Maintaining Integrity In Legalized Betting Amid Pandemic

By David O'Neil, David Sarratt and Michael McGregor
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Law360 (July 9, 2020, 6:22 PM EDT) --
David O'Neil
David O'Neil
David Sarratt
David Sarratt
Michael McGregor
Michael McGregor
On May 14, 2018, the U.S. Supreme Court in Murphy v. National Collegiate Athletic Association invalidated the Professional and Amateur Sports Protection Act, which had effectively permitted sports betting only in Nevada, opening the door for other states to legalize sports betting.[1]

To date, 22 states and the District of Columbia have taken advantage of Murphy, legalizing some form of sports wagering.[2] Twenty-four additional states have introduced sports betting bills that are under consideration.[3] According to one research firm, by 2024, as many as 40 states could allow sports wagering.[4]

With this changed legal landscape, sports organizations must rise to the challenge of balancing this new means of fan engagement with their ultimate goal of preserving the integrity of their sporting contests.

Without having the consistency of a federal regulation, and against the patchwork of numerous state sports wagering laws, this article: (1) overviews the growth of legal sports betting and integrity concerns in sports; (2) assesses sports organizations' gambling policies designed to protect the integrity of their sports; and (3) recommends other tools that sports organizations can use to further ensure contest fairness.

Given the revenue strains that the COVID-19 pandemic has placed on sports organizations, it remains to be seen if these compliance issues will become more salient as organizations potentially turn to legalized betting to offset their losses.

Where Things Stand: Growth in Legal Sports Betting and Ongoing Integrity Concerns

In the 10 months following Murphy, five major professional sports organizations entered their first official betting partnerships. In July 2018, the National Basketball Association became the first American professional sports organization to announce a deal with a casino and sports book operator.[5]

In the eight months that followed, the National Hockey League,[6] Major League Basebal,[7] National Football League[8] and Major League Soccer[9] entered sponsorship agreements with a gaming or casino partner. Six of the nation's largest sports betting companies now use official league data under multimillion-dollar contracts with organizations like the NFL and NBA.[10]

These partnerships highlight how much sports organizations stand to benefit from legal sport betting. A 2018 report from the American Gaming Association and Nielsen Holdings PLC projects that the NFL, NBA, MLB, and NHL could earn as much as $4.2 billion as a result of legal sports betting.[11] Interestingly, as much as $3.28 billion of that total is attributed to indirect revenue related to increased fan engagement and interest.[12]

Despite this new normal, organizations still face integrity concerns. A 2015 ESPN Inc. poll revealed that 41% of NFL, NBA, MLB and NHL players interviewed believed legal sports betting would challenge the integrity of their sport,[13] and 37% indicated that they have had a teammate they suspected of having a gambling problem.[14]

Similarly, according to a November 2017 study conducted by the NCAA, 11% of Division I football players and 5% of men's basketball players reported betting on a college game in their sport but not involving their team.[15] Among NCAA players who wager on sports, 76% of men and 61% of women held the belief that sports wagering is a harmless activity.[16]

Wagers on specific in-game events have raised particular concern. The NCAA study notes:

We continue to have concerns that wagering enhancements such as live in-game betting (odds generated in real-time for participants to bet on various aspects of a game as it unfolds) could present increased opportunities to profit from 'spot fixing' a contest (just a single mid-game event or a portion of a contest needing to be fixed for a bet to pay off).[17]

Bryan Seeley, senior vice president and deputy general counsel of MLB, echoed these concerns:

Any bet where the outcome can [be] influenced by fewer people, or one person, is a bet that poses a greater integrity risk. It's very difficult to fix a nine-inning game, I think most people would agree. It [is] not really difficult for one person to fix the outcome of one at-bat.[18]

Indeed, in-game wagering was at the center of a match-fixing scheme at a 2016 World Cup qualifier that resulted in FIFA banning a referee for life and ordering a replay of the match.[19]

Are Current Sports Organizations' Rules Sufficient?

