Wake Forest Law Review
21Apr

“Life, uh, Finds A Way”: Is the Political “Horse Race” the Next Great American Sport?

Categories: Current Issues Blog Uncategorized
Comments Off on “Life, uh, Finds A Way”: Is the Political “Horse Race” the Next Great American Sport?

By Alexander S. Boros

So far, 2020 has felt like an eternity and yet we are just four months in.  The spread of COVID-19 has turned the entire world upside down and has transformed the economy in a way we have never seen before.  One of the more interesting twists of fate in the midst of this global crisis was the end of sports in America.[1]  When COVID-19 struck, sports were in full swing: college basketball was entering its postseason, the NBA, MLS, and NHL were mid-season, and Major League Baseball was in the middle of Spring Training.[2]  By March 12, however, state and national social distancing guidelines created “The day the sports world stopped.”[3]  In the coming days, restaurants and bars would shut down and states across the country would shut down all non-essential businesses.[4] 

Millions of Americans would be shut in their homes to flatten the curve but were left without some unifying outlet of entertainment.  Online resources, available from the safety of our own homes, have become the only connection to the outside world.  Internationally, online poker tournaments set records for participation and prize pools, though such gambling is virtually illegal in the United States.[5]  Instead, American gamblers have increasingly wagered on sporting events as their chosen form of entertainment.[6]  When sports shut down, however, that multimillion-dollar gambling industry was also removed from the equation.  In North Carolina alone, sports gambling was expected to bring in $14 million to casinos and $1 million in tax revenues.[7]  Throughout the country, newly developed and well-established sportsbooks alike began facing a question suddenly on the lips of many small businesses owners: How will we stay in business?[8]

It turns out, there is no way to shut down American ingenuity.  In the beginning of April 2020, American sportsbooks FanDuel, DraftKings, and BetMGM each reached out to West Virginia’s Lottery for approval to accept bets in “political market[s].”[9]  Specifically, DraftKings hoped to accept bets on four markets: (1) Winner – Presidential Election; (2) Winning Party Overall; (3) Over/Under seats for each Party – Senate Over/Under for each Party – House Over/Under number of States won; (4) Over/Under Electoral College Votes Obtained and Turnout percentage.[10]  In these conversations, it was taken as a given that gambling on state and local elections was not allowed.[11]  On April 7, the state lottery approved each of the markets.[12]

Betting on elections is “nothing new” internationally.[13]  International gambling websites like InTrade and BetFair became popular in 2012, and the 2016 election brought in record numbers of bets and revenue.[14]  Opening political markets in the United States is a massive opportunity for states as well.[15]  Forecasts suggest that presidential election gambling would produce $1.1 million in new wagers and generating $150 thousand in new tax revenue for West Virginia alone.[16]  Those same projections expected nearly double the wagers on the Presidential election than were placed on Super Bowl LIV.[17]  That is because, although sports are hugely popular in the United States, they do not affect everyone.[18]  American democracy, on the other hand, affects everyone in this country.  Thus, political gambling is hugely popular with first time betters.[19]  In Europe, 12 percent of all wagers placed on the 2016 election were new betters.[20]  That number is nearly six times higher than the percentage of new betters across all other markets offered that year.[21]

Even though initial approval was given to West Virginia’s Sportsbooks, Mac Warner, West Virginia’s Secretary of State, quickly shut down the idea and revoked the approval.[22]  That’s because, in West Virginia, it is “unlawful to bet or wager money or other thing of value on any election held in [the] state.”[23]  It turns out that’s a common restriction across the fifty states.[24]  But should it be?

While direct wagering on elections is illegal,  predictive markets allowing “investing” in political outcomes have been operating within the United States since 1993.[25]  Two of the largest in the country, PredictIt and the University of Iowa’s Electronic Markets, limit the amount of money that can be invested at any time, and all data from the markets is used for research purposes.[26]  Although scholars are divided as to whether there is really a difference between these two markets, arguably the overall results are the same.[27]  At the end of the day, these markets include placing money on candidates based on their odds with either losses or gains that are realized.  Put simply, it is hard to see the distinction between the two forums.  This discussion may be the result of “being so preoccupied with whether or not they could [without stopping] to think if they should.”[28]  That may be a question for a different article.  If Sportsbooks can develop the appropriate, anti-corruption protections to ensure that unfettered gambling does not run amuck on our elections, the country’s next great sport spectacle may well be America’s democracy.

[1] See Mike Vaccaro, The Day Coronavirus Sent the Sports World Into Darkness, N.Y. Post (Mar. 12, 2020, 6:38 PM), https://nypost.com/2020/03/12/the-day-coronavirus-sent-sports-into-hibernation-has-come/.

[2] Id.

[3] Id.

[4] See, e.g., Gabriella Borter, New York Governor Orders All Non-essential Businesses Closed, Says Everyone Must Stay Home, Reuters (Mar. 20, 2020, 11:51AM), https://www.reuters.com/article/us-health-coronavirus-usa-new-york/new-york-governor-orders-all-non-essential-businesses-closed-says-everyone-must-stay-home-idUSKBN2172JP.

[5] David Purdum, Online Poker Tourney Sets Record Amid Pandemic, ESPN (Mar. 24, 2020), https://www.espn.com/chalk/story/_/id/28948562/online-poker-tourney-sets-records-amid-pandemic (noting online poker is legal in only a handful of U.S. states).

[6] See Alexander Boros, North Carolina is All-in on Sports Betting, Wake Forest L. Rev.: Current Issues Blog (Aug. 27, 2020), https://www.wakeforestlawreview.com/2019/08/north-carolina-is-all-in-on-sports-betting/.

[7] See Andrew Westney, NC House Approves Cherokee Sports Betting Bill, Law360 (July 16, 2019), https://www.law360.com/articles/1177393/nc-house-approves-cherokee-sports-betting-bill (“The bill’s supporters expect sports betting to generate $14 million in annual revenue for the tribe and about $1 million a year for the state.”).

