After nearly eight long months without NFL football, we have once again been graced by America’s favorite gambling subject. If you live in a state with legal sports betting, there is no way you could not have known via sportsbook advertising that football is back.
Advertising dollars are flowing freely in states across the country as DraftKings and FanDuel try to keep their place on top of the sports betting universe, and everyone else is trying to win over customers.
The advertisements are so ubiquitous if you went to sleep in September 2015 and woke up last week, you might not have noticed a difference except that “daily fantasy” – which seemingly was always a placeholder – has been replaced by “sportsbook.”
The advertising is annoying, and it is everywhere: television, radio, buildings, and the subway. Its ubiquity recently drew the ire of the director of the New Jersey Division of Gaming Enforcement, David Rebuck, on a webinar hosted by gaming supplier GeoComply.
Rebuck’s comments on sportsbook advertising
Rebuck highlighted three areas of concern with regards to sportsbook advertising:
- The sheer quantity of advertisements
- Confusing terms for bonuses
- Lack of emphasis on responsible gambling
As LSR reported, Rebuck warned operators, stating:
“Don’t allow your marketing staff to operate unchecked. They can get you in a lot of trouble because they have different objectives to you. They are not thinking about compliance. We understand the business need. They want to attract people and be creative but they cannot be unchecked.
If they are, they will be checked by us and it will happen in a way you won’t be happy with.”
Rebuck even noted that promotions could be blocked until the DGE pre-approves them.
Putting the cat back in the bag?
The big challenge for regulators is that the situation already made it to the point where it is. Daily fantasy advertising in 2015 only really came to a head after the then-New York Attorney General targeted DraftKings and FanDuel under a consumer protection legal theory.
But unlike in 2015 with a virtually unregulated product, sports betting is now a regulated product with a set of rules in place for operators. So tamping down what is already happening can be quite a challenge; just ask the UK.
Limiting advertising in the United States is more challenging than in other legal gaming jurisdictions around the world because the First Amendment permits a wide variety of speech even if regulators might not like it. Yet despite the First Amendment, there are several potential avenues to reel in the out-of-control media blitz.
The First Amendment
As we wrote (with a pretty solid prediction) that this issue would become a focal point less than a month after the Supreme Court struck down the Professional and Amateur Sports Protection Act, various jurisdictions around the world place heavy restrictions on gambling operators’ ability and means of advertising, But in the United States, that is harder.
The first threshold that the government has to meet mandates that to restrict commercial speech of the variety that sports betting advertising is, the government must show:
- the restriction furthers an important government interest
- the action taken must be substantially related to that objective
Regarding Rebuck’s complaints about confusing terms and conditions, regulators would generally be free to enact bans on false or misleading advertisements, as the Supreme Court’s jurisprudence has declined to extend commercial speech protection to false and misleading advertising.
Third time’s the charm?
Two previous efforts to ban gambling advertising have been struck down at the Supreme Court: first in the 1993 case, the U.S. v. Edge Broadcasting, and then again in 1999, in Greater New Orleans Broadcasting Association v. U.S.
With that said, regulators might be able to craft restrictions in a way that satisfies the rational basis test that a court is likely to apply.
However, in order for a policy restricting advertising to satisfy constitutional scrutiny, it would likely need to be carefully tied to the government’s objectives and be narrow in scope.
A few options on sportsbook advertising
While an outright ban on sports betting advertising is unlikely to satisfy First Amendment scrutiny (nor was that what Rebuck mentioned,) various vice industries have curtailed their advertising “voluntarily.” Most notably, the tobacco industry ceased many types of advertising as part of their 1998 Master Settlement Agreement with 46 states.
Other industries, notably in alcohol, largely regulate advertising via self-regulatory organizations. As membership is voluntary, these self-regulatory bodies have the ability to regulate without the same constraints as the government. This is a dominant model of regulation in many professional industries including law, and securities dealers.
Indeed, self-regulation is likely the preferred means to address a maturing US sports betting industry, whether via the American Gaming Association or some other organization. However, until the industry can establish that it is competently able to self-govern, it will always face a threat of a policy being imposed.
It is also worth noting that the permissive (rather than right-based) nature of licensing could allow regulators some leeway to impose restrictions more easily than a new law with severe restrictions on advertising. However, attempting to impose restrictions after licenses have been issued would likely be met with challenges from operators who met the conditions of licensure at the time of application.
The best-case scenario is that the sports betting universe can come up with a plan to self-regulate, either under an existing apparatus or a new apparatus.
However, it is not clear, given what has happened with other governing bodies in related spaces, if everyone in the industry wants to play by the same rules at this time.