So, are we ready for this? All the major sports organizations in the U.S. ban athletes from betting on their own sports and related conduct deemed detrimental to the game.[20] Below we examine some of the current gambling-related rules of the NBA, MLB and the NFL.[21]

The NBA's constitution empowers the commissioner to fine, suspend, expel or permanently disqualify players, owners, officers, coaches, organization referees and employees who wager on a game played by a team in the league operated by the NBA.[22]

Article 35A, which governs the conduct of owners, officers, coaches, other employees and referees, prohibits these individuals from directly or indirectly disclosing confidential or nonpublic NBA or team information, such as nonpublic information concerning the medical or personal condition of any player, to any individual or entity, under circumstances where the person knows or should know that such individual intends to use such information in connection with wagering money on an NBA game.[23]

The NBA's constitution also empowers the commissioner to dismiss and disqualify any player from the association if that player is found to have been guilty of agreeing to cause any game to result other than on its merits,[24] and allows for termination of an owner's interest by a three-fourths vote of the board of governors if the owner wagers or supports wagering by his or her employees on any game in which a team operated by a member of the NBA participates.[25]

While the NBA gives the commissioner discretion to determine the appropriate punishment for gambling violations, the MLB punishes covered individuals depending on whether the bettor had a duty to perform in the game on which they placed the bet. Section D of Major League Rule 21 imposes a yearlong suspension on any player, umpire, club, or league official or employee who bet on any baseball game in connection with which the bettor had no duty to perform.[26]

However, if these same individuals bet on any game in connection with which they have a duty to perform, he or she is permanently ineligible.[27] Under Rule 21, the commissioner has discretion impose an appropriate penalty when these individuals place bets with illegal book makers or agents for illegal book makers.[28]

Section A of Rule 21 renders any player or person connected with a club permanently ineligible if he promises or agrees to lose or fails to give his best efforts toward winning any baseball game with which he is or may be in any way concerned.[29] MLB requires that a printed copy of Rule 21, which generally governs misconduct, be posted in each clubhouse in both English and Spanish.[30]

The NFL has issued a standalone gambling policy, which widely applies to full- and part-time club and league personnel, league office employees, players, owners, coaches, athletic trainers, game officials, security personnel, consultants, club employees, game-day stadium personnel and other staff.[31]

The policy prohibits all NFL personnel, as so broadly defined, from placing, soliciting or facilitating any bet, whether directly or indirectly through a third-party, on any NFL game, practice or other event.[32] The policy prohibits all NFL personnel other than players from placing, soliciting or facilitating bets on any other professional, college, international or Olympic sports competition, tournament or event.[33]

The policy also requires that NFL personnel must always give their best effort[34] and prohibits NFL personnel from disclosing nonpublic information regarding any NFL game or event for a gambling related purpose.[35] In order to avoid any appearance of impropriety, NFL personnel are prohibited from: (1) accepting prizes with a value in excess of $250 in any season-long fantasy football game; or (2) participating in any daily fantasy football game regardless of value.[36]

Similarly to the NBA's policy, violations of this policy are to be decided by the commissioner and may include severe penalties, up to and including a fine, termination of employment and/or banishment from the NFL for life.[37] The policy emphasizes that NFL personnel have an affirmative duty to report potential or actual policy violations and that all NFL personnel have a duty to cooperate with any investigation conducted by or on behalf of the league concerning this policy.[38]

The gambling-related provisions discussed above vary not only in where they are hosted but also to whom they apply.

Location of Policies

While it is powerful to include the gambling policy in the sport organization's constitution or to display it in each clubhouse as a testament to the core value of integrity, a standalone policy may be better suited to address the issue of gambling throughout a sports organization head-on.

First, a standalone policy communicates to everyone in the organization that the organization takes gambling seriously. It sets a very clear tone from the top.

Second, each of the provisions discussed above is applicable to individuals beyond players, owners and high-ranking league officials, who may not read the organization's constitution or be present in the clubhouse to read provisions posted there.

A free-standing policy may simply be more accessible. Widespread review of an organization's policy by individuals at all levels will assist in creating an organizational culture in which everyone is engaged in protecting the integrity of the sport.

Finally, a standalone policy provides the organization with the flexibility to develop important procedures, such as reporting channels and a duty to cooperate. As we will discuss below, these functions are critical in ensuring that a policy remains functional.

Scope of Policies

Each organization's policy goes beyond players, coaches, and owners and prohibits gambling conduct of the organization's officials and employees. The NFL is the most rigorous in determining the scope of applicability, including part- and full-time employees and game-day stadium personnel.

It will be interesting to see if these definitions of covered persons expand to include persons affiliated with players. If a player's agent or family member started betting on his or her performance just before a game, such conduct would undoubtedly raise integrity concerns.

As risk evolves, sports organizations' policies must as well. They must be highly responsive not only to an evolving legal framework, but also to associated business risks, such as managing massive fan engagement.

Recommendations

The real challenge ahead will be in the effective implementation of these policies, with clear-eyed risk assessments, monitoring and testing. Each organization's risk profile will be different.

For instance, the NCAA and sports organizations with developmental leagues, such as the NBA and MLB, may have more reason to be concerned that legal sports betting will lead to illegal payments to athletes, who either receive no or substantially less compensation than their professional or major league counterparts. But a few best practices from other areas of compliance are worth considering here:

Auditing

Random, periodic audits of both the sports organizations and their member teams provide one tool to ensure that betting policies are working properly to identify and rectify integrity concerns. Audits should take into account whether there are particular member teams or regional offices where gambling-related risk may be more likely to exist.

Such audits can be in the form of an ethical awareness survey, which would likely provide valuable insight into the kinds of behavior main office employees, team employees, coaches and athletes perceive to be permissible under the organization's gambling policy.

The answers provide a rich dataset that the sports organization can mine for improvement of internal controls and identification of high-risk areas. While we recommend these audits be done at least annually, they should also be done specifically in relation to crown jewel events, such as the Super Bowl or March Madness. These events are likely to correspond to higher incidents of sports wagering, and any controversial plays or officiating calls, or buzzer-beaters will be subject to the highest levels of public scrutiny.

Communication and Complaints

Appropriate communication channels within sports organizations and with outside entities concerning potential violations will be important. Internally, sports organizations should foster internal systems of formal and informal communication both within the main office and with teams to encourage the prompt flow and escalation of information concerning possible violations of policy, or sports wagering in general.

This will include ensuring that employees have avenues through which they can safely raise issues within the organization. Similar communication channels should be established with sports wagering operators so that sports organizations can be alerted to abnormal sports wagering patterns or trends, particularly involving the activities of people just outside the ambit of those covered by sports organization policies, e.g., a player's relative or agent.

Conclusion

As states continue to adopt sports wagering legislation, sports organizations should be diligent in protecting the integrity of their contests. This will be a dynamic process as the risk associated with gambling continues to evolve and the level of gambling-related fan engagement has not yet been fully realized.

Finally, it will require collaboration internally with various departments and operating units within sports organizations and externally with traditional advisors, such as law firms, and potentially, new allies, such as sports wagering operators.



David O'Neil and David Sarratt are partners, and Michael McGregor is an associate, at Debevoise & Plimpton LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] Murphy v. NCAA , 138 S. Ct. 1461 (2018).

[2] Ryan Rodenberg, United States of sports betting: An updated map of where every state stands, ESPN, https://www.espn.com/chalk/story/_/id/19740480/the-united-states-sports-betting-where-all-50-states-stand-legalization (last visited Mar. 11, 2020).

[3] Id.

[4] Bob Woods, Making a wager? Half of Americans live in states soon to offer sports gambling, CNBC (July 10, 2019), https://www.cnbc.com/2019/07/10/half-of-americans-live-in-states-soon-to-offer-sports-gambling.html.

[5] Chris Isidore, Place your bets: The NBA just struck a deal with a casino, CNN Business (July 31, 2018), https://money.cnn.com/2018/07/31/news/companies/nba-mgm/index.html.

[6] Dan Rosen, NHL, MGM Resorts form sports betting partnership, NHL (Oct. 29, 2018), https://www.nhl.com/news/nhl-mgm-resorts-sports-betting-partnership/c-301392322.

[7] MLB, MGM announce gaming partnership, MLB (Nov. 27, 2018), https://www.mlb.com/news/mlb-mgm-announce-gaming-partnership-c301163068.

[8] NFL selects Caesars Entertainment as first casino sponsor, NFL (Jan. 3, 2019), http://www.nfl.com/news/story/0ap3000001007289/article/nfl-selects-caesars-entertainment-as-first-casino-sponsor.

[9] MLSsoccer Staff, MLS announces multi-year gaming partnership with MGM Resorts International, MLS.com (Mar. 19, 2019), https://www.mlssoccer.com/post/2019/03/19/mls-announces-multi-year-gaming-partnership-mgm-resorts-international.

[10] Khristopher J. Brooks, The new game in town for pro sports leagues: Selling stats, CBS News (Jan. 8, 2020), https://www.cbsnews.com/news/nba-nfl-sports-nascar-leagues-selling-stats-to-gambling-companies/.

[11] Am. Gaming Ass'n & Nielsen, How Much Do Leagues Stand to Gain from Legal Sports Betting?, Am. Gaming Ass'n (Oct. 18, 2018), https://www.americangaming.org/wp-content/uploads/2018/10/Nielsen-Research-All-4-Leagues-FINAL.pdf.

[12] Id.

[13] ESPN Staff, Mag Confidential: NFL, NBA, NHL and MLB pros weigh in on sports gambling, ESPN (Feb. 3. 2015), https://www.espn.com/chalk/story/_/id/12244334/nfl-nba-nhl-mlb-pros-weigh-sports-gambling.

[14] Id.

[15] Trends in NCAA Student-Athlete Gambling Behaviors and Attitudes: Executive Summary, NCAA (Nov. 2017), http://www.ncaa.org/about/resources/research/trends-ncaa-student-athlete-gambling-behaviors-and-attitudes.

[16] Id.

[17] Id.

[18] Michael Silverman, Sports' Great Gamble, Part 3: Future of 'integrity', Boston Herald (Feb. 26, 2019), https://www.bostonherald.com/2019/02/26/sports-great-gamble-future-of-integrity/.

[19] Joseph Odartei Lamptey v. Fédération Internationale de Football Association [FIFA], CAS 2017/A/5173, Arbitral Award (Court of Arbitration for Sports Dec. 4, 2017), https://jurisprudence.tas-cas.org/Shared%20Documents/5173.pdf ; see also FIFA Integrity, Case Summary Joseph Odartei Lampety, FIFA, https://resources.fifa.com/image/upload/case-summary-joseph-ortadei-lamptey.pdf?cloudid=xtqexb5a3zegjzk69gqe (last accessed June 12, 2020).

[20] See e.g., NBA Constitution, Article 35(d), MLB Constitution, Article II, Sec. 3, NFL Constitution, Article 8.13(A).

[21] Our analysis is limited to publicly available rules from these sports organizations.

[22] NBA Constitution, Articles 35(f) and 35A(g)(i)-(iv).

[23] NBA Constitution, Article 35A.

[24] NBA Constitution, 35(b).

[25] NBA Constitution, Article 13(e).

[26] MLB, Major League Rule 21(d)(1).

[27] MLB, Major League Rule 21(d)(2).

[28] MLB, Major League Rule 21(d)(3).

[29] MLB, Major League Rule 21(a).

[30] MLB, Major League Rule 21(h).

[31] Gambling Policy for NFL Personnel.

[32] Gambling Policy for NFL Personnel, 2(1).

[33] Gambling Policy for NFL Personnel, 2(2).

[34] Gambling Policy for NFL Personnel, 2(4).

[35] Gambling Policy for NFL Personnel, 2(5).

[36] Gambling Policy for NFL Personnel, 4.

[37] Gambling Policy for NFL Personnel, 7.

[38] Gambling Policy for NFL Personnel, 6.

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