[8] David Purdum, Wynn Las Vegas Temporarily Closing Sportsbook Due to the Coronavirus, ESPN (Mar. 13, 2020), https://www.espn.com/chalk/story/_/id/28900242/wynn-las-vegas-temporarily-closing-sportsbook-due-coronavirus.

[9] Adam Candee, Presidential Election Betting Asks In West Virginia Approved In An Hour, Emails Show, Legal Sports Rep. (Apr. 14, 2020, 1:23PM), https://www.legalsportsreport.com/39947/presidential-election-betting-west-virginia-emails/; see also Emails Between WV Lottery and Sports Betting Companies Regarding Elections Betting, Legal Sports Rep. (Apr. 14, 2020), https://www.documentcloud.org/documents/6837062-Emails-between-WV-Lottery-and-Sports-Betting.html [hereinafter Lottery E-mails].

[10] Lottery E-mails, supra note 9, at 20; E-mail from Jacob List, DraftKings, to David Bradley, West Virginia Lottery (Apr. 7, 2020, 1:50 PM) (on file with author) [hereinafter List E-mail].

[11] Lottery E-mails, supra note at 9, at 20; List E-mail, supra note 10.

[12] Lottery E-mails, supra note 9at 25; E-mail from David Bradley, West Virginia Lottery, to Jacob List, DraftKings (Apr. 7, 2020, 4:58 PM) (on file with author) [hereinafter Bradley E-mail].

[13] Sarah Zhang, You Can Bet Real Money on the US Election. It’s for Research, Wired (Mar. 1 2016, 7:00AM), https://www.wired.com/2016/03/can-bet-real-money-us-election-uh-research/.

[14] Id.; see also Lottery E-mails, supra note 9, at 22 (“The biggest market in terms of volume matched in the history of the Exchange is the 2016 Next President market …”); E-mail from John Sheeran, PPB.Com, to David Bradley, West Virginia Lottery (Apr. 7, 2020, 2:10 PM) (on file with author) [hereinafter Sheeran E-mail].

[15] Lottery E-mails, supra note 9, at 18; E-mail from Erich Zimny, Vice President of Racing & Sports Operations, Hollywood Casino at Charles Town Races, to David Bradley, West Virginia Lottery (Apr. 6, 2020, 3:56 PM) (on file with author) [hereinafter Zimny E-Mail].

[16] Lottery E-mails, supra note 9, at 18; Zimny E-mail, supra note 15.

[17] Lottery E-mails, supra note 9, at 18; Zimny E-mail, supra note 15.

[18] Lottery E-mails, supra note 9,at 24; Sheeran E-mail, supra note 14.

[19] Lottery E-mails, supra note 9,at 24; Sheeran E-mail, supra note 14.

[20] Lottery E-mails, supra note 9,at 24; Sheeran E-mail, supra note 14.

[21] Lottery E-mails, supra note 9,at 24; Sheeran E-mail, supra note 14.

[22] Press Release, Andrew “Mac” Warner, Secretary of State Warner Releases Statement on Wagering on Elections in West Virginia (Apr. 8, 2020), https://sos.wv.gov/news/Pages/04-08-2020-A.aspx.

[23] W. Va. Code § 3-9-22 (2019); see Press Release, supra note 22.

[24] Tamar Lapin, Political Betting Was Legal in West Virginia – For About an Hour, N.Y. Post (Apr. 8, 2020, 9:27 PM), https://nypost.com/2020/04/08/political-betting-was-legal-in-west-virginia-for-about-an-hour/.  

[25] See Zeke Faux, PredictIt Owns the Market for 2020 Presidential Election Betting, BloomsBerg BusinessWeek (Aug. 1, 2019, 9:10 AM), https://www.bloomberg.com/news/articles/2019-08-01/predictit-owns-the-market-for-2020-presidential-election-betting; Theo Francis, Wanna Bet? The Market Has a View on the 2020 Election, Wall St. J. (Jan. 10, 2020, 1:11 PM), https://www.wsj.com/articles/wanna-bet-the-market-has-a-view-on-the-2020-election-11578679896.

[26] Research Opportunities, PredictIt, https://www.predictit.org/research (last visited Apr. 20, 2020); About the IEM, U. Iowa, https://iemweb.biz.uiowa.edu/about/?mod=djem_election2020&mod=article_inline (last visited Apr. 20, 2020).

[27] Alexandra Lee Newman, Manipulation in Political Prediction Markets, 3 J. Bus. Entrepreneurship & L. 205, 208 n.25 (2010) (“Prediction market scholars disagree about whether the CFTC legally can regulate public prediction markets generally under the CEA, or whether state gambling laws should regulate these markets.”) (citing to disagreement in literature regarding the differences and likenesses of predictive markets and gambling).

[28] Jurassic Park (Universal Pictures 1993).

Tags:
17Mar

Fourth Circuit Determines “Loss Recovery Statute” Does Not Include Virtual Currency

Categories: 4th Cir. Blog Archive Civil Cases
Comments Off on Fourth Circuit Determines “Loss Recovery Statute” Does Not Include Virtual Currency

By Kelsey Mellan

On March 17, 2017, the Fourth Circuit issued a published opinion in Mason v. Machine Zone, Inc. a civil appeal of the district court’s dismissal of a Loss Recovery Statute claim. Plaintiff Mia Mason filed a class action complaint against Machine Zone, Inc. (“Machine Zone”), the developer of a mobile game entitled “Game of War: Fire Age” (“Game of War”). Mason alleged that she lost money participating in an unlawful “game device” – a virtual wheel that makes up a substantial part of Game of War. The district court dismissed Mason’s class action under FRCP 12(b)(6) for failure to state a claim. The Fourth Circuit subsequently affirmed the district court’s decision.

