Now that some of the buzz around the Supreme Court’s 7-2 ruling striking down PASPA has settled down, let’s take a look at the stakeholders in the sports business ecosystem that the decision will affect.
For all their handwringing and fighting against legalized sports gambling, the new law of the land will help sports leagues immensely. Sports gambling increases engagement, and the more engaged the fan is the better. Viewers won’t be tuning out if the game is decided but still within the point spread — we’ll get to this in another section.
It’s simply a case of more money flowing into the entire system. Leagues are going to benefit from increased viewership, greater partnership options, and we haven’t even addressed their “integrity fee” which has been quoted as high as one-percent of top-line wagers.
The leagues are all pushing for some type of federal framework. This would allow leagues to work with regulators on a country-wide level instead of a state-by-state level. Some leagues have been outwardly supportive of legalized gambling — the NBA — while others have said it has no place in the game — the NFL. That will change once they see the extra revenue generated by legalized gambling.
The rumored integrity fee would reportedly be put toward making sure that there are no betting irregularities. Most leagues already keep track of this stuff where they can. Now they’ll have more information. One-percent of top-line wagers is probably a good negotiating anchor, but it will have to come down. Either way, leagues are already looking to make money where they can.
By teams, we mean owners. Mark Cuban said he would not be surprised if franchise valuations double due to the change in the law regarding gambling. Teams will push to have greater partnership deals with casino and gaming companies. They will eventually have official betting partners.
They also may be able to benefit from wagers placed on-site. If U.S. teams adopt the European model, betting kiosks will be placed in and around the stadium. Fans will be making wagers from their seats or in the concourse. Teams will have to get creative, but the revenue opportunity is there. After all, if someone is betting in-stadium, the owner and team should benefit from it.
Every major union released a statement after the Supreme Court’s decision saying that they want a seat at the table when it comes to legalized gambling and the revenue it generates. Players deserve that seat because they are part of the product. There will undoubtedly be player prop bets that fans will take part in. The players should benefit if they are the subject of the bet.
The players and their unions also need to be sure that gambling revenue falls within the sport-related-income bucket. In basketball, it’s termed BRI — basketball-related income — and the players are entitled to a percentage of that BRI. The same goes for most other major sports. The players need to be sure that gambling revenue — like that one-percent integrity fee — has a carve-out dedicated to sports-related-income.
Legalized sports gambling is not some type of cure-all elixir for flagging ratings, but it’s most likely going to help the companies who own distribution rights to sports properties. The logic is simple. Games are never over when fans have money on point spreads. Fans will be more apt to watch a game when they have a dollar or two wagered on the outcome. This will increase the number of casual viewers and increased the engagement of avid sports fans.
Distribution partners have lived under an unnecessary code of almost silence when it comes to gambling. Some announcers had tongue-in-cheek references to totals or point spreads. Scott Van Pelt looked to move gambling more mainstream with his Bad Beats segment on SportsCenter. Now gambling will be more accepted. It can be talked about in-game. Gambling also creates programming options. There are entire shows dedicated to fantasy sports — specifically fantasy football. Now, there can be entire shows based around gambling in general. TV and cable networks will still have to take things slowly, but it wouldn’t be surprising to see an NFL gambling show coming to a TV station near you in the upcoming season.
State and federal government
States are using the gambling law to generate more revenue. The movement toward vice legalization hopes to create government income without directly raising taxes on every inhabitant of the state. We’ve seen this with marijuana legalization and the idea is generally the same when it comes to legalizing wagering on sports.
It is projected that 32 states will have legalized sports gambling on the books in the next five years. New Jersey is already ready to go, and six other states already have begun the process to make sports gambling legal.
Gaming and tech companies
FanDuel and DraftKings immediately announced they would be moving into sports gambling after the decision. It makes sense since daily fantasy is essentially gambling anyway. These companies may have a leg up. They have been gathering user data for some time now, and the people who play fantasy sports probably have an overlap in the demographic and potential customer profile of those interested in gambling.
Typical gaming companies have the back-end technology necessary to process sports bets and keep track of risk. They have software that spots betting irregularities and can partner with leagues and teams on their integrity crusade. Harrahs, Sands, Wynn, Caesars, William Hill and Cantor Fitzgerald have been doing this for a long time. The expansion of legalized gambling can only help them as long as they can leverage their expertise.
These gaming partners can also increase their visibility as official partners of teams and leagues.
Gambling has been going on whether the other stakeholders wanted to admit it or not. This isn’t a huge change for people who already gambled on sports. It’s a much bigger change for the casual gambler. There will be easier access. Corner gambling spots will open up. It will become an accepted part of the entire process of consuming sports. People who have been running illegal operations will either try to go legit or see most of their business fade away. There will still be black market gambling, but it won’t be as nearly as prolific as it is now.
There’s a dark side to gambling that needs to be addressed. States need to amp up their gambling addiction support. Teams and leagues need to realize that they should pay into a system that helps prevent addiction and supports fans who may stray too deep into sports gambling.
Startups and Investors
The investors who still had money in FanDuel and DraftKings have to be happy. This could be a huge windfall for those daily fantasy sites and in turn, a windfall for investors. FanDuel and DraftKings had fallen on some hard times. This could turn things around.
It also means new startups and greater investment into the gambling space. There will be innovation galore. Tech startups and apps will be created. Venture capital money will flow.