Don't Gamble With Your License, Know When To Run Spots for Sports Betting

Sports betting has to be among the biggest growth areas for broadcast advertising. Casino.org recently reported that sports betting wagering national advertising nearly quadrupled for the nine months ending May 31, soaring 281% to $282 million over that period.i Barron’s reports on data that shows enormous growth in gambling ads.ii And Nielsen reports that this growth has been a boon to local TV and, to a lesser extent, radioiii The increase is an obvious result in the change in the law, previously reported at Spin the Wheel. But some broadcasters are wary. Since the Murphy v. National Collegiate Athletic Association,iv case explicitly sent the determination back to the states, the question must be asked, is sports betting legal in my state? Advertisements that encourage listeners or viewers to engage in an illegal activity can expose broadcasters to criminal charges for aiding and abetting by encouraging them to break the law. So, it’s wise to be sure not only that sports betting is legal in the state of license, but that the specific type of wagering activity is allowed.

Let’s use Draft Kings as an example. If a review of state statutes and regulations reveals that sports betting has not been explicitly legalized in the state, or that other state laws implicate that anyone who engages in it would be in violation of law, then broadcasters should not air any advertisements from Draft Kings or others, until the station’s state legalizes sports betting, unless it can comply with, and detailed specific requirements laid out by the state.

Sports betting in most states would be classified as gambling. Typically, in a state where it is not legal, engaging in gambling or the promotion of gambling would be a misdemeanor. Advertising for sports betting, particularly sports betting that would occur or could possibly occur within the state, would likely be considered advancing or profiting from an unlawful gambling activity, where sports betting has not become a licensed or otherwise allowed activity. Thus, broadcasting in such a state, and accepting and running such sports book advertising could result in a charge of a misdemeanor offense, subjecting the station and its licensee to criminal and civil liability. That could subject their FCC license to challenge.

The law governing advertising of online sports betting in neighboring states where the activity may be legal, is unsettled. Broadcasters should use caution and take the reasonable measures described below should they decide to accept an ad relating to online sport betting in a neighboring state.

Furthermore, in states that have legalized sports betting, broadcasters must familiarize themselves with any related advertising requirements and ensure that any advertisements they accept comply with the law. For example, some states have conditioned such advertising such that it must:

· Not knowingly target minors or other persons who are ineligible to place wagers, problem gamblers, or other vulnerable persons;

· Disclose the identity of the sports wagering operator;

· Provide information about or links to resources relating to gambling addiction; and

· Not be otherwise false, misleading, or deceptive to a reasonable consumer; and include a nationally recognized problem gambling hotline phone number in promotional activity, such as: 1-888-BETS-OFF, 1-800-522-4700, or 1-800- 26 GAMBLER.

States have not adopted uniform requirements related to advertising for sports betting. For example, Kansas and Virginia have adopted similar rules with specific requirements while Nebraska and Arkansas have much more relaxed advertising requirements, merely requiring good faith. With such varied rules, broadcasters must be aware of the requirements of their state and ensure that the proposed ad complies.

Broadcasters must also be aware that Federal law and regulations regarding sports betting advertising, particularly cross-border sports betting, is unsettled. Seasoned broadcasters know that Federal statutes and FCC rules prohibit the broadcast of advertisements for lotteries or similar schemes dependent in whole or in part on chance with certain exceptions, three of which are relevant here.

