How Tech Threw Sports Betting a CurveballReading Time: 7 minutes
Sport Gambling’s Riskiest Bet, Why sports betting is everywhere.
If you watch live sports these days, there is one thing—besides the athletes, the announcers, and the play-by-play—that’s always there: betting. A 2018 Supreme Court decision made sports betting legal, and since then, it’s become seemingly inextricable from every aspect of big-time sports. You can’t turn on the TV or use the internet or even listen to a podcast without the ever-present opportunity to take the over or the under.
On a recent episode of What Next: TBD, I spoke with John Holden, an associate professor at Oklahoma State University, about the crucial role of technology in betting’s domination of live sports. Our conversation has been edited and condensed for clarity.
Obviously, sports betting is not a new thing. Can you walk us through the history?
Sports betting and sports are probably a little bit of chicken-egg: What came first? We can look back to ancient Greece—there was betting back then. So, sports and gambling have always been connected. In the U.S., we’ve gone through different waves of how we view gambling, both sports betting and gambling more broadly.
After World War II, there were big concerns about gambling and its connection to organized crime. Back in the 1950s, there was the Kefauver Committee, which was a famous 13-, 14-city tour by Senator Estes Kefauver, and he went around and he interviewed a number of organized crime figures. It really shone a light on what organized crime does in the United States, and one of the things to come out of that was that sports betting was one of their primary moneymaking operations. During this time, we also saw the emergence of Nevada and Las Vegas, and there’s obviously some organized crime overlap there.
For a while, Nevada was basically a lone gambling outpost. Then, tribal lands started experimenting with gaming in the ’70s and ’80s, and a few states saw that and thought gambling might boost tax revenue and help them recover from the brutal recession of the early ’80s. What happened next?
New Jersey and New York were all considering sports betting, and at this time the sports leagues didn’t like the idea that more states would have betting. The fear at the time was that more sports betting would lead to more game fixing. Major League Baseball and all the other sports leagues really had this fear that if we had legal betting, we would see the 1919 World Series just repeat itself over and over again and it would effectively spell the end of organized sports.
What ends up happening is, over three years, the professional sports leagues and the NCAA lobby Congress to pass a law. Congress couldn’t pass a law banning sports betting because Nevada’s gaming interests were simply too strong. But what they did do was they passed a law freezing gambling in place as it existed in 1992.
So, it effectively banned sports betting, except for Nevada?
But slowly, the positions of the major sports leagues began to shift. New Jersey legalized some sports betting in 2012, and even though the leagues were fighting with New Jersey, they began to realize that the national mood was changing. What did that shift look like?
NBA commissioner Adam Silver writes a New York Times op-ed, and it says, not only should sports betting be legalized, but the federal government should regulate it. He said, there’s $400 billion going offshore—MediaDownloader had an article around 2014 talking about how this number is completely made up—but the idea was that all this money’s going offshore, we’re not taxing it, we can’t see what’s happening. Let’s bring it on shore and regulate it.
A version of the New Jersey fight went all the way to the Supreme Court, and in May 2018, sports betting became legal. A few companies capitalized right out of the gate because they were already dominating the world of online fantasy sports. What was the key to their success?
Daily fantasy sports really served as a test run for the U.S. market, for whether society was ready for this shift toward legalized gambling. It also allowed the sports leagues the ability to see the reactions that people had to them partnering with these companies. At one time, a number of sports leagues owned pieces of these daily fantasy companies and every league and most teams had a partnership with daily fantasy companies. It became ubiquitous around the country. Despite the fact that [fantasy sports] existed within this sort of questionable legal space—where people weren’t sure, Is this gambling? Is it fantasy sports?—the product survived and it continued to thrive up until the opportunity to legalize [sports betting] after the Supreme Court.
FanDuel and DraftKings command a huge market share right now. Were they able to just carry all their fantasy players along with them the minute the Supreme Court said ‘go’?
A lot of people thought that what would happen is the legacy brands from Nevada—the MGMs, the Caesars, the William Hills, the companies that have been running sports books for years—would be the ones that consumers would gravitate to. What we saw was that no, people wanted to use FanDuel and DraftKings. They’ve been playing on these platforms for years. They’re familiar with the user interface, they’re familiar with how the deposit systems work. And the two daily fantasy giants have really turned sports betting on its head and, at the moment, control somewhere in the neighborhood of 70 to 90 percent of the market, depending on the month.
