More Money, More Problems: Highlighting Ongoing IP Issues in Sports Gambling and Microbetting
Gambling, and especially gambling on sports, has a fraught and storied legacy in American history. The famous Black Sox scandal of 1919 rocked Major League Baseball and resulted in the permanent establishment of the role of Baseball Commissioner and a permanent ban on gambling for major league ballplayers.[1] Though those specific rules against baseball players have not changed since 1920, attitudes against sports gambling more generally have softened somewhat in the last few years. The bellwether for this shift in attitude is the repeal of the Professional and Amateur Sports Protection Act of 1992 (“PAPSA”) in the seminal Supreme Court case Murphy v. NCAA.[2] PAPSA effectively banned the legalization of sports betting, with few exceptions.[3] Since the repeal of PAPSA in 2018, “30 states and Washington, D.C. have joined Nevada in legalizing sports betting.”[4] With this explosion in the market for legal sports betting comes new opportunities for those looking to capitalize on the influx of cash, as well as new challenges in the intellectual property space.
Prior to the decision in Murphy, Americans were betting at least $150 billion on sports annually.[5] In Murphy, the state of New Jersey successfully argued that PAPSA’s prohibition on establishing sports gambling under state law violated the 10th Amendment’s “anti-commandeering clause.”[6] In the years since, legal sports gambling has grown exponentially.[7] However, legal sports betting is still only a fraction of the total betting on sports in the United States.[8]
Enacting legislation allowing sports gambling in the remaining holdout states will be the most effective tool for those looking to cut into the illegal market. For example, opening up sports betting to residents of California, Florida, and Texas would add an additional 90 million potential customers.[9] Advancing those legislative efforts, when combined with increased education about illegal gambling could help expand legal betting even more.[10]
As the industry continues to expand, and especially as online sportsbooks look to grow their reach and footprints, two major questions remain: 1) How do these sportsbooks continue to protect the data they accumulate about customers gambling habits, and 2) How can these sportsbooks use that same data to increase their revenues while improving customer experience?
As to the first question, the answer lies in the ever-evolving fields of cyber-security and data protection. Sportsbooks and online casinos often require extensive customer information upon registration, including Social Security numbers, bank account information, and other highly sensitive data.[11] In recent years, cyber-attacks on casinos, like the 2014 attack on the Las Vegas Sands corporation, cost the affected companies tens of millions of dollars, as well as put valuable customer information directly into the hands of bad actors.[12] States are moving quickly to address these needs, but the rapid expansion of legalized gambling, especially sports betting, will continue to challenge cyber security going forward.[13]
To answer the second question, one need only look to the emerging field of microbetting to see an immediate and enticing application of the expansive data collected by legal sportsbooks. “Microbetting is the phenomenon of betting on small, in-game events.”[14] Microbetting is seen throughout the industry as the next big opportunity, and many leading broadcasting companies have signed lucrative deals with gambling outlets to secure their piece of the pie.[15] By utilizing the data willingly given by customers in a similar way to how social media algorithms target specific advertisements based on user data, these sportsbooks will be able to target specific microbets to the user, and keep them coming back.[16]
The expansion and innovation throughout the legal sports gambling world will provide myriad questions about the intersection of sports, intellectual property, and cyber security in the coming years. As states continue to adopt their own regimes for regulating this booming business, those interpreting intellectual property law will have to keep up.
Footnotes
