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Sportsbooks held the upper hand in the first few years of widespread legal US sports betting. Regulators are striking back, with impacts that could shape the future of the industry if all sides don’t tread carefully.

Though sports betting is among the nation’s most heavily-regulated industries, you couldn’t blame the average observer for feeling differently.

Since the Supreme Court struck down the federal wagering ban in 2018, sports betting ads online, on TV, on billboards and virtually everywhere else have seemed ubiquitous. For many, they were intrusive. Some sports fans have complained loudly that legal betting has even ruined their interest in competition.

Behind the scenes, regulators in the more than 30 states with legal sports betting have largely lived up to their responsibilities to protect players and keep sportsbooks in check. But these sportsbooks in many states have taken advantage of laws, beyond regulators’ authorities, that allow them to deduct their tax burdens to virtually nothing. This, indirectly, has led them to advertise even more.

Largely for financial reasons, this cycle has begun to break. But now regulators – and some lawmakers – are proposing even more drastic changes.

New states take charge

Sportsbook regulators have not exactly been pushovers in the nearly five years of legal US single-game sports betting outside Nevada. But the most recent adopters are aggressively pushing back like few states before them.

During recent hearings, Massachusetts regulators more than lived up to their reputation earned during the state’s commercial casino openings in the past decade as among the nation’s most thorough.

Combined with the state’s strict open-record laws that require all business to be conducted in public, Massachusetts sports betting applicants have been publicly run through the wringer for nearly every bet type, marketing practice, dollar spent and seemingly all other facets of their business.

This grilling, in part, led European gaming giant bet365 to pull its license application before its underwent regulators’ spotlight. Of the more than 30 books that publicly expressed interest in the state, less than 10 will apply for a license.

“Regulators are slowly evolving their position from what some considered passive observers to active enforcers.”

Despite all the intensity in regulatory meetings, most Massachusetts bettors will see minimal differences between the sportsbook offerings in most other states. Still, the Bay State’s advertising restrictions have already shaped policy nationwide.

Massachusetts explicitly bans the use of “free bets” in promotions for first-time bettors, a term that was ubiquitous in the early days of American sports betting but now seems on the verge of extinction.

Though sportsbooks are only subject to the requirements of regulators on a state-by-state basis, they tend not to violate the terms of any one state in all their available markets. This had led to the nationwide increase in the use of “second-chance” or other similar terms instead of “free” bets or other terms many regulators have found misleading at best or predatory at worse.

This in and of itself is a relatively minor change, but it underscores regulators are slowly evolving their position from what some considered passive observers to active enforcers.

Massachusetts’ firm push has undoubtedly inspired Ohio, another major sports betting market with a 2023 launch. Ohio regulators have issued six-figure fines to many of the biggest names in American gaming.

Meanwhile, Massachusetts has publicly lambasted operators for violating the state’s in-state college betting restrictions, surely leading these companies to double-check their compliance nationwide.

More dramatic changes proposed

This comes after what would be the most significant change in American sports betting marketing was introduced in Congress.

Rep. Paul Tonko, a veteran lawmaker who spearheaded the most comprehensive federal regulatory overhaul of pari-mutuel horse racing in the nation’s modern history, has introduced a bill that would effectively ban sportsbook advertising.

Though political realities make passing such a bill unlikely, Tonko is not a saber rattler looking for attention; this is a serious matter that the congressman, and many others, hope to deal with.

An objective analysis wouldn’t blame him. Even bettors are surely tired of being yelled at by Kevin Hart or Jamie Foxx every time they tune into a sporting event. In and around New York City, the nation’s new digital sports betting epicenter, it feels impossible to look at the Manhattan skyline without seeing multiple billboards for sportsbooks; not coincidently, Tonko represents New York in the House of Representatives.

Industry stakeholders have, unsurprisingly, rallied to kill the bill, arguing it will do more harm than good by indirectly pushing bettors back to unlicensed bookies or unregulated sites.

Though the offshore sites (which directly compete with these regulated companies) are not the indomitable scourge some stakeholders have characterized publicly, unlicensed operators do not offer problem gambling help, contribute no taxes and, perhaps most importantly to bettors, can have unreliable or inconsistent payouts. The regulated industry is a better answer to many of those problems.

Still, the regulated industry is not without faults of its own, and operators, lawmakers and regulators all share blame.

Problem gambling funding is not sufficient, activists have said. The ads Tonko and others are seeking to ban have problem gambling helpline numbers that are nearly impossible to decipher. Many states have their own individual problem gambling hotlines, creating confusion, and the national ads frequently are posted in states not even mentioned by any of these help numbers.

FanDuel, DraftKings, BetMGM and Caesars, which combined have more than 80% of the US market share by handle, have lost billions as part of these ads, along with promotions, marketing ventures and the promotions formally known as “free bets.”

They have said publicly in the coming year they expect to recoup that investment – many times over – putting another bullseye on the industry, one that inherently draws scrutiny for making money off of losing bettors.

The future

For nearly half a decade, the US sports betting seesaw has firmly tilted in the sportsbooks’ favor. Most would argue it still is. But now the push is coming the other way, one that could upend the entire industry if not executed properly.

Along with the more dramatic enforcement, increased scrutiny and curtailed ads, elected officials are starting to reevaluate the legislation that enabled sports betting in the first place, especially around taxation. The promo deductions that helped spark the marketing palooza are now being evaluated in multiple statehouses. Even some states, including Ohio, are considering a sportsbook tax increase.

While no sportsbook (or any business for that matter) hopes for more dramatic regulation or increased taxes, these can be net positives for the American sports betting ecosystem overall. It can mean better help for problem gamblers and more money in state coffers. It’s also better than the far more intense crackdown such as Tonko’s advertising ban.

“In and around New York City, the nation’s new digital sports betting epicenter, it feels impossible to look at the Manhattan skyline without seeing multiple billboards for sportsbooks.”

In the UK, decades of runaway promotions and advertising in part sparked a massive nationwide crackdown on virtually all facets of gambling, one that has put a permanent handicap on many operators’ financial bottom line. Though the state-by-state nature of gambling laws makes a federal move less likely, it’s foolish to think something drastic couldn’t happen in the US as well.

Economic realities – and investor sentiment – has helped turn the tide on sportsbooks’ wonton marketing spend. A revised regulatory push will likely keep things headed in that direction.

Empowered regulators can ultimately benefit bettors and the sportsbook advertisement-weary general public alike, but it is important to realize the potential consequences as power slowly shifts.

A couple fewer ads, and a few more tax dollars, are things that most Americans can support. “Risk-free” bet ads are a casualty sportsbooks can swallow.

But a blanket marketing barn or other extreme measures could jeopardize their multibillion-dollar investment and redirect players to the same unregulated market that elected officials and corporations are trying to stop. A shove too far in that direction could lead all parties worse off than they were before the sports betting expansion began.

Ryan’s Rant is the fourth new column from the iGaming NEXT editorial team following the launch of Conor’s Corner, Sonja’s Standpoint and Jake’s Journal this year.

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