Scott B. Scheinberg and Joshua R. Sallmen, Associates at Jones Day, discuss the conundrums facing the online sports betting industry with respect to the protection of consumers...
Whether it is “investing” in meme stocks like GameStop or rushing to a convenience store to purchase a chance at winning a $1 billion Mega Millions jackpot, Americans are hungry for an opportunity to get rich fast. After all, it has not helped that Congress continues to drag its feet in providing economic relief to Americans who have been impacted by the COVID-19 pandemic. Folks have an appetite for engaging in risky behavior in tough economic times, and online sports gambling presents the perfect buffet of options.
Online sports gambling remains a recent phenomenon. It has only been three years since the U.S. Supreme Court struck down the federal law that limited sports betting to essentially one state. In that time, twenty states have legalized online sports gambling. Many others have introduced legislation to do the same.
But as with any emerging industry, there are legal questions that must be answered. How will revenue be taxed on sportsbooks? Will sports leagues get a cut of tax revenue? How will the government investigate and police potential fraudulent activity in an effort to protect the integrity of professional and amateur sports and protect consumers?
Barstool Sports President Dave Portnoy may be getting a firsthand answer to the last question sooner rather than later. In early February 2021, the company hosted a “Rough N’ Rowdy” event, which is a recurring, amateur boxing contest held in West Virginia. Barstool acquired the Rough N’ Rowdy brand in 2017. The February fight card was headlined by former MLB great Jose Canseco, who fought a Barstool intern. Except that he didn’t. Canseco was knocked out in ten seconds. He never landed a punch.
Rumors began to fly about Canseco throwing the match and only agreeing to the fight to get paid over $1 million. Leading the charge on those rumors was Portnoy himself. Immediately after the fight, Portnoy took to Twitter to say that Canseco “100% took a dive”.
Barstool Sportsbook, which operates in Michigan and Pennsylvania, took wagers on the fight in Michigan. It did the right thing, particularly after Portnoy’s comments, by refunding wagers on Canseco. Barstool did not refund the $20 viewers spent to purchase the fight, however.
Barstool’s troubles did not end there. The fight is now under investigation by the West Virginia State Athletic Commission because the annual event was held in the Mountain State and sanctioned by its Athletic Commission.
Under West Virginia’s sports wagering law, a person is guilty of a felony when he “offers, promises, or gives anything of value to anyone for the purpose of influencing the outcome of a race, sporting event, contest, or game . . . .” If a person is found to violate that provision, he faces a fine of between $5,000 and $10,000, imprisonment for between one and five years, or both.
In this situation, it is uncertain what the Athletic Commission will conclude. Even if Portnoy’s actions fall outside the bounds of the sports wagering law, another fact that raises eyebrows is that Portnoy was involved in nearly every aspect of this boxing match. It was an event he promoted involving the company he founded and featuring his own intern that was held at a location owned by a company that holds a 36% interest in Barstool Sports. The entire scenario raises questions over the integrity of the fight that does not seem to be addressed by West Virginia’s law. It also does not help that since West Virginia’s law went into effect on March 3, 2018, the law has never been used to prosecute a bad actor.
The problem is not only in West Virginia. In a thorough article written by Associate Professor Jodi S. Balsam of Brooklyn Law School, she examines the issue of the increased risk of match-fixing associated with expanded sports betting. She notes that none of the jurisdictions that had legalized sports wagering as of her writing in 2020 included the criminalization of match-fixing in the enabling legislation. That leaves the only mechanism for the punishment of illicit behavior to feckless sports-bribery statutes. She observes that, as of 2020, “of the forty-six jurisdictions with sports and bribery/tampering statutes, Westlaw’s ‘notes and decisions’ and ‘citing references’ record a combined total of nine prosecutions, none more recent than 1987.” Moreover, the existing statutes arguably leave holes and do not address “extortion, blackmail, duress, or lone-wolf conduct,” according to Balsam. It remains to be seen whether these statutes will be dusted off and put to work in our nascent sports betting world, but neither Professor Balsam nor we are holding our breath.
