate transmission of data and what’s going on in an event to your mobile device, which will allow us to have play-by-play gambling, which is non-existent today.”
He’s right — there is nothing quite like this in the US sports betting market today.
Where’s the value, though?
Development aside, practical questions regarding the real-world use of the tech still linger. Is this as transformative as investors hope?
Probably not, at least for the foreseeable future.
On-field tracking generally requires wearable devices, for starters, an intrusion that players’ associations do not support. Biometrics are likely off the table entirely amid overarching personal health and data privacy issues.
A niche market for next-play betting
Some industry analysts, including Chris Grove of Eilers & Krejcik, acknowledge the value of fast data with a few caveats.
“We think next-play betting is likely to remain a niche activity,” Grove said, “even given advances in technology. Where data-rich leagues like the AAF are likely to see more activity is in forms of betting that draw heavily on data, but have a longer action window.”
It’s similarly unclear whether other leagues would throw their weight behind such technology. While opening up to sports betting in a general sense, some commissioners remain concerned about losing engagement to in-game betting.
There’s nothing proprietary about betting on a single play, but latency and demand continue to act as barriers to such granular forms of betting in fast-paced sports. Time will tell whether or not AAF managed to create a workable solution for MGM before it fell apart.