Facts & Procedural History

Machine Zone developed and operates Game of War, a popular video game that can be downloaded for free on mobile devices. Game of War is a strategy game in which players build virtual towns and armies, and “battle” each other in a virtual world. While it is free to play the game, players can purchase virtual “gold” at prices ranging from $4.99 to $99.99. Players can use this gold to “improve their virtual towns” and to obtain virtual “chips” for use during the Game of War “casino.”  This virtual casino is a game of chance in which players can use their virtual chips for an opportunity to obtain prices for use within the game by “spinning” a virtual wheel – a completely randomized feature of the game. The first time a player enters Game of War, he or she is entitled to one free spin of the wheel. However, after the player uses this free spin, must use chips to pay for each additional spin. If a player doesn’t have enough chips to spin, the player must use virtual gold to obtain more chips.

Players who spin the wheel have no control over the outcome of the spin and, thus, no skill on the part of the player influence what the outcome will be. Players obtain prizes from spinning the wheel. If a player wins enough prizes he or she may want to sell his or her account on “secondary markets” for real money. However, this sale on secondary markets, such as Amazon, would violate Machine Zone’s terms of service.

Mason started playing Game of War on her cell phone in early 2014. After using her complimentary spin of the virtual wheel, Mason began purchasing virtual gold in order to obtain more chips to continue spinning the wheel to earn prizes. Between early 2014 and January 2015, Mason spent over $100 to participate in the casino.

Mason filed a class action in the District of Maryland under Maryland’s Loss Recovery Statute. She alleged that she lost money playing an unlawful “game device” and sought “full disgorgement and restitution of any money [Machine Zone] has won” from Mason and similarly situated Maryland residents. The district court determined that Mason failed to state a claim under the Loss Recovery Statute because “she did not lose money” in the virtual casino – and thus, the court dismissed Mason’s complaint.

Plaintiff-Appellant’s Claim Under Maryland’s Loss Recovery Statute

Mason argues that the district court erred in dismissing her class action under FRCP Rule 12(b)(6) because she lost money while playing in the virtual casino – which she claims is an unlawful “game device” under the Loss Recovery Statute. The Fourth Circuit reviewed the district court’s dismissal de novo, accepting Mason’s well-plead allegation as true and drawing all reasonable inferences in her favor.

Maryland’s Loss Recovery Statute states “a person who loses money at a [prohibited] gaming device…may recover the money as if it were a common debt.” The statute defines gaming device as “a game or device which money or any other thing or consideration of value is bet, wagered, or gambled,” and includes a “wheel of fortune.” Pursuant to the Maryland state case, F.A.C.E. Trading, Inc. v. Todd, the Fourth Circuit was required to interpret Maryland’s gambling statutes in a manner that “gives validity not only to the word, but to the spirit of the law. For the purposes of this appeal, the Fourth Circuit assumed that the virtual casino was a prohibited “gaming device” and agreed with the district court that Mason did not lose any money when spinning the wheel in the virtual casino. Therefore, she failed to satisfy a required element for stating a claim under the Loss Recovery Statute.

In deciding whether the loss of virtual money fell under the Loss Recovery Statute, the Fourth Circuit looked to Cates v. State, a Maryland case which noted that the predecessor to the Loss Recovery Statute encompassed a public policy “not to help one who loses at gambling, but to discourage illegal gambling by putting the winner on notice that the courts will force him to disgorge his winnings.” In the case of Game of War, Machine Zone did not “win” any money. Rather, Mason participated in the virtual casino by “spinning” the virtual wheel where no money was at stake – only virtual prizes and chips. Thus, Mason could not have lost or won money as a result of her participation in the virtual activity. Moreover, the Fourth Circuit determined that the fact that Mason could sell her account on “secondary markets” was irrelevant – as the entire account would be sold, not just the virtual prizes or chips.  Thus, the Fourth Circuit rejected Mason’s contention that the existence of a secondary market showed that she lost money as a result of her participation in Game of War’s virtual casino.

 Disposition

 Accordingly, the Fourth Circuit affirmed the district court’s conclusion that Mason did not “lose money” within the meaning of the Loss Recovery Statute as a result of her participation in the Game of War casino.

Tags:
16Oct

Fourth Circuit Finds Government Failed to Disclose Impeachable Evidence in Gambling Case

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Finds Government Failed to Disclose Impeachable Evidence in Gambling Case

file6351284658923

By Paige Topper

On June 25, 2015, in the criminal case of United States v. Parker, a published opinion, the Fourth Circuit vacated the defendants’ convictions of illegal gambling. The Fourth Circuit found that the government failed to disclose material impeachment information relating to a government witness who testified about a fifth participant in the gambling operation.

Fifth Participant Requirement Under 18 U.S.C. § 1955

Jack Parker and Douglas Taylor (“Defendants”) were convicted for conducting an illegal gambling business under 18 U.S.C. § 1955. Section 1955 defines an illegal gambling business in part as a business that involves five or more persons who partake in all or part of the business (“five-participant requirement”). At the trial court level the Defendants stipulated that they operated a sports gambling business together. The government claimed that Defendants were linked to another two-person gambling operation conducted by Brett Parker and Bryan Capnerhurst. The government further argued that because Defendants and the other gambling business shared both clients and the proceeds or losses from those clients, Brett, Bryan, Jack, and Douglas all participated in the same gambling business.

In order to meet the five-participant requirement, the government presented several theories. One of the theories was that Brett’s wife, Tammy Parker, participated in the business by using the gambling income for family expenses and maintaining the financial records. In support of this theory, the government provided testimony from its witness, Ben Staples, who claimed that he assisted Tammy in preparing federal tax returns in which she disclosed the income from the gambling business. The government also presented evidence that Tammy would occasionally accept payments for bets when Brett was not home.

Prior to Defendants’ trial, the government received notice that the Securities and Exchange Commission was investigating Ben Staples for fraud. However, the government did not disclose this information to Defendants’ attorneys. It was only after Defendants were found guilty of illegal gambling that their defense counsel learned of the SEC complaint. Defendants requested a new trial based on the government’s failure to disclose impeachment evidence as required by Brady v. Maryland. The trial court concluded that the government did not violate Brady because the SEC investigation was not material evidence.