This commentary does not stake a position on whether Barstool actually committed an infraction. Such a determination is best left to the appropriate investigatory body who can gather all the facts and apply them to the law. The point is not whether there was foul play in this one event. It is possible Canseco acted on his own to throw the match or even possible that Canseco really did get knocked out in what must be one of the quickest pay-per-view bouts in history, though certainly not one of the most-watched. But Barstool had complete control over this event, and its own executive cast doubts upon the event’s integrity. West Virginia has done the right thing by opening an investigation, but if there was foul play, there is arguably no solid regulatory or criminal-investigatory authority in West Virginia or any state to punish it.
Put another way, there is ostensibly nothing—save for some old statutes which have never been used in this or any context since 1987—to stop any company from hosting an event in another state or country, taking wagers on it, and fixing the outcome. Indeed, after mainstream sports were suspended in the early days of the COVID-19 pandemic, sportsbooks began offering betting markets on table tennis matches held “in an undisclosed location in Eastern Europe.” Months later, New Jersey suspended betting on some of the matches after a match-fixing alert from the Sports Wagering Integrity Monitoring Association, a private, nonprofit watchdog organization. And yet, in the face of evidence of impropriety on events offered for betting to residents of New Jersey and other states, it is unclear whether New Jersey or any state took further action than to suspend future betting on the implicated players. But sportsbooks, such as FanDuel Sportsbook in Pennsylvania, continue to offer table tennis matches, as well as other minor and obscure events and competitions. If any of those events or competitions were fixed, the consumer would be up to the mercy of the sportsbooks themselves to police it, because it does not appear that the current regulatory and criminal framework is up to the task. Glaringly, authorities in Michigan have not announced an investigation into the legitimacy of the Rough N’ Rowdy event, which received heavy publicity and on which its own residents placed wagers. We are left to hope that these less-notable events are not being fixed or tampered with.
Lawmakers and those in leadership roles in the major professional sports leagues agree that protections need to be put in place that protects the integrity of professional and amateur sports, as well as consumers who place legal wagers on the outcomes of contests. Shortly after the Supreme Court struck down the Professional and Amateur Sports Protection Act, leaders from the major professional sports leagues testified before the House of Representatives about the need for such regulations. Jocelyn Moore, who serves as the NFL’s Executive Vice President of Communications and Public Affairs, stated, “The absence of clear sports betting standards threatens the integrity of our Nation’s sporting contest, something Congress has sought to protect for nearly 60 years.”
Moore also suggested that the lack of clear regulations from states that have legalized online sports gambling is not an oversight. Instead, she testified, “[W]e are witnessing a regulatory race to the bottom.” As a result, West Virginia might not have started an investigation into the Rough N Rowdy event had Portnoy abstained from tweeting about it to his 2.3 million followers. If any foul play occurred with the event and the perpetrators get caught, they may have Portnoy to thank. But a savvy match-fixer will not announce to the world that she has tipped the scales, and under the current barebones investigatory and disciplinary framework, she might get away without so much as an investigation. Perhaps she already has. We do not know. And that right there is the problem.
Scott B. Scheinberg is an Associate at Jones Day and a member of the firm’s Business and Tort Litigation and Investigations and White Collar Defense practice groups. He has helped companies navigate a wide variety of investigations on topics ranging from environmental compliance to financial and accounting fraud. Scott attended the University of Pittsburgh School of Law, where he served as the Editor in Chief of the Law Review.
Joshua R. Sallmen is an Associate at Jones Day and a member of the firm’s Labor and Employment practice group. He defends employers against a wide variety of claims, including unpaid wages, unpaid benefits, and wrongful termination under state and federal laws. Before joining Jones Day, Josh served as a judicial law clerk on the U.S. Court of Appeals for the Third Circuit. Josh attended the University of Pittsburgh School of Law, where he served as Editor in Chief of the Law Review.
The views expressed in this commentary exclusively reflect the views of the authors and not Jones Day or any of its clients.
Suggested citation: Scott B. Scheinberg and Joshua R. Sallmen, The Fix Is In: Protect Consumers, Sports in Emerging Online Betting Industry, JURIST – Professional Commentary, March 11, 2020, https://www.jurist.org/commentary/2021/03/scheinberg-sallmen-sports-betting-consumers/.
This article was prepared for publication by Vishwajeet Deshmukh, a JURIST staff editor. Please direct any questions or comments to him at email@example.com.
Opinions expressed in JURIST Commentary are the sole responsibility of the author and do not necessarily reflect the views of JURIST's editors, staff, donors or the University of Pittsburgh.