A Nielsen study shows how sports betting can help the NFL

Legalized sports betting may be the way for the NFL to do business, according to a recent Nielsen study.

Is gambling the future marketing campaign for the wide world of sports? A recent Nielsen study found that that there is much more interest in the NFL when betting is involved. But in consideration of all the political hurdles sports betting faces, is it really worth the task and trouble?

The gambling associated with fantasy sports leads analysts to believe that it’s a symbiotic relationship. Whether you’re staking last week’s pay stub at Churchill Downs or borrowing from a student loan to use towards a UFC match, gambling can be seen as a powerful revenue stream for a sports landscape that is constantly in need of reinvention.

Furthermore, sports betting can create a new crop of target markets to replace the veteran fan. Stigmatize by it’s former association with the mafia, the objective of organized crime has remained intact in sports betting (legal or otherwise) since then: generate revenue. That benefactor by itself can help prop up the growth of an sports industry that is constantly in flux.

NFL & college football bets projected to top $90 billion in 2016, 98% wagered illegally (via @AmerGamingAssn)
— Darren Heitner (@DarrenHeitner) September 7, 2016

In its 1920s debut, organized crime evolved with the help of New York’s five families: Genovese, Lucchese, Bonanno, Gambino and Colombo. Many mob bosses relied on runners to conduct their illegal gambling businesses, fighting detection by law enforcement. Their underground operations were eventually challenged by the district courts in the 1970s. In the proceeding decades, the mafia dissolved, but their level of commitment in racketeering remains untouched.

Shortly before the mafia’s reign, the sports community got a taste of illegal business practices when the 1919 Chicago White Sox were accused of fixing the World Series. The incident, tagged the Black Sox Scandal, involved eight White Sox players, including “Shoeless” Joe Jackson, who supposedly altered their performance during a series with the Cincinnati Reds. The reward for doing so was cash and for White Sox 1B Chick Gandil, his promised sum of $20,000 turned into just $5,000.

A scandal that influenced Eight Men Out, a novel and 1988 film of the same name, the Black Sox pinned sports betting on the map as a business plan for wrongdoers. In the case of the eight White Sox players, all were banned for life for their participation in money laundering. But what kind of repercussions would future bettors face for similar run-ins?

For a long time sports betting lived in the shadow, as an excess constrained to Las Vegas or the internet, still tainted by the scent of scandal and organized crime. Even though daily fantasy sports dates back to 2009, it wouldn’t be until 2015 that the “entertainment” of sports betting got the publicity it needed to really step out of the shadows. As a result of this newfound exposure, a manifest of objections followed; it began with the question of morality and the debate of legal vs. illegal.

Many challenges lay ahead for states that want to be acknowledged as a safe haven for sports bettors. Mainly because of the mafia, though, legal barriers were erected, starting in the 1970s. Congress beefed up its security for the fight against illegal gambling by first introducing the RICO Act, which was later followed by two major puzzle pieces, PASPA (1992) and the Unlawful Internet Gambling Act (2006).

Together, these three pieces of legislation would plot a handful of prosecutors into the seats of courtrooms, including the Governor of New Jersey, Chris Christie.

Most court cases arose from failure to meet the expectations of PASPA, a law so peculiar in its wording that it’s hard not to bump into. Other than that, most souls of contemporary sports betting made deals with the devil once internet usage expanded. As a consequence of the building numbers of sites that encourage gambling, the Unlawful Internet Gambling Act came to be and crashed the party.

Unlawful Internet Gambling Act

A mandate that has effected nearly every online gambling website since 2006, the Unlawful Internet Gambling Act is the antagonist of it all. In short, transactions between the site and its customers are monitored. If a transaction is listed as “restricted,” then a red flag is raised.

Online poker is the clear target in this instance, but with this new internet police, many sites have uncovered loopholes, like offshore payments.

Professional and Amateur Sports Protection Act (PASPA)

PASPA is another big man on campus. It’s also one of the first laws to allow a state rights in managing illegal gambling.

Used as a defense mechanism by Congress against the organized crime of the early days, PASPA was inaugurated into law after it was considered just a collection of acts, which were passed by Robert Kennedy.

Also known as the Bradley Act, PASPA stressed the following:

"“It shall be unlawful for [either] . . . a governmental entity . . . or a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.”"

Other than Nevada, only a few other states are allowed to run a legal gambling operation. Jack Markell, then-Governor of Delaware, tried to elect his state into the discussion, but the proposal failed due to violation of PASPA.

Racketeer Influenced and Corrupt Organizations Act (RICO)

The grandfather of the anti-organized crime laws, RICO was enacted in 1970. It provided the stomping ground in dissolving the mafia and even the biker gang, Hells Angels.

