Blog By: Luke Price
The American sports betting industry is in its seventh year of regulated operations outside of Nevada.[i] So far, operators have combined to generate over $30 billion of lifetime gross revenue from almost $400 billion in total handle.[ii] Kentucky officially legalized retail betting on September 7th, 2023, and online wagering on the 28th of the same month.[iii] The legalization of sports betting occurred in Kentucky after the passage of House Bill 551 in March 2023, becoming the 34th state to legalize sports betting and the 25th state for mobile sports betting.[iv] With just more than a year passed, players in Kentucky have much favored online betting, spending $2.3 billion compared to retail sportsbooks attracting $87.1 million during those 12 months.[v] Given Kentucky’s immediate ties to horse racing and college sports fanaticism, these gaudy numbers should come as no surprise.
Kentucky was able to pass HB 551 thanks to the United States Supreme Court’s decision in Murphy v. NCAA, where the Court ruled that it was unconstitutional for Congress, through the Professional and Amateur Sports Betting Act of 1992 (PASPA), to compel states to deny sports betting when there was no accompanying federal standard.[vi] The Court held in Murphy that federal laws preventing states from authorizing sports betting infringed on states’ sovereignty.[vii] However, opponents of sports betting worry about the adverse effects of its legalization.[viii] For example, despite the standard ban on sports gambling for individuals under the age of 21, major sports betting companies, such as Caesars Sportsbook and DraftKings, advertise and host events for students on college campuses.[ix] In addition, others point out that athletes have experienced an increase in hostile behavior from losing bettors.[x] Further, many point out the lack of federal funding for gambling addiction programs, even when there is an estimated two million Americans struggling with severe gambling addictions.[xi]
Aiming to address the public health challenges posed by sports betting, the SAFE Bet Act may fill the need for the federal standard the Court discussed in Murphy to rein in sports betting’s rampant expansion.[xii] The SAFE Bet Act was introduced by U.S. Rep. Paul Tonko and U.S. Senator Richard Blumenthal and would require states to gain approval from the Justice Department to offer legalized sports gambling.[xiii] The bill would require states that have legalized sports betting to reach specific standards regarding affordability, advertising, and artificial intelligence in an effort to curb problem gambling.[xiv] Approved states would need to adopt sports betting frameworks that, among other things, prohibit sports betting broadcast advertising between 8 a.m. and 10 p.m. local time and ban those ads during live sporting events.[xv] Further, the Act would disallow advertisements that try to induce gambling through “bonus bets” and similar promotions and block marketing tactics that target problem or ineligible gamblers—such as those under the age of 21—and urge them to place bets.[xvi] Additionally, the SAFE Bet Act would outlaw proposition bets—something the NCAA has also been lobbying for—which refer to wagers on specific events or outcomes in a game.[xvii]
However, there have been many in opposition to the SAFE Bet Act. The American Gaming Association issued a statement that “blasted” the bill, stating that it was “a slap in the face” to state legislatures that have approved betting across the country.[xviii] Jeff Ifrah, a gaming lawyer and a founding member of iDevelopment and Economic Association (iDEA), says that the bill is a lot to process because “the first suggestion out of the gate [is] to include an unconstitutional registration requirement” and that the bill sponsors appear to be trying to “fill some sort of need that doesn’t exist.”[xix] Some lawmakers, such as Las Vegas congressional representative Dina Titus say that while the bill is “perhaps well-intentioned, pre-empting gaming regulators by outlawing most forms of advertising and restricting the types and methods customers can place bets is a misguided approach.”[xx] Instead, Titus says that the gaming industry has taken bold steps to regulate themselves over the past few decades and that self-regulation or state regulations would be more beneficial than the federal government getting involved.[xxi]
One of the main criticisms of the SAFE Bet Act is that the Act has strayed from its core mission of becoming a federal framework for problem and responsible gambling.[xxii] An alternative bill called the GRIT Act, filed in January, could be a better way to impose a federal standard for sports betting.[xxiii] The GRIT Act would take half of the excise tax and funnel it to problem and responsible gaming at the state and federal level.[xxiv] The proposal earmarks 75% of tax revenue to go back to states for treatment and education, while the remaining 25% would fund federal research into gambling addiction.[xxv]
For Congress to reassert its power and provide the federal standard the Court mentions in Murphy, Congress needs to enact a federal standard that directly regulates private actors like sportsbooks, comprehensively occupies the regulatory field, and avoids compelling state action, thereby adhering to the principles of preemption and the anticommandeering doctrine. The Supreme Court in Murphy emphasized that preemption provisions must regulate private actors to be valid.[xxvi] While the SAFE Bet Act strives to accomplish this, the bill may be likely to face constitutional scrutiny as the Act will come under the question of whether the law sets minimum standards or whether it imposes “targeted, affirmative, coercive duties” on state regulators.[xxvii] Overall, the SAFE Bet Act is a promising introductory bill to further the discussion on sports betting regulation. However, a favorable federal standard that Congress would pass still needs revision. A more deliberate framework needs implementation through firmer state laws or a federal framework to combat the adverse effects of sports gambling. The SAFE Bet Act tries to accomplish these objectives, but the periphery of the Act falls short and needs amendment.
