As a result of the U.S. Supreme Court’s decision striking down the Professional and Amateur Sports Protection Act of 1992, there are currently 20 jurisdictions (including jurisdictions in which sports betting is State-lottery based or Tribal based) with legalized sports betting. Of those States, several only permit sports betting at brick-and-mortar sportsbooks, such as New York, or limit internet sports betting to the brick-and-mortar casino facility (“facility”), such as Mississippi. A number of States have legalized internet sports betting, including New Jersey, Pennsylvania, Nevada, West Virginia, Rhode Island, Delaware, Illinois, Indiana, Iowa, Montana, Oregon, Rhode Island, Tennessee and the District of Columbia. Numerous other jurisdictions are also considering legislation to open their borders to lawful sports betting. As additional States begin to legalize and regulate internet sports betting, sports betting operators (“operators”) will increasingly partner with casino companies through market access agreements to capitalize on the blossoming sports betting market and ensure that they can have a piece of the pie in new jurisdictions.
A common theme in sports betting legislation in the United States is that an operator may only operate in the State if they do so through or in partnership with a facility. Of course, if an operator is only running a retail sportsbook for a facility, it will need to partner with that facility for the operation of the sports book. Unlike many jurisdictions outside the United States, however, an operator must generally also partner with the facility in order to offer internet sports betting within the State. For example, in New Jersey, a casino with a sports wagering license is permitted to conduct an online sports pool directly, or it may authorize an internet sports pool operator (licensed as a casino service industry enterprise) to operate the same on its behalf. See N.J.S.A. 5:12A-11. Many jurisdictions in the United States follow a similar framework.
Notably, States that have legalized internet sports betting (as well as internet gaming) have also restricted the number of individually branded websites/platforms, or skins, that a particular facility can have under its umbrella. So, in addition to having to partner with facilities in order to enter a jurisdiction, operators are faced with a finite number of opportunities to partner with facilities in each jurisdiction.
For example, New Jersey limits each facility to providing no more than three sports betting skins. See N.J.A.C. 13:69N-1.16. Indiana also provides for a maximum of three skins. See IC 4-38-6-8. Other jurisdictions are more restrictive. For example, Iowa and the District of Columbia allow two skins and one skin, respectively. See 491 IAC 13.7(99F); 30 DCMR 2120.9.
Due to the requirements to partner with facilities and skin restrictions in various jurisdictions, market access agreements are increasingly important for operators, in which operators enter into agreements with casino companies (particularly with facilities in multiple jurisdictions) in order to secure a skin in the jurisdictions in which the casino company operates. These agreements effectively guarantee the operator the right to offer their sports betting services in those jurisdictions, even if some of those jurisdictions have not yet legalized sports betting. Notable market access agreements include partnerships between William Hill and Eldorado Resorts and multiple agreements between Penn National and DraftKings, PointsBet, theScore and The Stars Group.
Pre-emptive market access agreements, which apply to jurisdictions that have not yet legalized sports betting, will continue to be a key tool for operators in the race to guarantee access to new jurisdictions. These agreements, however, are not without risk. For example, if a State adopts laws and regulations legalizing internet sports betting, but limits facilities to the use of a single skin, certain agreements may become irrelevant. Other complications may arise due to acquisitions. For example, William Hill has asserted that if Eldorado’s acquisition of Caesars is completed, due to William Hill’s existing agreement with Eldorado, William Hill would obtain the right to exclusively operate sports books at casinos currently owned or managed by Caesars and operate internet sports betting in States that Caesars has a license to do the same.
Despite the potential shortcomings of market-access agreements, the risks of these agreements are outweighed by the benefits of a guaranteed right to offer sports betting services if favorable legislation is adopted. As a result of how most jurisdictions in the United States are choosing to legalize and regulate sports betting and internet sports betting, particularly in regard to partnerships with existing facilities and skin restrictions, it is a safe bet to say that market access agreements are here to stay.
C.J. Fisher is a partner, and Lea Giosa is an associate, in the Gaming Practice Group of Fox Rothschild LLP, an Am Law 100 law firm. Their practice focuses on all aspects of gaming law, including gaming regulatory compliance, investigations, licensing and competitive bids. They may be reached at (609) 572-2209 or firstname.lastname@example.org or email@example.com