First, broadcasters are permitted to air advertisements or information relating to a lottery conducted by a “state acting under the authority of state law, broadcast by a radio or television station licensed to a location in that state or any other state which conducts such a lottery.”v Under this exception, broadcasters licensed to a state that has a state run lottery may advertise or air information related to their state of license’s lottery, another state’s lottery or other legal private sector gambling activities. Broadcasters licensed in states that do not operate a state-run lottery, however, may not air information relating to lotteries, even if they are only reporting information about another state’s lottery or broadcasting from a remote location in a state that does permit lotteries.vi

Second, broadcasters may broadcast advertisements or information related to a lottery, gift enterprise, or similar scheme, that is authorized or not otherwise prohibited by the state in which it is conducted and which is either: (1) conducted by a non-profit or governmental organization; or (2) conducted as a promotional activity by a commercial organization, which is clearly occasional and ancillary to the primary business of the organization.vii Thus, broadcasters may air advertisements or information related to lottery type events conducted by non-profits or governments, and by commercial businesses, that are using the event as an occasional promotional activity.

Third, pursuant to the Supreme Court’s 1999 decision Greater New Orleans Broadcasting Association, Inc. v. United Statesviii broadcasters may air truthful advertisements and information related to lawful private casino gambling, provided that casino gambling is legal in the state where the casino is located. Applying that Supreme Court principle, broadcasters may air advertisements for casino gambling activities operating legally in the state where the activity is located, even if such gambling is illegal in the state where the broadcaster is licensed.

As noted, the FCC has treated different types of gambling in different manners. Based on Greater New Orleans, and other First Amendment commercial speech cases, statutes and regulations (including the FCC regulation) that penalize or prohibit broadcast advertising of legal activities are likely to be found unconstitutional. Thus, once a state legalizes sports betting, the FCC would be unlikely to penalize a station for airing advertising relating to it.

Forms of gambling that are legal in one state but not legal in an adjoining state present a unique problem for broadcasters in the state where the activity is not permitted. Generally, under the commercial speech doctrine, a station should be permitted to advertise a legal activity in an adjoining state even if that activity is not legal in the state in which the broadcaster is located. This is clearest when the activity can only occur when the participant is physically present in the state where the activity is legal. For example, California broadcasters can advertise Nevada casinos, but users can only gamble in those casinos when they are physically present in Nevada. Where the activity occurs online, by telephone, or in some other manner not requiring physical presence, there is a greater danger of illegal activity – specifically, acts of gambling occurring in a state in which they are prohibited. In such a case, the broadcaster should take two steps: (1) Ensure that the advertiser utilizes reasonable and adequate controls to ensure that its gambling services that are legal in a certain state are only made available to persons legally entitled to those services (e.g., adult residents of that state), and (2) make clear in the advertisement itself, probably with a disclaimer, that those services are only available to certain qualifying persons (e.g., a super or voice disclaimer stating, “Only available to Kansas residents over 21 years old”). A disclaimer alone is unlikely to be sufficient; due diligence requires the broadcaster to verify that the advertiser has in place adequate controls to screen out persons who are not legally permitted to engage in the gambling activity authorized by a particular state. For example, should the advertiser assert that its control consists of geo-fencing based on internet protocol addresses of its participants, further investigation as to the adequacy of that measure will be needed, because in the past IP-based geo-fencing has been shown to be a very crude and highly inaccurate method of determining a user’s residence. Moreover, your disclaimer may need to include other qualifications, depending on the law of the state that authorized this particular form of gambling.

Without the protection of Greater New Orleans, there is also potentially additional exposure to liability under other Federal laws, such as the Wire Act,ix Illegal Gambling Business Act,x the Travel Act,xi and the Unlawful Internet Gambling Enforcement Act.xii Given that states have only been permitted to legalize sports betting since 2018, after the Supreme Court issued its decision in Murphy v. National Collegiate Athletic Association,xiii there is not much guidance on how the government will interpret federal gambling laws with regard to cross state advertising. However, there is a risk that any interstate advertising may be considered a violation of these statutes and subject broadcasters to liability. We note also that broadcast networks accept Draft Kings advertising and deliver it to their affiliates with a small print disclaimer at the bottom of the screen that lists the states that can participate. Caution should be exercised as the sufficiency of such a disclaimer has yet to be tested, and it is unclear whether such disclaimers will provide protection to a broadcaster from liability related to sports betting.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.