What’s the role of technology in enabling this kind of betting?
We know that when the internet became a household staple, two things emerged: porn and gambling. You get new technology, you immediately get the vice industries. There’s been internet gambling since 1995, and people became familiar with that. As technology advanced, so did gambling technology. When sports betting was legalized, a lot of people who perhaps are less familiar with the offshore world of sports betting thought that people would want that Nevada experience—going to the sports book, seeing the 50 TVs, the big couches, you go up to a window, you place a bet. But what we found after is that no, people don’t actually want that.
That’s something that Las Vegas does very well and that’s why you go to Las Vegas. If you’re in New Jersey or Delaware or North Dakota, people want to bet from their couch, they want to bet from their phones. So what we’re seeing now is 90 to 95 percent of all bets are being placed online.
So it really is an internet thing?
In the U.S., advertising and marketing around sports betting is everywhere. Is it the same in Europe?
Europe is not a monolith, and perhaps our best country as a mirror would be the U.K. They took a number of steps a few years ago to ban numerous pieces of content from gambling advertising, like making it look like you’re having more fun than it is, making it look like gambling makes you sexy. And we’ve recently seen the publishing of a white paper that pushes even further with recommendations to protect European bettors. One of the things that England has done is that they don’t allow advertising of sports betting during soccer broadcasts, so there’s no gambling advertisements allowed during Premier League soccer games—that’s one of these things that their research shows lessens irresponsible gambling.
There are also colleges with exclusive betting relationships with particular companies. What do you make of that?
There was a lot of controversy when the University of Colorado signed a deal with PointsBet whereby PointsBet would be the official gambling partner of the University of Colorado athletic department. After the controversy broke, a number of schools were much more quiet about their partnerships, but it was still happening. We saw Michigan State sign a deal with Caesars. LSU very, very prominently signed a deal with Caesars, and a large number of people received an email informing them that they could get a free bet or something to that extent from Caesars if they had a ticket to the game. It really raised a lot of eyebrows about whether sports betting companies should be associated with college sports and, to a bigger extent, whether they should be allowed on campuses where the majority of undergraduate students are still under 21, which is sort of the default age for legal gambling.
The extent of these partnerships certainly varies. I’m sure you’re like me; you receive a lot of emails, and you’re like, How did I get on this mailing list? Mailing lists are one of the valuable commodities that people have, so it’s not surprising that Caesars or PointsBet or FanDuel want access to a large list of customers that are in sort of their target demographics. State laws and gambling regulations around the country prohibit targeting underage bettors. We have seen, however, that this does happen occasionally—underage bettors or people who are on self-exclusion or prohibited lists are receiving sports betting content that they shouldn’t be.
In the past few weeks, there have been a series of sports gambling scandals. For example, at least 41 athletes at the University of Iowa and Iowa State are being investigated for betting on sports, which is against NCAA rules. Then, the University of Alabama’s baseball coach was fired after being linked to suspicious bets. This all feels like a critical mass. Do you think there is any sentiment—either from the public or from lawmakers—that maybe we’ve gone too far?
I think some states are feeling this. We saw Rep. Paul Tonko from New York introduce legislation that would ban gambling advertisements in Congress. We are hearing rising calls for something to be done. We have now seen the American Gaming Association, the chief industry group, put out new guidelines around advertising, and a conglomeration of operators and sports leagues put out their own guidelines largely echoing the themes of the American Gaming Association. The question is, can they do it? The reality is, simply not advertising on college campuses is not going to be enough to stop this. You have to tone down the broadcast during the games.
I think the bigger issue with gambling restrictions would be the First Amendment. Rep. Tonko’s initiative—that would effectively give it the cigarette treatment and say no advertising—would run into problems. I don’t think that we have the history around gambling that we have around tobacco that would allow it to survive a First Amendment challenge. We could probably place some guardrails around the advertising, but a blanket ban would likely face a challenge and probably be defeated.
So, where is this all going?
That’s really the billion-dollar question. I think a lot of people expect that in the next five years we’re going to see some things come out that we don’t like. We’re likely going to see problem gambling numbers rise. We’re going to see questions about how much tax revenue this has actually brought in. For the gambling companies, the big objective is to have sports betting as a placeholder—much like daily fantasy sports was—until online gaming, online casinos are legalized, because there’s much better profit margins. Around the country, we’re going to see a lot more care be put into how we go about legalizing this.
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