[i] Eric Ramsey, US Sports Betting Revenue & Handle, Legal Sports Report (Sept. 23, 2024) https://www.legalsportsreport.com/sports-betting/revenue/#:~:text=US%20Sports%20Betting%20Revenue%20%26%20Handle&text=Operators%20have%20so%20far%20combined,%24400%20billion%20in%20total%20handle.
[ii] Id.
[iii] Henry Palattella and Tyler Maher, Kentucky Sports Betting – Is Sports Betting Legal in Kentucky?, Forbes, (July 25, 2024) https://www.forbes.com/betting/legal/is-sports-betting-legal-in-ky/#:~:text=Sure%20enough%2C%20Kentucky%20legalized%20sports,the%20Bluegrass%20State%20on%20Sept. [https://perma.cc/53J6-EPCW].
[iv] Id.
[v] Id.
[vi] Michael McCann, Unrestrained Promotion of Sports Betting Target of New Bill, Sportico (Sept. 30, 2024) https://www.sportico.com/law/analysis/2024/sports-betting-federal-bill-public-health-1234799084/ [https://perma.cc/6SLV-537F].
[vii] Alyson Diaz, Korinne Dunn, & Saba Mengesha, Betting on Improvements to Sports Gambling Regulations, The Regulatory Review (Feb. 24, 2024) https://www.theregreview.org/2024/02/24/saturday-seminar-betting-on-improvements-to-sports-gambling-regulations/#:~:text=In%20Murphy%20v.,authorizing%20online%20or%20mobile%20bets [https://perma.cc/9H4P-E5F8].
[viii] Id.
[ix] Id.
[x] Id.
[xi] Id.
[xii] McCann, supra note vi.
[xiii] Id.
[xiv] Christopher Keating, ‘You have a casino in your house’. Lawmaker wants sports betting crackdown; industry fights back, Hartford Courant (Sept. 17, 2024) https://www.courant.com/2024/09/16/ct-senator-looking-to-limit-sports-betting-amid-problem-gambling-increase-you-have-a-casino-in-your-house/ [https://perma.cc/HYM9-GMS9].
[xv] McCann, supra note vi.
[xvi] Id.
[xvii] Id.
[xviii]Jill R. Dorson, Not much to like about SAFE Bet Act, say industry insiders and addiction advocates, Igaming business (Oct. 1, 2024) https://igamingbusiness.com/sports-betting/safe-bet-act-hurt-more-than-help/ [https://perma.cc/5X3P-89B2].
[xix] Id.
[xx] Id.
[xxi] Id.
[xxii] Id.
[xxiii] Id.
[xxiv] Dorson, supra note xviii.
[xxv] Id.
[xxvi] Murphy v. NCAA, 584 U.S. 455.
[xxvii] Ben MacLean and Whitney Fore, The SAFE Bet Act: Not-So-Safe From Tenth Amendment Issues?, Zwillgenblog (Oct. 10, 2024) https://www.zwillgen.com/fantasy-sports/the-safe-bet-act-not-so-safe-from-tenth-amendment-issues/ [https://perma.cc/2E65-DWTK].