By David Woods and Brendan Franzoni, of Hughes, Hubbard, & Reed
Online and app-based gambling on sporting events has exploded in popularity over the last several years, taking the sports book out of the casinos and into people’s homes and on their mobile devices. Five years ago, mainstream sports betting apps were almost nonexistent. Fast-forward to today, and more than 30 states have legalized online gambling in some form (including on phone-based apps) and more states are considering the move as a means of shoring up tax revenue.
To quickly capture market share and loyal consumers in this space, gambling companies are blanketing popular sports and highly watched events (e.g., Super Bowl, World Series, etc.) with multi-million-dollar marketing campaigns, promotional advertising, and sponsorship credits. It has been reported that in 2022 alone, FanDuel and DraftKings each spent over $1 billion on marketing and promotions—a significant increase over prior years, and a figure likely to rise again this year. These marketing efforts can be seen during almost any major sporting event, reaching millions of viewers—both youth and adult—who may have never set foot in a casino, much less known how to place a bet with a bookie.
Of course, gambling is intended to be an adult activity and the states that have legalized it have set minimum ages between 18 and 21 years old to participate. But adults are not the only ones who like to gamble. As anyone who was once young can attest, young people can be especially attracted to high-risk activities intended for adults, such as smoking cigarettes, vaping or drinking alcohol. So, it should surprise no one that critics have begun to draw parallels between the marketing efforts of today’s gambling companies and the tactics used by tobacco companies in the past. Indeed, these products raise many of the same regulatory and compliance issues: how to make them available to informed adult consumers, while keeping them out of the hands of youth; what restrictions should be put on the activity and its marketing; and how to deal with issues of potential addiction among those who gamble.
In a May 24, 2023, Sports Illustrated article titled “Young People Are Gambling More, and NCAA Athletes Are No Exception,” a NCAA Survey “of more than 3,500 18-to-22-year-olds found that sports wagering is pervasive, with 58% having engaged in at least one sports betting activity. The survey said that 67% of students living on campus are bettors and tend to bet at a higher frequency; 41% of college students who bet on sports have placed a bet on their school’s teams; and 35% have used a student bookmaker.” Additionally, the survey found “that gambling advertisers are targeting colleges: 63% of on-campus students recall seeing betting ads, which is a higher rate than in the general population or those who commute/virtually attend college; and 58% of those students indicate they are more likely to bet after seeing the ads.” Similarly, CBS News, in its May 25, 2023, coverage of the NCAA, raised concerns over teen sports-gambling, noting that “teenagers are placing sports bets online even though some of them reside in states where sports gambling is prohibited under the age of 21, or illegal altogether.”
Critics are quick to draw comparisons between claims about past tobacco industry conduct, which led to waves of litigation against tobacco companies over the last several decades, and current efforts by online and app-based gaming companies to capture a new and highly lucrative market now that sports betting has become increasingly legal over the last several years. Some point to the sheer dollars being spent and ubiquity of advertisements one sees on TV and digital media platforms, in addition to the use of celebrities and popular sports figures in those ads. Others point to the use of free samples, e.g., “first bet free” and “risk-free betting,” and other appealing offers to drive initiation and continuing sales. And some scientists point to similarities in how nicotine and gambling both activate reward systems in the brain to secrete the chemical dopamine, a neurotransmitter that leads to feelings of pleasure upon its release.
Given these perceived similarities, it may be only a matter of time before the same plaintiffs’ attorneys who started suing tobacco companies decades ago—and more recently turned their attention toward opioids, vaping products and social media companies and their algorithms—start to target online sports betting platforms and apps.
Responsible gambling companies should act now, not only to position themselves favorably in the defense against such litigation, but because it’s the right thing to do. Here are some proactive guardrails that can protect both the company and consumers alike.
Among the first things that an online or app-based gambling company should consider is shoring up its youth access prevention (YAP) efforts. This will help to limit both youth access and youth appeal of the company’s platform and the services and/or products it provides. For example, the point of first access (i.e., landing page) of a company’s website should include “adult only” restrictive language. It should also be age-gated to require, at the very least, a simple self-attesting “click-through,” through which online users certify that they are old enough and in a jurisdiction that allows online gambling. Additional levels of independent third-party age verification (e.g., name, DOB, driver’s license/photo ID, etc.) should also be required in order to create an account and place bets or gamble on a company’s platforms.
Companies also need to take a hard and critical look at what they are doing to ensure that kids are not unnecessarily exposed to gambling advertising and content. In recent years, federal and state regulators, as well as public health advocates, have targeted and criticized companies for appealing to youth via their marketing practices across various adult consumer product categories, including vaping, alcohol, and cannabis/CBD. As we have seen in these other product categories, whether marketing is interpreted as appeal to youth can be very subjective, but often turns on a number of key factors, from ads with colorful graphics to catchy slogans to use of youthful looking models (e.g., 25 or younger) to alignment with pop culture and trends. To avoid these regulatory and health community concerns, responsible gambling companies should have clear marketing content approval processes, comprehensive written policies and marketing guidelines outlining when, where, and how they advertise. These policies should establish and provide internal guardrails for marketing practices and campaigns to ensure such initiatives are directed only to—and are primarily reaching—the company’s intended target demographic: adult consumers. By way of example, such policies could include: using clear, “adult only” messaging and warnings on all public-facing marketing and advertisements; avoiding youth-oriented imagery (e.g., cartoons, superheroes, animation, etc.) or themes (e.g., gambling is “cool” or popular or rebellious); setting clear age demographic limits for TV and digital/online viewership and magazine readership, (e.g., 85% 21+); age-gating all social media to 21+; engaging only with celebrities, influencers and/or models over the age of 25; and monitoring company-owned social media and hashtag use for inappropriate user-generated content. While it is impossible to reach adults exclusively given the ubiquity of marketing content and ostensibly unfettered access to media outlets, a well-established marketing framework can effectively reduce youth access and exposure to gambling marketing while also mitigating regulatory and litigation risks.
Many gambling companies have formal policies and responsible gambling initiatives designed to help problem gamblers stop or limit their own gambling. Many of these tools appear to be voluntary, which raises the issue of whether the companies have internal tools or algorithms that allow them to proactively identify and limit potential problem gamblers who may be unwilling to limit themselves.
As we have seen with the legalization of recreational cannabis across many U.S. states and the accompanying rise in youth-related concerns (e.g., use, access, addiction, etc.), one cannot help but think that lawsuits against online and app-based gambling companies involving claims of improper youth access and addiction are a matter of when—not if. Given this likelihood, these companies should consider training employees on best practices for document creation, so that they are ready in the event their documents are used against them in litigation. Everything they write (including emails, texts, and direct messages) will likely be read by their critics someday.
The gambling industry should start preparing to defend against litigation now, especially as claims and legal theories made decades ago in tobacco litigation—and more recently in litigation against social media companies, as well as opioid and vape manufacturers—heat up. Online and app-based gambling companies will soon have to contend with youth use and new, unique scientific issues surrounding compulsive gambling in a world where one can make bets all day, every day without setting foot in a casino. How they handle these issues will be scrutinized for years to come. They must ensure they are doing things the right way to avoid criticism (and lawsuits) later on.