Establishing a Brady Violation

The Supreme Court in Brady held that suppression of evidence that favors the defendant violates due process when the evidence is material to guilt or punishment. To establish a Brady violation, a defendant must show (1) that the undisclosed information was favorable, either because it was exculpatory or impeaching, (2) the information was material, and (3) the prosecution knew about the evidence and failed to disclose it.

Defendants Proved All Three Prongs of Brady Violation

First, the Fourth Circuit concluded that the SEC investigation of Ben Staples was favorable because it was impeaching. The Fourth Circuit reasoned that the evidence of the investigation would have demonstrated Staples’ potential desire to receive favorable treatment in his fraud case by testifying as a government witness in this case. Furthermore, the evidence would show Staples’ untruthful character.

Second, the Fourth Circuit found that the SEC investigation was material. At trial the jurors were not asked to specify the identity of the fifth participant in the gambling business and thus the Fourth Circuit could not know whether any juror relied on Tammy’s involvement to satisfy the five-participant requirement. However, the Fourth Circuit determined that, based on the relative strengths of the government’s theories for the five-participant requirement, there was a reasonable probability that at least one juror viewed Tammy as the fifth participant. Thus, the Fourth Circuit looked to whether impeaching Staples’ testimony would have had a reasonable probability to change a single juror’s view of Tammy’s involvement in the gambling business. The Fourth Circuit found that Staples’ testimony is the only evidence that firmly established Tammy’s active management of the gambling proceeds and thus the testimony provided critical evidence to support the government’s theory that Tammy was the fifth participant.

The Fourth Circuit did not explicitly address the third prong of the Brady test, but held that the government violated its obligation under Brady by failing to disclose the evidence of the SEC investigation to defense counsel. The Fourth Circuit was not persuaded by the government’s argument that a Brady violation had not occurred because Defendants were aware of the SEC investigation. While Jack and Brett might have been aware that Ben Staples was involved in a scam, the Fourth Circuit concluded this evidence was not enough to relieve the government from its disclosure obligations under Brady.

Fourth Circuit Vacated Defendants’ Convictions and Remanded

The Fourth Circuit held that the government violated its disclosure obligations under Brady by failing to disclose impeachable evidence relating to Ben Staples, a government witness. In particular, the Fourth Circuit concluded that the SEC investigation was material to the outcome of the case. Therefore, the Fourth Circuit vacated the convictions and remanded. The Fourth Circuit noted that it did not enter judgments of acquittal because, while the evidence is not overwhelming, the government formed a sufficient basis for defendants’ convictions for illegal gambling under § 1955.

Tags:
22Nov

(Non)Gambling Corruption in Sports

Categories: Online
Comments Off on (Non)Gambling Corruption in Sports

By Ryan M. Rodenberg

The Professional and Amateur Sports Protection Act (“PASPA”), a federal statute banning state-sponsored sports gambling nationwide except in Nevada, Delaware, Oregon, and Montana, celebrated its twentieth anniversary on October 28, 2012.[1]  If New Jersey voters and the state’s governor have their way, PASPA will not reach its twenty-first birthday.  On January 17, 2012, New Jersey Governor Chris Christie signed into law a voter-approved referendum to amend the state’s constitution and permit regulated gambling on sports.[2]  The referendum was a direct affront to PASPA and in clear conflict with the statute’s prohibitive language.[3]  Governor Christie acknowledged the obvious conflict in a subsequent press conference and all but invited a legal challenge:

We intend to go forward and allow sports gambling to happen . . . . [A]m I expecting that there may be some legal action taken against us to try to prevent it?  Yes.  But that’s going to be their burden to try to prevent it . . . . We may have to go through some litigation to get there . . . but I think we’re going to be successful.[4]

The National Collegiate Athletic Association (“NCAA”), National Basketball Association (“NBA”), National Football League (“NFL”), National Hockey League (“NHL”), and Major League Baseball (“MLB”) accepted the governor’s invitation to litigate.  The quintet of plaintiffs, all specifically deputized under PASPA to enforce the terms of the statute,[5] filed suit in the U.S. District Court for the District of New Jersey on August 7, 2012, seeking declaratory and injunctive relief.[6]  In their complaint in NCAA v. Christie, the plaintiffs alleged:

Sports gambling in New Jersey would irreparably harm amateur and professional sports by fostering suspicion that individual plays and final scores of games may have been influenced by factors other than honest athletic competition.  As Congress recognized when it enacted PASPA, the proliferation of sports gambling threatens to harm the reputation and goodwill of Plaintiffs, and to adversely affect the way the public views amateur and professional sports.[7]

In Christie, the plaintiffs argued that gambling’s corrupting influence detrimentally impacts the integrity of the game.[8]  The stance of American sports leagues in connection with this issue has been long and largely consistent. Once described by an in-house MLB attorney as a “campaign. . .aimed at preserving the integrity of our sports contests,”[9] leagues primarily posit that corruption is a creature of external gambling, not from sources of a more endogenous variety.  With PASPA-specific Christie as a backdrop, this article normatively argues that such a near-singular focus on gambling as the root cause of sports corruption is insufficient and dangerous.  Industry representatives and government policymakers should take a broader view of corruption issues in sports and be mindful of money-driven manipulation, fraud, and deception that is completely unrelated to gambling.  Khalid Ali, Secretary General of the Belgium-based European Sports Security Association, expressed similar sentiments regarding how nongambling corruption in the sports industry can impact game outcomes and in-game events: “We must remember that betting-related match-fixing is only half of the story. Nonbetting, or sporting related, match-fixing also threatens the integrity of sport. . . .”[10]  More broadly, law professor Richard H. McLaren opined that “there is an increasing need to regulate corruption, keep sporting events clean, and restore and build public confidence in professional . . . sport.”[11]

The impetus for PASPA is well documented.  Congress surmised that betting on sports was “. . .undermin[ing] public confidence in the character of professional and amateur sports . . . [and] promot[ing] gambling among our Nation’s young people.”[12]  Then-New Jersey Senator Bill Bradley, a former NBA player for the New York Knicks, set forth other reasons supporting PASPA: “If the dangers of state sponsored sports betting are not confronted, the character of sports and youngsters’ view of them could be seriously threatened . . . . Legalizing sports gambling would aggravate the problems associated with gambling.  As a society, we cannot afford this result.”[13]

