Risky Wagers: How Lack of Oversight Increases the Odds of Corruption in Sports Gambling

Thanks to the internet, sports gambling—once limited to smoky back rooms and local bookies—has rapidly expanded, and this expansion has fueled growing concerns over the integrity of professional sports. Sports gambling has long been intertwined with sports-related corruption, but the sheer number of gambling transactions made possible by the advent of online betting (through both legal and illegal websites) substantially increases the likelihood that bribery or match-fixing will be used to ensure a “winning bet.”

National regulatory approaches have not kept up with the heighted risks. The United States, for example, continues to rely on outdated regulatory regimes and ill-defined responsibilities shared between state regulators, federal regulators, and professional sports leagues. As more and more states move to legalize sports gambling, the US is in urgent need of a centralized authority that possesses the necessary incentives and requisite capabilities to properly regulate this burgeoning industry.

To see why reform is needed, consider each of the three main actors (or sets of actors) that have some responsibility to deal with the integrity threats posed by online sports gambling in the U.S.: state governments, the federal government, and the professional leagues:

State governments have traditionally regulated traditional forms of gambling like casinos and lotteries, but they are ill-equipped to regulate online platforms. In particular, states lack of the expertise and resources to engage in the analysis of countless online gambling transactions to detect suspicious betting patterns indicative of corruption. Furthermore, even if states developed the sophistication to effectively monitor online betting data, their limited jurisdiction restricts their ability to pursue many potential sports-related corruption cases, which are likely to involve conduct in other states and gambling websites operating in foreign jurisdictions.

The federal government’s ability to address online gambling and match manipulation is hamstrung by a different problem: lack of adequate legal authority. Only one federal criminal statute, the Sports Bribery Act, directly deals with sports manipulation, and since the Act’s enactment in 1964, it has produced only eighteen prosecutions, none of which involved a major US sports league. Even the FBI’s Integrity in Sports and Gaming Unit has only found two actionable cases since 2018, neither of which involved game manipulation or match-fixing. When the federal government does prosecute sports-related corruption, it has to rely on indirect criminal predicates. For example, when the Department of Justice prosecuted Tim Donaghy, a longtime NBA referee who conspired to profit from inside information on NBA games, the prosecutors had to rely on a theory of wire fraud and a “deprivation of honest services” due to a lack of specific criminal prohibition against sports manipulation.

As for the professional sports leagues, the hope that they might engage in meaningful self-regulation is undermined by the fact that these leagues now view online gambling as a significant source of sponsorship deals and ad revenue. Furthermore, the growing popularity of sports gambling has led to a significant bump in sports viewership. Greater restrictions on sports gambling could threaten this source of revenue, and greater self-scrutiny might backfire on the leagues if uncovering game manipulation or bribery results in reputational harm to the league.

The existing system of disjointed regulatory responsibility should be replaced with a centralized federal authority that has primary responsibility for monitoring online gambling and for investigating and prosecuting sports-related corruption. Such a centralized authority could more effectively combat sports-related corruption with investigative and enforcement authority over the entire corruption scheme—the gamblers who manipulate matches through corrupt means and the athletes, coaches, or referees who take bribes or engage in other corrupt activities.

This centralized body should have the authority and responsibility to monitor and aggregate betting data from all states and territories to better detect betting patterns indicative of match-fixing or game manipulation. In the case of illegal sports gambling websites, where betting data is rarely reported to regulators, this central authority could establish relationships or cooperative agreements with the foreign jurisdictions that host many of these unregulated platforms to share information or regulatory responsibility. This body should also have primary responsibility to investigate corruption allegations in sports leagues. Sport Integrity Australia offers a valuable example of how this might work. Sports Integrity Australia, launched in 2020, collaborates with law enforcement and professional sports leagues to maintain the integrity of professional sports. The body takes complaints directly from athletes and has received over 1,300 such complaints, 117 of which resulted in referrals to law enforcement. This agency has already arrested four individuals for suspicious betting behavior on Australian Football. The US should follow suit by creating a similar body at the federal level, with the expertise and authority to oversee the professional sports industry.

To make this new enforcement agency more effective, the U.S. would also need to update its substantive laws. In particular, Congress should amend the federal criminal code to specifically penalize the act of sports manipulation for personal gain. Actionable offenses should also include tactics such as the use of extortion or blackmail to influence game outcomes, which have in the past been effectively used to influence college athletes and other vulnerable groups. The law should also specifically prohibit the disclosure of confidential inside information, such as players’ injuries, for monetary or other personal gain.

Such reforms will likely face significant resistance from the online gambling industry, whose outsized influence has catapulted sports wagering out of the back rooms and into mainstream acceptance. Indeed, past attempts to broaden federal oversight of sports wagering, such as legislation proposed in 2018 to set federal minimum standards for sports betting, have failed. But pushing for such reforms is ever more urgent. As the illegal sports gambling market grows larger and more lucrative, tackling corruption will become increasingly difficult. Immediate and coordinated action is thus needed so that illegal sports gambling does not become engrained in professional sports as an opponent incapable of defeat.

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