Recent Gambling Indictments Offer Potential Compliance Opportunities

The recent announcement of gambling-related federal criminal indictments involving professional athletes sent shockwaves throughout both the sports and sports betting worlds. The criminal cases, which include allegations of insider betting, are putting both industries on the defensive and have generated discussion of potential compliance issues as scrutiny grows concerning the ever-increasing connectivity between the two industries.

The Allegations

The indictments allege that professional athletes provided nonpublic information or agreed to adjust their performance in games to assist individuals who then placed winning wagers related to the players’ performance. The wagers at issue included so-called proposition or “prop” bets, which are based on the performance of individual players, as opposed to whether a team wins or loses. Of course, all of the defendants in these cases are presumed innocent and will have their day in court if they choose to. Nevertheless, the detailed allegations contained in these indictments have rocked the sports world and have already drawn scrutiny by a range of stakeholders, including state gaming regulators and policymakers.

The Reaction to the Allegations

At the federal level, both the Senate Commerce Committee and the House Energy and Commerce Committee have launched inquiries into the NBA’s compliance practices. In a bipartisan letter sent within days of the public announcement of the indictments to NBA commissioner Adam Silver, the Senate committee’s chair and ranking member described these cases as “a matter of Congressional concern” and requested that the NBA produce a range of documents including relevant policies and all documents related to the league’s own investigations into sports betting, gambling, game rigging or related conduct.

State gaming regulators were also quick to respond, with at least one promising to reassess its policies concerning so-called “prop” bets. Others are likely to follow suit as regulators attempt to process the significance of this scandal, its causes and potential regulatory responses.

The sports betting industry has also weighed in, emphatically pointing to the critical role that legal and regulated markets play in identifying suspicious and illegal activity and the fact that integrity monitoring systems flagged the abnormal betting patterns that led to the federal probe. Immediately following the announcement of the indictments, the American Gaming Association’s president and CEO, Bill Miller, issued a very strong statement in response, emphasizing that it is “important to recognize that the regulated legal market delivers transparency, oversight, and collaboration with authorities that assists in bringing these bad actors to light.”

Sports leagues that are popular with bettors will face questions about their respective compliance programs that are intended to mitigate the occurrence of conduct such as that alleged in these cases.

Compliance Issues Raised by the Allegations

Among the many compliance issues raised by the allegations in these recent indictments are the following:

1.  Injury Disclosure Protocols. Whether a particular player is injured or otherwise unable to play can obviously be market-moving information. Leagues typically have rules regarding timely and accurate reporting and such rules could be clarified, if necessary, and should be strictly enforced. Moreover, team medical and training staff might benefit from training to detect potential manipulation.
   
2. Integrity Monitoring. Leagues typically partner with integrity firms to monitor betting markets in real time and should consider enhancing these partnerships. Specifically, AI-driven tools can detect anomalies in prop bet volumes, timing and geographic concentration and should be considered where appropriate.
   
3. Insider Access Controls. Rules concerning access to nonpublic information, including lineup changes, rest schedules or injury status should be reviewed and enhanced where possible. Leagues should implement clear guidance to players and other insiders on sharing otherwise nonpublic information outside of authorized channels and should ensue robust training in this area.
   
4. Background Checks and Relationship Training/Audits. Leagues should consider requiring players, coaches and staff to disclose relationships with known gamblers and/or other categories of persons such as individuals with connections to criminal enterprises. Regular training on these issues should be the norm and periodic audits should be considered.
   
5. Internal Investigations. Leagues should also consider investing in internal compliance teams and/or outside experts armed with robust investigative tools to conduct professional and thorough investigations of suspected misconduct.
   
6. Prop Bets. Following the NBA’s 2024 decision to impose a lifetime ban on former player Jontay Porter for betting on league games and sharing inside information in order to affect prop bets concerning his performance, the league reached an agreement with some major sports books to mitigate the risk of such activity. Sports betting companies should expect renewed examination of prop bets by regulators in the wake of these indictments.

While no compliance measures, alone or in combination, can entirely eliminate all misconduct by insiders related to gambling, a serious examination of potential compliance enhancements should be part of every league’s efforts to mitigate their risk in this area.

Conclusion

These latest scandals highlight the importance of compliance in sports as it relates to betting and should serve as a reminder that as betting markets grow bigger and more sophisticated, so too must the safeguards that protect the integrity of competition. Teams and leagues must be proactive in creating compliance programs, educating stakeholders, and cooperating with regulators and law enforcement, all with the critical goal of assuring the public of the integrity of the game and every part of it. The stakes are high and without robust compliance, the line between competition and corruption can become dangerously thin.