Declarations filed in Christie by the president of the NCAA and commissioners in the NBA, NFL, NHL, and MLB tell a similar story.  NCAA President Mark Emmert stated that “the NCAA and its member institutions have worked diligently since its inception over one hundred years ago to protect the integrity of the NCAA and maintain the public’s confidence in college athletics.”[14]  MLB Commissioner Bud Selig declared that “my most important responsibility is working to maintain the integrity of MLB and to preserve public confidence in our sport.”[15]  Gary Bettman, the commissioner of the NHL, stated that the league “works tirelessly to earn and protect its reputation for integrity of competition, without which the league will no longer be viewed as quality family entertainment.”[16]  Declarations by NBA Commissioner David Stern and NFL Commissioner Roger Goodell were largely analogous.[17]  In the five declarations that were filed, the concept of “integrity” was repeatedly referenced, evidencing its corruption-related importance in a general sense and to sports gambling specifically.

Integrity-laden discussions in connection with sports corruption speak to a wider narrative than mere sports gambling, however.  Sports are distinguishable from other forms of entertainment.  In a case pertaining to the ownership of real-time sports data under copyright law, the U.S. Court of Appeals for the Second Circuit, in dicta, observed that, “[u]nlike movies, plays, television programs, or operas, athletic events are competitive and have no underlying script.”[18]  In other words, the ultimate outcome of sporting events is, presumably, uncertain.  Such uncertainty of outcome is often described synonymously as competitive purity, sporting legitimacy, and honest athletic competition.  Researchers have empirically tested the extent to which uncertainty of outcome is attractive to sports leagues, broadcasters, and consumers,[19] including gauging suspense as a predictor of viewer enjoyment[20] and advertising effectiveness.[21]  Gambling-related corruption in the form of microlevel spot fixing, point shaving, or outright match-fixing undoubtedly runs counter to the perception of uncertain outcomes in sports.  Outcome uncertainty is also impacted by manipulation completely unrelated to gambling.  The “convergence of sports and entertainment” was detailed in Money Games by David M. Carter, a book that included glowing testimonials from NBA Commissioner Stern and MLB Commissioner Selig referencing the blurred line between sports and noncompetitive scripted entertainment.[22]

Examples of such (corruption-inducing) blurring abound,[23] with the so-called “Spygate” scandal being the most prominent recent domestic example.[24]  During Spygate, it was revealed that the NFL’s New England Patriots used team personnel to surreptitiously videotape opposing teams in order to gain a competitive advantage.  The entire episode resulted in calls for a Congressional hearing by U.S. Senator Arlen Specter,[25] an unsuccessful class action lawsuit by aggrieved fans of an opposing team,[26] and a full-length investigative book.[27]  Using a variety of statistical techniques,[28] academics have pinpointed (sub)conscious nongambling corruptive biases among judges, referees, and umpires in baseball,[29] basketball,[30] gymnastics,[31] ice hockey,[32] diving,[33] figure skating,[34] rugby,[35] and soccer.[36]  Also, in just the past two years,[37] specific instances or allegations have arisen in connection with (i) suspense-motivated stoppages in car racing events;[38] (ii) uneven rule enforcement of time violations in tennis;[39] (iii) the lack of randomness in the U.S. Open tennis tournament draw;[40] (iv) at least one NFL referee requesting a coach to call a timeout in order to accommodate more television commercials;[41] (v) rematch-ensuring fraud by boxing judges;[42] and (vi) strategic tanking in badminton,[43] soccer,[44] and the NBA.[45]  Each of the foregoing examples was unrelated to gambling but nonetheless manipulated and impacted the uncertainty of outcome supposedly inherent in nonscripted competitive sporting events.[46]

Gambling-related corruption in sports is barred at the federal level by the Sports Bribery Act of 1964.[47]  In contrast, corruption unrelated to gambling is not explicitly banned.  Such absence is problematic.[48]  Due to the “peculiar economics” of sports,[49]commercialized sporting events are unique in that “[u]nlike most economic contests, demand arises more from interest in observation of the contest itself (e.g. a race or a match) than in the outcome of the contest.”[50]  Working in concert with affiliated referees, coaches, players, facility personnel, commercial sponsors, or broadcast partners, a sports league cognizant of such demand function can, in theory and practice, manipulate its own contests to artificially inflate consumer interest and revenue potential.  So long as such manipulation has no nexus to gambling, the rigging of game outcomes or individual events occurring therein is legal.  No federal law definitively prohibits it.

The closest any law comes to such a ban is the so-called “quiz show scandal” statute that was passed in 1960 following multiple high-profile cases of deceptive fraud on wildly popular television shows that tested contestants’ intellect in various ways.[51]  The show Twenty-One was the most prominent example of how such shows were scripted for commercial success, with certain contestants being supplied the answers to trivia questions while other contestants were instructed to purposefully answer select questions incorrectly.[52]  Findings from a U.S. House of Representatives subcommittee found a “complex pattern of calculated deception of the listening and viewing audience.”[53]  Legislative action was swift – 47 U.S.C. § 509 generally forbids deception of the public by engaging in “any artifice or scheme for the purpose of prearranging or predetermining in whole or in part the outcome of a purportedly bona fide contest of intellectual knowledge, intellectual skill, or chance.”[54]  Although athletic contests are not explicitly excluded from the statute, one commentator has opined that the law pertains only to “skills that are of a primarily intellectual nature . . . [and] does not cover athletic events, talent contests, or beauty pageants.”[55]

