Editor’s note: Legal Sports Report consulted multiple sources including attorneys and industry experts to compile the following summary about where mobile sports betting takes place.
If a bettor is in her house and sitting down on her couch as she places a bet to an in-state sportsbook, where does that bet occur?
This sounds like a simple question, but perhaps like “The Dress,” there are two options and both appear reasonable.
The first obvious possibility is that the bet is made where the bettor’s phone is physically located. The second obvious answer would be that the bet is placed where the sportsbook is located.
But there is a third possibility: the bet is placed where the server that receives and dispatches it is located. This might or might not be where the sportsbook stands.
Despite the apparent simplicity of the question, the answer probably depends on where the question is being asked, and maybe even who is asking. And how courts view the answer could have a seismic effect on which states choose to offer mobile sports betting in the United States.
Why are we asking about this?
The location of where a bet is made has been newsworthy for the last several years in the sports betting context.
That’s in large part because the location of where a bet is made has been a focal point to the question of whether New York needs a constitutional amendment to have mobile sports betting. Legislative proposals this year for NY sports betting make the assumption that server location is paramount.
The constitutionality of mobile betting in New York was researched by at least five different law firms in 2018-2019, with many of the opinions touching on this question of where a bet is placed.
1) Friedman, Kaplan, Seiler & Adelman LLP memo
This memorandum, drafted for FanDuel and DraftKings, was tasked with answering two questions. The second question addressed the issue of where a bet is made.
The memorandum first uses a contract law case as an illustration, which held that a contract was made in the jurisdiction where it was accepted. By analogy, if a bettor is an offeror (of a betting contract) and the bookmaker is the offeree (or the party capable of accepting,) the bet would be placed where the acceptance takes place.
Under this logic, if servers accepting a bet are located in a casino with a sportsbook, the bet would be deemed to be made at the sportsbook – even if the bettor was not in the building.
However, the memorandum does cite another case whereby a bettor in New York was found to have violated state law by engaging in gambling even though gambling was legal in the jurisdiction where the bet was accepted. This separation makes clear that there is no absolute certainty.
2) Holwell Shuster & Goldberg memo
A second memorandum written for FanDuel and DraftKings found similarly that if servers are housed at casinos, then for purposes of the analysis, the bet was placed at the casino.
It argues that if there were a need for patrons to be physically present, the legislature could specify that. But by not specifying the need for patrons to be physically present it was likely permissible provided servers were on-premises.
3) Debevoise & Plimpton memo
A memorandum for FanDuel argued that New York law determines that a bet is deemed made where it is accepted.
The memo cites a 1978 case involving horse racing that states the location of a bettor at the time he places a bet does not matter. The implication is that it’s where the bet is accepted that is significant.
The memorandum provides a number of illustrations of courts finding that where a bet is accepted is the determining factor, however, it notes that there are detractors.
4) Jenner & Block memo
An additional memorandum was prepared for the Madison Square Garden Company and found support for the proposition that mobile betting under the proposed New York regulations would likely be deemed acceptable.
5) Gibson Dunn white paper
A final white paper analyzing, in part, the constitutionality of mobile betting in New York was prepared by the law firm Gibson Dunn (of New Jersey sports betting lawsuit fame.)
The white paper found that under the legislation they analyzed, mobile wagers would likely be deemed to occur at a casino, if that was where the servers were physically located.
There appears to be support for the contention that a bet, in some circumstances, can be deemed to be made where it is accepted. In the above-examined cases, the servers were proposed to be located at the casino.
There are, however, some questions that still loom even within the state-level case law. This is a largely uncontemplated question; legal mobile betting remains very new. So much of the conversation is being driven by situations that are analogous but not a perfect match.
One potential way of clarifying uncertainty is for legislation to explicitly state that wagers are deemed placed at the location of the server. This is the case in multiple state-level sports betting bills in 2021, so we could be on our way to an answer.
The federal view
The debate over where a bet is made has occasionally come up. Various criminal law cases have rejected arguments that because wagering was permissible in the end jurisdiction, the activity was permissible in the originating jurisdiction.
Though not directly adopting a different approach than some of the state cases, there is some uncertainty on the idea that where a bet is accepted is a definitive answer for where a wager is placed.
In 2002, the federal government’s General Accounting Office (GAO) released a report that provided a bit of light on the question of where a wager is made. In regards to a case involving the Coeur D’Alene tribe, the report stated:
A recent case addressed some of the issues and raised the question of whether Internet gambling takes place on tribal lands when bettors who are not on tribal lands use their home computers to access Internet lotteries via computer servers that are. The case involved the question of whether the state of Missouri could prevent a Native American tribe in Idaho from accepting money from Missouri residents via a lottery Internet site. After dismissals, removals, and appeals, the case was eventually settled, but it is unclear whether the court resolved the issue of whether Internet gambling takes place on tribal lands when the Web site is located on those lands.
The GAO report noted that this question was also one that was open in Canada as well.
A recent case from the Ninth Circuit Court of Appeals in a case involving the Iipay Nation of San Ysabel, held that the Iipay Nation could not operate an online bingo site within the scope of their gaming compact within California merely because even though the servers were located on tribal land, it did not mean that the activity occurred on tribal lands according to the court.
So where is a bet made?
It remains something of an open question. It is not beyond the realm of possibilities that state courts and the federal courts could reach different conclusions.
Indeed, there are potentially even different results depending on which state is being looked at. While not a surefire fix in all states, it would likely clear up at least some ambiguity if as states passed sports betting legislation, they designated the location of mobile bets.