Weekly Gaming & Gambling Insights: December 16, 2024 Edition by Orrick, Herrington & Sutcliffe LLP

Recent Updates

• Senate Judiciary Committee Conducts Hearing on Sports Betting While Industry Observes from the Sidelines
• Tennessee Aims to Mandate Disclosures for Influencer and Brand Ambassador Usage
• After Success in Election Markets, Robinhood Considers Sports Betting
• WHO Advocates for Advertising Ban as Digital Gambling Expands

Senate Judiciary Committee Conducts Hearing on Sports Betting While Industry Observes from the Sidelines

On Tuesday, December 17, the Senate Judiciary Committee convened for a hearing titled “America’s High-Stakes Bet on Legal Sports Gambling.” Those who provided testimony included NCAA President Charlie Baker, former NFLPA representative Johnson Bademosi, the Executive Director of the National Council on Problem Gambling Keith Whyte, former New Jersey Department of Gaming Enforcement Director David Rebuck, and gambling addiction clinician Harry Levant.

Members of the committee and witnesses partook in an animated discussion regarding various aspects of the sports betting sector, encompassing collegiate prop bets, responsible gambling practices, tribal gaming, and the scope of the illegal market. A key focus was whether mobile sports betting necessitates further examination at the federal level or if individual state authorities are more suitably positioned to act as regulators. Several committee members, such as Sen. Richard Blumenthal (D-CT), underscored the significance of the proposed SAFE Bet Act, which aims to introduce additional federal oversight in the sports betting realm. Witnesses and committee members also cited the GRIT Act, which proposes to allocate half of the federal excise tax on sports betting to fund initiatives aimed at preventing and treating gambling addiction.

Among the witnesses, all except Rebuck indicated a certain degree of interest in enhanced federal involvement in the regulation of sports betting. Specifically, Levant and Bademosi endorsed the SAFE Bet Act, while Whyte demonstrated his strong support for the GRIT Act. Baker concurred with components of the law with which he was familiar. Among the Senators present, Sen. Blumenthal, Sen. Peter Welch (D-VT), and Sen. Thom Tillis (R-NC) expressed a preference for greater federal engagement. Sen. Adam Schiff (D-CA) voiced his support for Baker’s proposal to prohibit prop bets on college athletes. Sen. Alex Padilla (D-CA) articulated his desire to include tribal perspectives in future sports betting discussions. No Senators expressed evident opposition to the idea that the federal government should intervene in sports betting regulations, though Sen. John Kennedy (R-LA) did characterize himself as a “libertarian” on gambling matters. Ultimately, the Senators agreed to prolong these discussions into the subsequent Congress.

Tennessee Aims to Mandate Disclosures for Influencer and Brand Ambassador Usage

The Tennessee Sports Wagering Council will convene a hearing on January 15 to examine the roles of influencers in advertising betting products. The proposal would obligate licensed operators to reveal to the Council the identities of the influencers and brand ambassadors utilized in social media and advertising, along with the terms of compensation for the relationship and an overview of the influencer or ambassador’s role in promoting the licensed sportsbook. These modifications, which include a requirement for operators to disclose arrangements with brand ambassadors or social media influencers, are part of a broader initiative to enhance transparency in sports betting promotions, akin to current regulations for athletes with wagering agreements. While other states have implemented regulations governing endorsements, Tennessee’s proposal would significantly surpass other state mandates.

The suggested regulations also touch upon additional aspects of sports betting, such as clarifying eligible collegiate proposition bets and mandating multi-factor authentication for user accounts. Following the legalization of sports betting in Tennessee in 2019, the regulatory environment has witnessed substantial alterations, including the transfer of oversight from the Tennessee Lottery to the Sports Wagering Council in 2021.

After Success in Election Markets, Robinhood Considers Sports Betting

Robinhood might be looking to venture into the sports betting market, buoyed by the success of its event contracts during the recent presidential election. The Derivatives product offered by Robinhood, accessible to a limited number of customers who met specific criteria, recorded over 100 million event contracts for the 2024 presidential election. During Robinhood’s first investor day event, CEO Vladimir Tenev indicated interest in exploring sports event contracts, mentioning that their customer demographic, mainly millennials and Gen Z, is keen on merging stock trading, cryptocurrency monitoring, and sports betting in a single platform. Nevertheless, the company is likely to encounter significant obstacles should it decide to enter this domain, including navigating intricate state regulations, the relationship between federal and state regulatory frameworks, reputational risks, the necessity for operational know-how in sports betting, customer acquisition expenses, and potential erosion of brand loyalty once operational.

WHO Advocates for Advertising Ban as Digital Gambling Expands

The World Health Organization (WHO) has recently urged for restrictions on gambling advertising, citing the 1.2% of the global adult population that allegedly struggles with gambling disorders and warning that the adverse effects of gambling jeopardize progress toward global health and development objectives. The WHO emphasized the need for effective prevention and regulation to alleviate these consequences. As the global gambling sector continues to grow rapidly, with expected revenues of $700 billion by 2028 driven by greater smartphone accessibility, gambling is becoming increasingly normalized. The WHO specifically pointed out the commercialization and digitization of previously analog gambling methods and asserted that enhanced online access and high-risk products necessitate a more robust public health response. Among the measures the WHO advocates are prohibitions on advertising and the fostering of counter-messaging that explicitly warns against the harms associated with gambling.