To close the legislative gap and ensure that both gambling and nongambling integrity issues in sports are addressed, there are three possibilities.  First, the aforementioned quiz show scandal statute could be revised to explicitly include sporting events.  Second, the Sports Bribery Act of 1964 could be amended to include unilateral or collaborative nongambling sports manipulation, fraud, or deception as a prohibited activity.  As is the case in securities fraud cases, both of the aforementioned proposed legislative tweaks would require that defendants act with scienter.[56]  Third, a new statute, modeled on the doping-specific Integrity in Professional Sports Act of 2005, could be enacted.[57]  All three proposals are consistent with the plethora of integrity-focused comments league executives have enunciated in Christie and elsewhere, including the open letter NFL Commissioner Roger Goodell released on the eve of an(other) “unpredictable” 2012 season that stated, in relevant part: “As always, we hold everyone, including ourselves, strictly accountable for protecting the integrity of the game . . . .”[58]  Accordingly, assuming the plaintiffs’ Christie pleadings, coupled with related public statements made in other contexts, accurately reflect sports league policy vis-à-vis integrity in its broadest construct, the leaders of the most prominent American-based sports governing bodies would seemingly be active supporters of the integrity-preserving legislation proposed here.

           *   The author is an assistant professor of sports law analytics at Florida State University.  He earned his JD from the University of Washington-Seattle and his PhD from Indiana University-Bloomington.  Prior to academia, he worked at Octagon, Nike, the ATP Tour, and Keller Rohrback LLP.  He would like to thank the members of the Wake Forest Law Review for expert editing and helpful comments.  William Winter and Yoon Tae Sung provided excellent research assistance.

        [1].   28 U.S.C. §§ 3701–3704 (2006).  PASPA was signed into law by President George H.W. Bush on October 28, 1992.  Nevada, Delaware, Oregon, and Montana were grandfathered in under the statute by virtue of their then-existing regulated gambling on sports.

        [2].   Complaint at 2, Nat’l Coll. Athletic Ass’n v. Christie, 3:12-cv-04947-MAS-LHG (D.N.J. Aug. 7, 2012).

        [3].   28 U.S.C. § 3702 (2006).

        [4].   Cheryl Armstrong, All Major Sports Sue NJ Governor Christie for Signing Gambling Law, Courthouse News Serv., http://www.courthousenews.com/2012/08/09/49140.htm (last updated Aug. 9, 2012).

        [5].   28 U.S.C. § 3703 (2006).

        [6].   Complaint, supra note 2, at 11.

        [7].   Id. at 3.   In a previous PASPA-related case involving Delaware, the same group of five plaintiffs made related allegations.  See Office of Comm’r of Baseball v. Markell, 579 F.3d 293, 304 (3d Cir. 2009) (ruling under the language of PASPA’s grandfathering clause that Delaware is limited to offering multi-game football parlay cards, not single game wagering).

        [8].   Complaint, supra note 2, at 3. For treatment of recent high-profile gambling-related scandals, see Sean Patrick Griffin, Gaming the Game: The Story Behind the NBA Betting Scandal and the Gambler Who Made it Happen (2011); Declan Hill, The Fix: Soccer and Organized Crime (2008).  For an in-depth discussion of three historical sports gambling scandals, see generallyEliot Asinof, Eight Men Out (1963); Dan E. Moldea, Interference: How Organized Crime Influences Professional Football (1989); Charley Rosen, The Wizard of Odds: How Jack Molinas Almost Destroyed the Game of Basketball (2001).

        [9].   Thomas J. Ostertag, From Shoeless Joe to Charley Hustle: Major League Baseball’s Continuing Crusade Against Sports Gambling, 2 Seton Hall J. Sport L. 19, 21 (1992).

      [10].   ESSA Welcomes the Commission’s Proposals to Safeguard the Integrity of Sport, DINGNews.com (Oct. 24, 2012), http://www.dingnews.com/en/
nota.aspx?id=18405.

      [11].   Richard H. McLaren, Is Sport Losing its Integrity?, 21 Marq. Sports L. Rev. 551, 552–53 (2011).

      [12].   S. Rep. No. 102–248, at 4 (1992).

      [13].   Bill Bradley, The Professional and Amateur Sports Protection Act—Policy Concerns Behind Senate Bill 474, 2 Seton Hall J. Sport L. 5, 5–6 (1992).

      [14].   Declaration of Mark Emmert at 4, Nat’l Collegiate Athletic Ass’n v. Christie, No. 3:12-cv-04947 (D.N.J. Aug. 10, 2012).

      [15].   Declaration of Allan H. Selig at 2, Nat’l Collegiate Athletic Ass’n v. Christie, No, 3:12-cv-04947 (D.N.J. Aug. 10, 2012).

      [16].   Declaration of Gary Bettman at 2, Nat’l Collegiate Athletic Ass’n v. Christie, No. 3:12-cv-04947 (D.N.J. Aug. 10, 2012).

      [17].   Compare Declaration of David J. Stern at 3, Nat’l Collegiate Athletic Ass’n v. Christie, No. 3:12-cv-04947 (D.N.J. Aug. 10, 2012), with Declaration of Roger Goodell at 2, Nat’l Collegiate Athletic Ass’n v. Christie, No. 3:12-cv-04947 (D.N.J. Aug. 10, 2012).

      [18].   Nat’l Basketball Ass’n v. Motorola, 105 F.3d 841, 846 (2d Cir. 1997).

      [19].   For a survey of dozens of such empirical studies, see generally Dennis Coates et al., Outcome Uncertainty, Reference-Dependent Preferences and Live Game Attendance, (U. of Alberta, Dep’t of Econ., Working Paper No. 2012-07, 2012), available at http://www.economics.ualberta.ca/~/media/economics/
FacultyAndStaff/WPs/WP2012-07-Coates-Humphreys-Zhou.

      [20].   See generally Jennings Bryant et al., “Buzzer Beaters” and “Barn Burners:” The Effects on Enjoyment of Watching the Game Go “Down to the Wire”, 18 J. Sport & Soc. Issues 326 (1994); Erik M. Peterson & Arthur A. Raney, Reconceptualizing and Reexamining Suspense as a Predictor of Mediated Sports Enjoyment, 52 J. Broadcasting & Electronic Media 544 (2008); Gan Su-lin, et al., The Thrill of a Close Game: Who Enjoys It and Who Doesn’t?, 21 J. of Sport & Social Issues 53 (1997).

