On May 14, 2018, the United States Supreme Court decided the pivotal matter of Murphy v. National Collegiate Athletic Assoc., repealing the Professional and Amateur Sports Protection Act of 1992. The decision cleared the way for legalized sports betting across the United States and created an associated need for gambling advertising. In the years since Murphy was decided, 30 states and the District of Columbia have legalized online sports betting, resulting in a cascade of gambling advertising. Even though legalization slowed in 2024, a massive sports betting market has already been created across the nation, opening the door for marketing companies to join the gambling advertising fray.
As our readers are aware, gambling advertising companies must manage compliance with numerous and differing regulations across state lines. Those that are unaware of or ignore their compliance obligations risk incurring significant fines for violations of state gambling advertising regulations. Although each jurisdiction's gambling marketing regulations vary to a certain degree, there are still baseline commonalities that apply across the country.
Companies Must be Licensed to Engage in Gambling Advertising
Subject to a few exceptions, almost every jurisdiction requires that companies entering the gambling advertising market obtain licensure prior to proceeding with their marketing activities. Typically, companies will negotiate a contract with casino and sports gambling operators and/or licensees to advertise their offerings.
As part of the application process, state gaming commissions typically require that applicants provide a letter of intent ("LOI") or executed contract with a gaming operator or licensee that is authorized to do business in the applicable jurisdiction. In some states, marketers will not be allowed to even begin the licensure process without first submitting this LOI or contract.
After the initial stages of the application review process, companies can expect varying degrees of scrutiny based upon whether they intend to provide gambling advertising services on a flat rate (such as Cost Per Click ("CPC"), Cost Per Impression ("CPM"), etc.), or an equity (or "bounty") basis. Companies advertising on a flat rate basis will typically pay lower fees, fill out fewer forms, and face a shorter application processing timeline. Meanwhile, those operating on an equity or "bounty" basis can expect to disclose their entire corporate structure, litigation history, and finances. In addition, company officials and key employees can expect to be fingerprinted and undergo extensive background checks.
Companies Must Exercise Caution, Even After Becoming Licensed
Cautionary tales abound in the gambling advertising space. State gaming authorities are constantly monitoring marketing media to ensure that they comply with applicable regulations, both in substance and scope. For example, in August 2023, DraftKings was fined $94,440 in Maryland for allegedly advertising to underage fantasy sports players. A little over one month later, PointsBet was fined $25,000 in New Jersey for undisclosed advertising violations.
Companies engaged in gambling advertising also face the prospect of potential private rights of action. On December 8, 2023, two sports bettors brought a class action lawsuit against DraftKings for allegedly violating Massachusetts consumer protection and false advertising laws. According to the underlying complaint, DraftKings ran a gambling advertising campaign offering a bonus of up to $1,000 to new customers. In fine print, however, DraftKings made clear that to obtain the $1,000 bonus, new customers would have to:
- Make an initial deposit of $5,000;
- Risk a total of $25,000 within 90 days; and
- Ensure that their bets qualified by only placing bets with odds of "-300 or longer."
According to the complaint, customers chasing these requirements were "statistically likely to lose money." Plaintiffs further alleged that "they would have had to wager an average of more than $276 gambling on sports every day for three months" to meet the bonus requirements. Because the bonus was directed to new sports bettors, plaintiffs alleged that the promotion was intentionally deceptive and predatory. For this alleged misconduct, Plaintiffs, on behalf of all class members, asked that the Court award the $1,000 promised bonuses in actual damages, along with attorneys' fees and costs.
Exercise Caution When Engaging in Gambling Advertising
With the proliferation of online sports betting across the United States, it can be quite lucrative for companies to advertise for casino and sports gambling operators and licensees. Before initiating gambling advertising operations, however, it is important that marketing companies understand that they must attain licensure to do so. Interested marketing companies must be very clear about which type of license they are applying for and proceed through the process carefully.
After licensure, marketers must comply with state gaming regulations as they roll out their respective advertising campaigns. These regulations call for significant fines and vary across state lines. Accordingly, companies interested in conducting gambling advertising should consult with experienced legal counsel.
The attorneys at Klein Moynihan Turco diligently monitor evolving gambling marketing laws so that clients remain compliant with applicable regulations.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.