Betting Industry Adjusts To Crackdown On Ads

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The New York metropolitan area was all about conferences this week — and not just in regards to the basketball tournaments playing out on the hardwood.

Over the past few days, a contingent of C-suite executives, lobbyists, and venture capitalists convened for iGaming NYC 2023, one of the nation’s top online gaming conferences. The event took place down the street from the Big East conference tournament, held at Madison Square Garden. The iGaming  gathering was one of three major sports business conferences in the tri-state area this week, along with Sports Business Journal‘s Tech Week in Manhattan and the Seton Hall Law School Gaming Bootcamp in Newark, New Jersey.

Throughout March, advertisers will flood the airwaves with gambling promotions as operators look to acquire thousands of new customers during the most popular month-long event on the sports wagering calendar. The NCAA men’s basketball tournament kicks off next week amid a push among state and federal regulators to crack down on the explosion of sports betting advertising.

On Friday, Massachusetts launched mobile sports betting in a state with some of the strictest advertising standards nationwide. On the federal level, New York Rep. Paul Tonko introduced a bill last month that calls for a federal ban on all sports betting commercials across the country. Back in Tonko’s home state, the New York State Gaming Commission (NYSGC) recently proposed new regulations that would prevent sportsbook operators from targeting minors with certain advertising inducements.

“It is a reaction to the saturation in advertising on sports betting,” Light & Wonder Global Head of Gaming Affairs Howard Glaser told Sports Handle. “An incalculable amount of money got spent as sports betting started up in different states. They flooded the airwaves and advertising is accessible to all, including minors who cannot bet. It was just too much, too fast.”

Shockwaves across the industry

On Monday afternoon, state gambling directors from New York, New Jersey, Colorado, and Pennsylvania sat elbow to elbow at a fireside chat at the Seton Hall boot camp. As expected, the new advertising standards dominated the discussion.

In New York, the proposed regulations would prohibit false and misleading advertising, require companies to disclose material facts in marketing, and ban advertising on college media, NYSGC Executive Director Rob Williams said during the panel discussion. His commission proposed the new rules after two state senators authored legislation that would require operators to include warnings about addictive and harmful gambling. The warnings are akin to those in the tobacco industry that were ushered in on the heels (hooves?) of Joe Camel, Williams noted.

“We know there’s a lot of law, especially in the First Amendment, and what we can do on this, but it’s a position my commissioners thought was appropriate to at least advance and see where we come out,” Williams said.

The enhanced advertising regulations have prompted compliance teams to swing into action. At Rush Street Interactive, the parent company of BetRivers, meetings between the responsible gambling, marketing, and compliance teams have recently become “more frequent and more productive,” Rush Street Chief Compliance Officer Laura McAllister noted on a panel. At another Seton Hall panel, bet365 Legal & Regulatory Counsel Robert Moncrief Jr. advised compliance officials to establish strong relationships with state regulators in advance of a launch in order to mitigate potential issues down the road.

Meanwhile, financial experts indicated that it is too early to determine if the strict advertising standards will have a meaningful effect on company valuations. Across the Atlantic, jittery sportsbook executives are bracing for the release of new rules by the U.K. Gambling Commission that could require operators to conduct affordability checks on customers and impose lower limits on wagers. There is wide sentiment that the regulations may depress valuations of top online gaming companies.

In the U.S., stringent advertising regulations could be a major constraint for operators, given that customer acquisition is the lifeblood of the industry, said Lloyd Danzig, founder and CEO of Sharp Alpha Advisors, a leading venture capital firm specializing in sports betting and online gaming. On the other hand, if major competitors are under the same restrictions, it could allow the companies to lower their customer acquisition costs, he emphasized.

“Imagine if McDonald’s and Burger King both decided together to not advertise anymore. How much business would both of them lose? It is hard to say; it’s not that much,” Danzig told Sports Handle. “But as long as one knows the other is advertising, they both have to do so. In a weird way, I wonder if some of these restrictions will have the same effect.”

Texas-sized developments

While New York is the most populous state in the nation with mobile sports betting, efforts to legalize the activity in Texas have intensified during the current legislative session. Proponents of legal sports betting in the Lone Star State are optimistic that a referendum could make it onto the 2024 ballot, in part due to support from the Texas Sports Betting Alliance, which includes Dallas Cowboys owner Jerry Jones and several pro sports teams in the state, as well BetMGM, DraftKings, and FanDuel.

Jeremy Kudon, a partner at New York law firm Orrick, Herrington & Sutcliffe, counts DraftKings and FanDuel among his clients. Kudon, one of the foremost lobbyists in the sports betting industry, is encouraged by the collaboration between operators and sports franchises inside the state.

“If we get tailwinds heading into a tornado, you need all the tailwinds you can get,” Kudon told Sports Handle. “Local owners are just saying how important this is to the Texas economy. That, to me, is a big difference from where we’ve been in other states.”

The stakeholders may also benefit from the close political alliance between Texas Lt. Gov. Dan Patrick and State Sen. Lois Kolkhorst, the author of two sports betting bills — SB 715 and SJR 39.

“It’s massive. It provides us with a path in the Senate that we didn’t have in 2021,” Kudon observed.  “We still have a lot of work to give her (Kolkhorst) the support she needs from her constituents and colleagues. Our work is cut out for us in Texas, but having her as a sponsor is a huge step forward.”

Betting on every shot

Outside college basketball, sports fans had other viewing options this week, as golfers teed off at The Players Championship, an event known as the PGA‘s “fifth major.”

At Sports Business Journal‘s Tech Week, attendees viewed a presentation from HeadVantage, a startup that works with NBC Sports to equip athletes with miniature cameras and sensors, including eye-tracking technology. The company’s sensors, which fit under a golfer’s cap, can be used to track swing angle and ball flight in real time.

The PGA Tour has also enlisted HeadVantage’s technology to provide greater insights on a golfer’s lie in a bunker, the club of choice on a given swing, and the probability of placing a shot over or around a tree. It is HeadVantage’s goal to enable “better betting” on every golf swing over the course of a tournament, co-founder and CEO Jay Hedley said during the presentation.

As of 2:00 ET on Friday afternoon, favorite Collin Morikawa had odds of +380 at FanDuel to win The Players. Morikawa, who shot a first-round 65, trailed leader Chad Ramey (+1600) by two shots early in Friday’s second round.



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