      [21].   See generally Colleen C. Bee & Robert Madrigal, It’s Not Whether You Win or Lose; It’s How the Game is Played: The Influence of Suspenseful Sports Programming on Advertising, 41 J. Advertising 47 (2012).

      [22].   In antitrust cases, for example, sports leagues often argue that they are merely one of many options in the entertainment market along with motion pictures, music, and Broadway shows. See, e.g., Am. Needle v. Nat’l Football League, 130 S.Ct. 2201, 2207–2208  (2010).

      [23].   See Richard H. McLaren, Corruption: Its Impact on Fair Play, 19 Marq. Sports L. Rev. 15, 15 (2008) (noting that corruption “robs sport of its essential feature of uncertainty of the outcome and accelerates its spin into the forum of entertainment, and thus it no longer is sport”).

      [24].   Corruption is by no means restricted to U.S. sports, with the multi-faceted corruption surrounding soccer’s global governing body, the Fédération Internationale de Football Association (“FIFA”), being the most obvious recent example.  For details regarding FIFA’s recent corruption-related travails, see Roger Pielke, Jr., How Can FIFA be Held Accountable?, Sport Mgmt. Rev. (forthcoming 2013), available at http://leastthing.blogspot.com/2012/10/how-can-fifa-be-held-accountable-now-in.html.

      [25].   See Mike Fish, Specter: Goodell’s Spygate Explanations Don’t Pass Scrutiny, ESPN (Feb. 15, 2008), http://sports.espn.go.com/nfl/
news/story?id=3246788.

      [26].   See Mayer v. Belichick, 605 F.3d 223, 225, 237 (3d Cir. 2010).

      [27].   See generally Bryan O’Leary, Spygate: The Untold Story (2012).

      [28].   A related nonquantitative inquiry has been undertaken in the nascent field described as “the jurisprudence of sports.” See Mitchell N. Berman, “Let ‘em Play”: A Study in the Jurisprudence of Sport, 99 Geo. L. J. 1325, 1334–35 (2010) (noting the use of temporal variance in foul calling); Mitchell N. Berman, Replay, 99 Calif. L. Rev. 1683, 1687 (2011) (describing the use of instant replays).

      [29].   See Christopher A. Parsons et al., Strike Three: Discrimination, Incentives, and Evaluation, 101 Am. Econ. Rev. 1410, 1415–16 (2011).

      [30].   See Kyle J. Anderson & David A. Pierce, Officiating Bias: The Effect of Foul Differential on Foul Calls in NCAA Basketball, 27 J. Sports Sci. 687 (2009); Paul Gift, Sequential Judgment Effects in NBA Officiating: An Analysis of Referee Bias in Make-Up Call Situations 16–17 (July 1, 2012) (unpublished working paper), available athttp://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2104391; Joseph Price & Justin Wolfers,  Racial Discrimination Among NBA Referees, 125 Q. J. of Econ. 1859, 1859, 1867 (2010); Joseph Price et al., SubPerfect Game: Profitable Biases of NBA Referees, 21 J. of Econ. and Mgmt. Strategy 271 (2012); Timothy Zimmer & Todd H. Kuethe, Testing for Bias and Manipulation in the National Basketball Association Playoffs, 5 J. Quantitative Analysis Sports (2009).

      [31].   See Hillary N. Morgan & Kurt W. Rotthoff, The Harder the Task, the Higher the Score: Findings of a Difficulty Bias 2–3, 16–17 (Aug. 28, 2012) (unpublished working paper), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1555094 (discussing that more difficult gymnastics routines typically receive higher scores).

      [32].   See generally Jack Brimberg & William J. Hurley, Are National Hockey League referees Markov?, 22 OR Insight 234 (2009).

      [33].   See generally John W. Emerson et al., Assessing Judging Bias: An Example From the 2000 Olympic Games, 63 Am. Statistician 124 (2009).

      [34].   See generally Eric Zitzewitz, Nationalism in Winter Sports Judging and Its Lessons for Organizational Decision Making, 15 J. of Econ. and Mgmt Strategy 67 (2006).

      [35].   See Katie Page & Lionel Page, Evidence of Referees’ National Favouritism in Rugby, 1–35 (NCER Working Paper Series, Working Paper No. 62, 2010), available at http://www.ncer.edu.au/papers/documents/WPNo62.pdf.

      [36].   See generally Thomas J. Dohmen, The Influence of Social Forces: Evidence from the Behavior of Football Referees, 46 Econ. Inquiry 411 (2008); Luis Garicano et al., Favoritism Under Social Pressure, 87 Rev. Econ. Statistics 208 (2005).

      [37].   For historical examples of nongambling fraud in sports, see Brian Tuohy, The Fix Is In: The Showbiz Manipulations of the NFL, MLB, NBA, NHL and NASCAR (2011), and Patrick Hruby, The Truth is Out There: From the 1985 Draft Lottery to the Olympics to Game-Fixing…Which Sports Conspiracy Can You Believe, PostGame (May 30, 2012), http://www.thepostgame.com/blog/hruby-tuesday/201205/conspiracy-theory-david-stern-michael-phelps-patrick-ewing-michael-jordan.

      [38].   See Terry Blount, Bruton Smith Wants ‘Timeouts,’ ESPN.com (June 30, 2012), http://espn.go.com/racing/nascar/cup/story/_/id/8117189/bruton-smith-says-nascar-needs-mandatory-cautions.

      [39].   See Douglas Robson, Is It Time for Tennis to Bring in Shot Clock?, USA Today (Mar. 8, 2012), http://usatoday30.usatoday.com/sports/tennis/story/2012-03-08/atp-tour-flouting-the-time-rule/53420792/1.

      [40].   See Paula Lavigne & Alok Pattani, U.S. Open Random Draw Questioned, ESPN.com, http://espn.go.com/espn/otl/story/_/id/6850893/espn-analysis-finds-top-seeds-tennis-us-open-had-easier-draw-statistically-likely (last updated Aug. 15, 2011).

