Tonko, Blumenthal scorch sportsbooks, introduce federal regulation

On September 12, 2023, U.S. Representatives Paul Tonko of New York and Richard Blumenthal of Connecticut criticized the current practices of American sports betting operators as they unveiled the SAFE Bet Act. This legislation aims to establish a stringent federal framework governing digital sports wagering.

The legal landscape of sports betting underwent a significant transformation in 2018 when the U.S. Supreme Court invalidated the Professional and Amateur Sports Protection Act (PASPA). This ruling has since allowed nearly 40 states and jurisdictions to legalize various forms of wagering, evolving the conversation around regulatory practices in this burgeoning industry.

During a press conference in Washington, Tonko and Blumenthal detailed the key provisions of the SAFE Bet Act, first proposed in March. They were accompanied by other advocates including Mark Gottlieb and Harry Levant from the Public Health Advocacy Institute (PHAI), who articulated the public health implications associated with sports betting. Additionally, Gordon Douglas shared a poignant personal testimony about his son’s struggle with sports betting addiction and his journey to recovery.

The overarching message from the event was clear: the current model of U.S. sports betting is unsustainable.

Bill Proposes Comprehensive Changes in Federal Framework

The SAFE Bet Act, which stands for Supporting Affordability and Fairness with Every Bet, proposes transformative changes to the legal sports betting landscape by emphasizing three core principles: affordability, advertising, and the use of artificial intelligence (AI).

One of the bill’s most controversial components is its call for a “general nationwide prohibition” on sports betting. While this appears contradictory to the Supreme Court’s ruling on PASPA, Tonko clarified that the ruling allows Congress to establish regulations for sports gambling.

Under the proposed framework, states wishing to conduct sports betting must submit applications to the U.S. Attorney General that demonstrate compliance with minimum federal standards set forth in the bill. These approvals, valid for three years, are still subject to further clarification, especially regarding states that have already legalized wagering. Currently, 38 states and Washington, D.C. allow some form of legal sports betting.

Blumenthal emphasized that the bill does not aim to impose a ban on sports betting. Rather, it seeks to establish foundational standards that states must meet, thereby allowing states the flexibility to exceed these requirements.

Advertising Restrictions and Inducements Under Scrutiny

A major focus of the SAFE Bet Act is the revision of advertising and promotional strategies within the sports betting sector. Key changes would include:

• Banning betting advertisements during television broadcasts from 8 AM to 10 PM and during live sporting events.
• Prohibiting inducements that encourage viewers to engage in betting or create gambling accounts.

Tonko remarked that marketing for such a potentially addictive product should be restricted during hours when children could be exposed to it. He criticized the use of celebrities promoting betting strategies, arguing that the industry often targets vulnerable individuals in its advertising.

“The current gambling industry systematically targets individuals who are likely to lose,” Blumenthal stated, stressing that the industry’s revenue stems largely from these vulnerable demographics.

This assertion gained attention in light of recent discussions in Massachusetts, where the Gaming Commission heard from Fanatics Sportsbook representatives who claimed that “fully half” of the bettors they limit are losing players.

Additionally, the SAFE Bet Act proposes the establishment of a national self-exclusion list, akin to systems already operational in Australia (BetStop) and the UK (GamStop).

Implementing New Affordability Measures

Mandatory affordability measures represent another critical aspect of the SAFE Bet Act. The bill proposes:

• Capping deposits to a maximum of five within any 24-hour period.
• Prohibiting the use of credit cards as funding sources.
• Requiring operators to conduct affordability checks for bettors wagering over $1,000 in a single day or $10,000 within 30 days.

The concept of “affordability checks” has been a contentious topic within the UK betting industry. Tonko argued that sportsbooks should bear the responsibility of refraining from serving customers who are chasing losses, drawing parallels with regulations in the alcohol industry that prevent bars from serving intoxicated patrons.

Concerns Over AI Technologies

Blumenthal categorized AI technology as the most alarming aspect of the proposed legislation. His concerns stem from AI’s ability to analyze bettors’ behaviors and offer personalized promotions, which the bill seeks to prohibit. The use of AI-generated gambling products, especially microbetting, is also included in this ban.

Microbetting was highlighted as a particularly hazardous form of betting – an issue exacerbated by DraftKings’ acquisition of SimpleBet, a microbetting supplier. Tonko articulated that this practice transforms every moment of a sporting event into a betting opportunity, amplifying risks to consumers and the integrity of sports.

The act would also ban all prop bets involving college or amateur athletes, a controversial area that has spurred considerable debate, particularly in light of concerns about athlete safety and integrity.

Industry Opposition and Response

It comes as no surprise that various industry stakeholders promptly condemned the SAFE Bet Act. Chris Cylke, Senior Vice President of Government Relations for the American Gaming Association (AGA), criticized the bill as an overreach that undermines state regulators who have invested considerable effort into developing tailored regulations that reflect local market conditions.

Nevada Representative Dina Titus characterized the bill as an “outdated and unwarranted prejudice against gaming,” asserting that while the intentions may be commendable, the approach of imposing sweeping federal regulations could hinder state-level progress.

The iDevelopment and Economic Association (iDEA), representing igaming and sports betting operators, labeled the proposal as an inappropriate federal intrusion into an area successfully regulated at the state level since the Supreme Court overturned PASPA in 2018.