The purpose of enlisting RICO was to stop the “infiltration of organized crime and racketeering…in interstate commerce.”

Lawmakers felt that racketeering added a negative image to the states in terms of economic development. If one’s to set-up a business, then it should qualify as a legal entity (pay its own taxes, etc.).

RICO doesn’t have a place in sports betting, but it’s the founding father behind PASPA and the Unlawful Internet Gambling Act.

How did these translate into sports? What amount of power, if any, would be exercised against the disobedient citizen?

With Nevada already a veteran of the limelight, a couple of states off the Eastern Seaboard joined the festivities. First, Delaware was sued by the NFL because a state-sponsored lottery promoted gambling with the NFL’s name attached to it. Secondly, the Vegas of the East, New Jersey, has been struggling with the Supreme Court lately to legalize sports betting.

NFL vs. Delaware

The NFL sued the State of Delaware after learning about a statewide lottery that used the NFL brand without permission. In 1977, the Delaware State lottery was questioned based on three games it offered: Football Bonus, Touchdown and Touchdown II.

The NFL wasn’t a fan of Delaware’s football lottery and league representatives felt that it undermined the basics of intellectual property.

In a poll conducted during the trial, 50% of respondents said this act of gambling would negatively affect the NFL and 30% said it takes sportsmanship out of the game.

NCAA vs. Chris Christie

A state recently rejected by the Supreme Court to allow legalized sports betting, New Jersey and Governor Chris Christie have always visualized the probability of joining Nevada in legalized sports betting.

It started with Christie passing a bill in 2012, permitting bets on both amateur and professional sports at casinos and racetracks in Atlantic City. The NCAA caught wind of this and eventually threatened legal action against Christie.

The NCAA thought that Christie and his Sports Wagering Law of New Jersey not only discredited PASPA, but would also cripple the integrity of amateur sports.

Since the boom of the sportsbook in 1992, sports gambling is an unstoppable force. And with about three billion people on the Internet every day, the online presence of sports gambling makes the industry invincible and there are two prime players paving the way.

A mandate that has effected nearly every online gambling website since 2006, the Unlawful Internet Gambling Act is the antagonist of it all.

Founded in 2009, FanDuel is the original cast member in daily fantasy sports (DFS). As of late 2015, FanDuel CEO Nigel Eccles and his team savored $275 million in Series E funding from New York-based law firm KKR (Kohlberg, Kravis and Roberts) and Google Capital. A year earlier, FanDuel also boasted some girth in its number of users (~a million) vs. the amount of prize money ($550 million) given to players.

Although sports betting is a sensitive topic in professional sports, FanDuel has partnered with the NBA and 16 NFL organizations to promote their product. If that’s not enough hypocrisy, then the countless FanDuel commercials on sports networks and the over/under values on ESPN’s College Gameday highlight the foggy judgment of the gaming and sports industries. Even the Jacksonville Jaguars have a lounge at EverBank Field called FanDuelVille.

Through one success of another comes competition and FanDuel realized that fate in daily fantasy sports when DraftKings came around in 2011.

Dubbed the new kid on the block, DraftKings swung their bat furiously by acquiring partnerships with the MLB, NFL and NHL. In 2015, FOX Sports showed their love by donating $150 million to the Boston-area company, of which has three co-founders: Matt Kalish, Jason Robins and Paul Liberman. By offering their DFS service, DraftKings secured the same level of traffic, but handed out over $1 billion in prize money in 2015 – an obvious advantage over their competitor.

Everything might seem well on the surface, but money is, in fact, the root of all evil and both DFS providers got tangled up in legal trouble in 2015.

In The People of the State of New York vs. FanDuel, the New York Attorney General pursued FanDuel and DraftKings. Arranged in late 2015 at the Supreme Court in New York, both companies faced an uphill legal battle pertaining to illegal betting within the state. Eric Schneiderman, New York’s AG, wanted to halt the outflow of money to either FanDuel or DraftKings from customers in New York. In turn, Schneiderman wanted to ban the two from doing business in New York.

This isn’t the first time Schneiderman knocked into FanDuel and DraftKings.

About a month earlier, DraftKings content manager, Ethan Haskell, was investigated for his involvement in a scheme involving a $350,000 pay day from FanDuel. Haskell allegedly leaked player data from Week 3 of the 2015 NFL season. Since he used information gathered from DraftKings to help him with his FanDuel lineup, Haskell brought into light the controversy of online sports betting. Though it’s apparently common for employees of both companies to partake in their rival’s business, the premise of insider trading buried the credibility of sports betting into an inescapable sinkhole.

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