      [41].   See Doug Farrar, Jeff Fisher was Asked to Call Timeouts for MNF Commercial Breaks, Yahoo! Sports (Oct. 19, 2010), http://sports.yahoo.com/nfl/blog/shutdown_corner/post/Jeff-Fisher-was-asked-to-call-timeouts-for-MNF-c?urn=nfl-278323.

      [42].   See Bob Velin, Bradley-Pacquiao Decision Leaves Boxing Reeling, USA Today, http://usatoday30.usatoday.com/sports/boxing/story/2012-06-10/timothy-bradley-manny-pacquiao-results-stuns/55509840/1 (last updated June 11, 2012).

      [43].   See Justin Peters, Shuttlecock and Bull, Slate (Aug. 1, 2012, 2:20 PM), http://www.slate.com/articles/sports/fivering_circus/2012/08/badminton_scandal_olympics_2012_why_were_those_olympic_badminton_players_trying_to_lose_and_why_is_the_sport_so_dirty_.html.

      [44].   See Tom Degun, IOC Content with FIFA Decision Not to Punish Japan on Olympic Match-Fixing Admission, Inside Games (Aug. 2, 2012), http://www.insidethegames.biz/sports/summer/football/18027-ioc-content-with-fifa-decision-not-to-punish-japan-on-olympic-match-fixing-admission.

      [45].   See Henry Abbott et al., 10 Points on Tanking, ESPN.com (Apr. 27, 2012), http://espn.go.com/blog/truehoop/post/_/id/41456/10-points-on-tanking.  For a more in-depth treatment of the issue, see generally Christopher Walters & Tyler Williams, To Tank or Not to Tank? Evidence from the NBA (Mar. 2-3, 2012) (unpublished working paper), available at http://www.sloansportsconference.com/wp-content/uploads/2012/02/35-Walters_Williams_NBA_2012.pdf.

      [46].   For the avoidance of doubt, all references to “sports” herein are distinguishable from professional wrestling, a noncompetitive entertainment spectacle widely known to be staged with prearranged outcomes. See David Shoemaker, A Brief History of Wrestling Fakery, Grantland (June 15, 2012, 12:00 AM), http://www.grantland.com/story/_/id/8056213/john-cena-big-show-how-century-pretend-fighting-led-wwe-reality-era.

      [47].   18 U.S.C. § 224 (2006).  Shortly after passage of the statute, the Federal Bureau of Investigation set up a Sports Bribery Program.  See Sports Bribery Program, Fed. Bureau Investigation, http://www.fbi.gov/about-us/investigate/organizedcrime/sports_bribe (last visited Nov. 7, 2012).

      [48].   The absence of a specific integrity-preserving statute in the context of modern “reality” television shows that involve prize-earning competitions among contestants is equally problematic.  See Tara Brenner, A “Quizzical” Look into the Need for Reality Television Show Regulation, 22 Cardozo Arts & Ent. L.J. 873, 898 (2004); Kimberlianne Podlas, Primetime Crimes: Are Reality Television Programs “Illegal Contests” in Violation of Federal Law?, 25 Cardozo Arts & Ent. L.J. 141, 170 (2007).

      [49].   Walter C. Neale, The Peculiar Economics of Professional Sports, LXXVIII The Q. J. of Econ. 1, 1 (1964).

      [50].   Ian Preston & Stefan Szymanski, Cheating in Contests, 19 Oxford Rev. of Econ. Pol’y 612, 612 (2003). See also Scott M. Gilpatric, Cheating in Contests, 49 Econ. Inquiry 1042, 1042 (2011).

      [51].   See 47 U.S.C. § 509 (2006).  A 1994 Hollywood movie directed by Robert Redford entitled “Quiz Show” dramatized the scandal that engulfed Twenty-One, one of the most popular shows of the genre.  For a scholarly account of the scandal, seeRichard S. Tedlow, Intellect on Television: The Quiz Show Scandals of the 1950s, 28 Am. Q. 483, 487–89 (1976).

      [52].   See Joseph Stone & Tim Yohn, Prime Time and Misdemeanors 26–27 (1992).

      [53].   H.R. Rep. No. 86-1800, at 25–26 (1960).

      [54].   47 U.S.C. § 509(a)(3) (2006).  Title 47 of the U.S. Code sets forth the parameters under which the Federal Communications Commission (“FCC”) and the National Telecommunications and Information Administration function.  The most recent FCC inquiry into a potential violation of the statute involved “Our Little Genius,” a Fox television game show that was pulled prior to its planned debut in 2010.  See Edward Wyatt, F.C.C. Opens an Inquiry for a Game Show on Fox, N.Y. Times (Feb. 19, 2010), http://www.nytimes.com/2010/02/20/business/media/20genius.html?scp=7&sq=&st=nyt&gwh=3523063375E729F351AFABD0EE902BF2&_r=0.

      [55].   Podlas, supra note 49, at 156.  Although beyond the scope of this Article, a plausible argument can be made that competitive sporting events do fall under the purview of the statute.

      [56].   For a discussion of how the scienter requirement attaches in the analogous context of securities fraud, see Ernst & Ernst v. Hochfelder, 425 U.S. 185, 197–214 (1976).

      [57].   Sponsored by U.S. Senator Jim Bunning of Kentucky, the Integrity in Professional Sports Act of 2005 solely pertained to doping matters.  It died in committee and was never voted upon.  See Integrity in Professional Sports Act, S. 1960, 109th Cong. (2005), available at http://www.gpo.gov/fdsys/pkg/BILLS-109s1960pcs/pdf/BILLS-109s1960pcs.pdf.  

      [58].   Roger Goodell, Letter to NFL Fans, NFL.com (Aug. 31, 2012, 2:32 PM), http://www.nfl.com/news/story/0ap1000000056927/article/roger-goodell-there-is-no-place-for-bounties-in-football.

Tags: