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Inside the explosion of online sports betting with Eric Lipton: podcast and transcript

Chris Hayes speaks with Eric Lipton, Pulitzer Prize-winning journalist, and New York Times investigative reporter, about the rise of online sports betting.

You’ve probably encountered an advertisement for sports betting in one form or another. In the past few years, there’s been a marked rise in the number of online sports betting ads from companies like DraftKings and FanDuel. Gambling companies now spend billions of dollars a year on advertising. At the same time, there’s growing concern over the effect betting is having on our experience with sports, the lack of comprehensive federal regulation and its addictive potential. Eric Lipton is a Pulitzer Prize-winning journalist and New York Times investigative reporter. He’s spent years following the sports betting boom. Lipton joins WITHpod to discuss how we got to this moment where sports gambling ads are integrated into almost every sports broadcast, the role of lobbying in the explosion of online betting, how the space is policed and more.

Note: This is a rough transcript — please excuse any typos.

Eric Lipton: It’s become effectively a gambling enterprise. You know, that sports was always a big corporate operation, you know, that was a moneymaking operation. But it was a game. And it was a pastime. But it is now a part of a gambling enterprise. And it has changed the relationship that Americans have with sports in a pretty fundamental way.

Chris Hayes: Hello and welcome to "Why Is This Happening?" with me, your host, Chris Hayes.

If you're a sports fan, which I am, probably more obsessively a sports fan than I would like to be, I spend a lot of time-consuming sports, you've noticed something over the past, I would say, probably two or three years, which is the penetration of sports gambling into every aspect of sports broadcasts and the trappings of sports.

I mean, if you watch any kind of game, the three things that I tend to watch are basketball, football and baseball, not only are there ads in between, like, in the commercial breaks for one of a number of different sports betting outfits, often casinos in Vegas that have created their sort of online brands, that could be Caesars or MGM. Sometimes it's purely online entities like DraftKings and others. But basically, huge name stars like Jamie Foxx or Kevin Hart, you know, doing these big glossy ads for sports gambling.

And it's not just sports gambling in the commercial breaks. It's actually been integrated into broadcast to the point where the broadcasters themselves will say that there is some update to the line in a game, right? So, like, the line is like what, you know, one team is favored by seven points, and seven and a half points is usually how it's done.

So, you know, they have to win by more than eight for you to win the bet. And after the first half, they're not doing as well, so the line is down to three and a half or something. So, you can get in on the halftime action, right? And it feels, to me, really gross and over-the-top.

And it also feels to me like it's penetrated all sports broadcast to a degree that I find really unnerving. And I tweeted about this, and people like, it really went everywhere because I think that is one of these rare things in American life that span different political and ideological commitments, this feeling that sports gambling has just kind of colonized all professional sports in a way that maybe feels strange and unnerving.

And then, I just know also personally, like, people are betting a lot more on sports than they used to. You can download an app, and I've done it myself. I've done it with friends during, like, the NFL Playoffs last year. You can download an app. And within minutes, again depending on what state you're in and we can talk about this, you can be, all kinds of bets, every insane bet that you can imagine.

It has completely in the last several years just transformed, I think, the experience of sports fandom and sports in general. And I also just worry that it's headed towards a major crash or crisis.

And I thought a great person to talk to about it would be Eric Lipton, who is a Pulitzer Prize-winning journalist. Probably familiar to you, he has a byline in "The New York Times" where he has been an investigative reporter for years. And he has been focused a lot on the sports betting beat, particularly over the last few years as it has exploded.

So, Eric, welcome to the program.

Eric Lipton: Thanks for having me.

Chris Hayes: Maybe, I wonder if we should start with, like, the pre-history, right? Because I think I've always associated sports betting with a thing that was, like, in a gray area legally and also kind of like a vice that, you know, bookies, like the idea of a bookie and a bookie would keep numbers. The only place that you could really bet on games legally or easily would be actually at a Vegas casino, where there would be a room you could go to. And, you know, during the March Madness tournament, you can, you know, bet on this team or that.

But before this sort of recent explosion, like, it was mostly just like gray market/illegal, like, sports bookies, right?

Eric Lipton: That's right. I mean, until the Supreme Court ruled in 2018 that states were authorized to pass legislation that legalized sports betting, the only place you could do this was if you went to basically Vegas and play, and did sports betting, where it was one of many gaming options available, or if you went to one of the offshore sites and bet illegally in the black market.

And so, other than that, there was not legal sports betting in the United States until 2018.

Chris Hayes: And what was that 2018 Supreme Court case?

Eric Lipton: Basically, New Jersey had decided to test the federal law that prohibited states from legalizing sports betting. And this goes back to Chris Christie when he was governor. And they were watching the decline of New Jersey as other states legalized brick-and-mortar casinos, like Pennsylvania, and they were worried about the decline of Atlantic City.

And they thought one way to maybe, you know, improve the numbers in Atlantic City was to legalize sports betting in Atlantic City. So they thought we would allow sports betting in Atlantic City. But as soon as they thought about that idea, it quickly became, well, we would have to legalize sports betting across New Jersey because we'd give it to the racetracks, the horse race tracks and the casinos in Atlantic City.

And next thing you know, New Jersey had passed a law that legalized sports betting statewide in New Jersey. And that began a court challenge because immediately, the professional sports leagues sued New Jersey and said that's illegal. It's against the federal law. You can't do that. And it worked its way through the courts. New Jersey kept losing until it reached the Supreme Court.

Chris Hayes: And federal law basically said, under federal law, Nevada is the only place this can be done?

Eric Lipton: That's right. The law itself had a problem because it was --

Chris Hayes: That's a little tough to defend.

Eric Lipton: Right. It was inconsistent. You know, how could you allow one state? It was unconstitutional in a sense, because you couldn't, you know, you've given a right to one state and then said other states can't do this.

And I think that early on, Chris Christie and the lawyers in New Jersey felt that their law clearly violated the federal law, but that this federal law could likely be overturned by the court.

Chris Hayes: And so, it gets to the court and the court does rule in favor of New Jersey and basically strikes down the law.

Eric Lipton: That's right, in 2018.

Chris Hayes: And so, then, what happens next? What Pandora's Box does that open up?

Eric Lipton: This had been, you know, some time in the making, because there had already been effectively a test case in the form of daily fantasy sports. If you remember, the --

Chris Hayes: Yes.

Eric Lipton: -- onslaught of advertising for daily fantasy sports and just the massive run at trying to entice, you know, people who wanted to bet on their phones, to bet on, you know, not real games with real players. And that phenomenon demonstrated how powerful of a tool that the phone could be as a betting device. And you could have, you know, the data moving fast enough.

And I think that what happened was that the brick-and-mortar casinos, which had been opposed to allowing betting to go online, saw the potential of daily fantasy sports. And as the Supreme Court was preparing to decide, and it was clear from the oral arguments that the court was going to side with New Jersey and overturn the law, basically, the casinos came together with the sports leagues which actually had sued New Jersey and decided, you know what, we're going to collectively move to embrace sports betting.

So then, you had the casinos, the professional sports teams, and DraftKings and FanDuel which had more in (ph) daily fantasy sports, all come together to bring this to the United States. And as soon as the Supreme Court ruled, you had this wave of, you know, a collective lobbying effort to legalize sports betting nationally.

Chris Hayes: So, let's go back to the FanDuel-DraftKings. So, people are probably familiar with fantasy leagues, right, in which you draft individual players and your performance depends on their performance. And you can trade players, and you can cut them, and you can rotate them through when you're in a league with other people who are doing the same thing. People have gotten very into this. It's been around for a while.

But I feel like it's gotten more intense recently, like, as part of the culture. I just know people that, like, go to a destination for their draft at the beginning of the season. And you know, it's grown, I think, in its popularity.

Now, FanDuel and DraftKings did this thing, it was kind of a little bit of a workaround, right, where you could bet on these fantasy lineups. But what it meant was you weren't betting on the actual outcomes of games, which is always the kind of red line, if I understand, that the actual leagues are worried about.

Eric Lipton: Right. Well, they did face challenges in individual states that said this was a form of gambling and you need to get, you know, a legal authorization. But they went state by state and argued that it was a game of skill and, therefore, it was not gambling.

And to some extent, it was their campaign to get legislation passed or regulations passed in individual states that also demonstrated to the professional sports leagues and to the casinos that if they were to have to go state by state to pass this, that they could succeed.

Chris Hayes: I see.

Eric Lipton: And so, the daily fantasy sports folks had gotten something like 30 different states to, basically, formally authorize. After, if you happen to remember, that New York state had challenged, they briefly blocked daily fantasy sports in New York state. And after that, they mobilized and managed to convince more than 30 states to recognize it as a legal form of the play.

And so, I mean, this essentially was an early, you know, trial run of the effort to legalize sports betting. Daily fantasy sports, you know, became an important demonstration of how could we pull this off nationally.

Chris Hayes: Now, a really important detail to zoom in on here is that you say, the professional sports leagues sued New Jersey. And I mean, there is a history here, right? Maybe, it's worth talking about this for a while.

I mean, anyone who's seen "Eight Men Out," which is about the Chicago White Sox, the Black Sox Scandal of the early 20th century, in which players on the team were, you know, betting against themselves. So they were throwing games, right. There's always been this concern, if you allow a lot of sports gambling, and if you legalize it and if it's accessible, that the actual competitors and participants themselves will get pulled into it.

And of course, to the extent, you know, they end up owing a ton of money to a bookie, then the bookie says to him, here is how you can pay me back. You know, make sure you don't score 20 points tomorrow night. Right? And then someone can bet the under on their individual performance and, you know, hit it big.

Like, am I right that that's the thing that has hung over this entire conversation for a century?

Eric Lipton: Yeah, no question. It was sort of the black plague, especially for baseball, with the kind of Pete Rose, you know, and the fact that Pete Rose had been, you know, a coach at the same time that he was betting on his own, you know, in games.

And it was a practice that, in fact, the professional sports league cited in their lawsuit, at the same time as they were suing New Jersey, saying that this was in a compromise the integrity of the game. Behind the scenes after the oral arguments, when it became clear that the court was likely going to side with New Jersey, they were already negotiating with, you know, DraftKings and FanDuel lobbyists to begin an alliance to legalize state by state.

So, they saw where this was headed. But yes, this was why baseball in particular was so adamantly opposed to embracing legalized betting was that they saw that it was going to undermine the integrity of the game. But they changed their tune just before the Supreme Court ruled.

Chris Hayes: I have to say that, you know, if you're talking about, you know, Kevin Durant, right, or Devin Booker, you know, Giannis Antetokounmpo, right, like some huge NBA star, right, or even anyone in the NBA, I don't think it's that likely, right, that these athletes are going to compromise and risk, you know, the millions and millions of dollars they're making for some side bets.

But one thing that's really striking to me is, like, you can bet on anything on those platforms.

Eric Lipton: Right.

Chris Hayes: And I mean, there's some, like, obscure game in a, you know, a mid-major Division I NCAA basketball team. Like, I don't know. If someone, the lead scorer can, like, tank that game and his friends all put a few thousand on the game, like, it just seems like once you penetrate down to amateur sports and the kind of sports you could bet on, that there is just a ton of opportunities for exactly the kind of corruption and point shaving and thrown games that, you know, took down the Major League Baseball at one point.

Eric Lipton: Right. I mean, the bets are not simply about who wins and losses. There is the prop bets that allow you to bet on individual plays and rushing yards, receiving yards, receptions, touchdowns, interceptions, points, rebounds, assists, steals, blocks, three pointers. I mean, there is all kinds of little things you can bet on --

Chris Hayes: Right.

Eric Lipton: -- beyond the winner and loser.

You know, and the professional leagues do prohibit their players from betting. And for example, recently, there were, I think five NFL players that were punished, you know. And they're tracking their players because they have the capacity to see who is betting.

Every time a bet is made in the United States, there is a company called GeoComply which gets pinged. And it can tell you who is betting and the exact location of that person. And their computer authorizes every single bet and all the platforms contract with GeoComply. And so, they know --

Chris Hayes: Wow.

Eric Lipton: -- who is betting and they know where that person is. And it allows a compliance to know if one of your, you know, assuming they're not using someone else's phone, to know who is betting.

Chris Hayes: Oh, wait a second. Let's stop there. I don't think I quite right (ph). So, there is a monopoly company that has the contracts with everyone --

Eric Lipton: Yes.

Chris Hayes: -- that is the compliance company, such that if I'm the starting shooting guard on Iona, which is a college here in the New York area, that's not like a big, huge NCAA player, but a Division 1 team. And if I'm a good player, like, if I'm, like, I'm going to make a few extra thousand with a prop bet against my own points tonight, this GeoComply basically would know it's my phone if I tried to make it myself.

Eric Lipton: Assuming it's your phone, yes. They --

Chris Hayes: Right.

Eric Lipton: -- every single bet goes to the GeoComply. And they have to sign off on that bet based on where you are located, because they have to know, like, for example, in Washington, D.C., if you're in Rock Creek Park in Washington, D.C., that's Federal Park. You can't bet on a federal park. If you're across the street from a federal park, you can bet. So --

Chris Hayes: Right.

Eric Lipton: -- your exact location has to be known. And they have to --

Chris Hayes: Right.

Eric Lipton: -- and that's one of the reasons why, you know, it's the uberization of cell phones. It's like that Uber --

Chris Hayes: Right.

Eric Lipton: -- the technology that Uber developed, the reason we have mobile betting now is the technology. It's only in the last decade that the technology has existed, the latency, the accuracy, the confirmation --

Chris Hayes: Right.

Eric Lipton: -- ability, all of that. And that's what daily fantasy sports really demonstrated, is that these phones were incredible tools for online betting. And it was only once that revolution occurred that the company saw that and they realized we got to grab this.

Chris Hayes: So, after the 2018 Supreme Court ruling, it's a little bit of like, okay, any state that can manage to legalize this can do this. What happens? What do those state campaigns look like in terms of getting states to legalize it?

Eric Lipton: They're really phenomenal in scale lobbying exercises. I mean, dozens of lobbyists. I mean, and I --

Chris Hayes: They feel, though, I mean, everything on this topic seems phenomenal in scale. Like, every time I see, like, anything having to do with sports betting, even just an ad, I'm like, I feel like that ad costs $5 million to me.

Eric Lipton: Yes.

Chris Hayes: Like, where are these people getting all this money?

Eric Lipton: It's actually $1.5 billion a year that the gambling companies are now spending on TV and radio advertising. It's an enormous amount of money.

Chris Hayes: Oh, my god.

Eric Lipton: But the state campaigns are enormous and elaborate. You know, the thing that I've seen in sports betting is that basically, they, for the most part, get it passed when the industry decides what it wants collectively. If you have disagreement between the casinos and like FanDuel and DraftKings or disagreement between the video poker player, you know, companies and the casinos, or between the Native American tribes and the casinos, if there is any fratricide, for example, in California, where you had the Native American tribes and FanDuel and DraftKings going at each other, they spend more than $500 million on competing referendums.

And it goes down in ashes. If you don’t have --

Chris Hayes. Wow.

Eric Lipton: The fratricide is the thing that stops the ball from rolling on the passage of more sports betting in the United States. So, in Missouri, for example, right now, you know, it looks like they pass another year, even though the Kansas City, you know, has had such success with its teams recently, it looks like another year will go by where they will not have sports betting.

And that's because the video slots companies desperately want a cut of the bill. They want to have their piece. They want to have their 10,000 units of video slots in gas stations. And unless they get that, they keep killing the bill with their patron in the legislature, Danny Hoskins.

And so, what I see in the states is basically, you have the professional leagues have their own lobbyists. The casinos have their own lobbyists. The video slots people have their own lobbyists. And the Native American tribes have lobbyists.

And you'll get like dozens and dozens of lobbyists. And they're all there in the rotunda hanging out as these things are being debated. And they're working their friends in the legislature to get the language in a way that meets their interest.

Chris Hayes: And so, what you're saying is if they all do get on the same team, right, if they all team up and say and push a bill that, you know, does whatever has to be done to sort of cut everybody in, right, if there is a bunch of different interests, they tend to get their way.

Eric Lipton: For the most part. That's what I've seen. And in the cases where they can't come to consensus, if there is even a one man out, that one person out will sabotage the whole thing. That's what I've seen.

Chris Hayes: And then, how is the tax revenue structured here? Like, does it tend to be that the states have, like, a special gambling tax where they're going to take some special cut of this, of the winnings? Or is it just normal income, meaning that you know, it's just reported as normal income, and if you have a state income tax, then they get it that way?

Eric Lipton: No. I mean, this is one of the big areas of lobbying is what will the tax rate be? And so, it goes everywhere from, you know, 60 percent of the net revenues go to the state to down to 10 percent. And, you know, New York State takes 50 percent, which is the industry considers really large share of the total.

And so, for example, I mean, New York State has collected an extraordinary, just since January, $900 million in taxes. It's an extraordinary number --

Chris Hayes: Oh, wow. That's a lot.

Eric Lipton: -- just in taxes. But, in other states, they have, you know, 10 percent or even eight percent tax rate. And so, that's one of the big lobbying questions. And in other states as well, they are allowing, when you see all of these promotions, we're saying, you know, you make your first bet risk-free, we'll give you $1,000. We'll give you $5,000.

In some states, if you were to sign up for all of them, you could get more than $10,000 in, quote, "risk free or bets". In many states, they don't have to pay taxes on those promotions. And we're talking about in excess of $1 billion worth of promotions that have been given out to incentivize people to start betting on, you know, with sports betting that have been tax free.

So, the states essentially become part of the marketing campaign by giving them incentivizing tax free promotions.

Chris Hayes: Wow. So, that $1 billion, because that was striking to me. I think, it was the NFL playoffs. I think it was because it was new. I live in New York, and New York can just legalize. And I think the first time that the first NFL playoffs that had happened after New York had legalized, they were just throwing money at everyone. I mean --

Eric Lipton: Right.

Chris Hayes: -- to an astounding degree, like one of these, like, something isn't right here kind of feelings I had, of like, wait, someone told you he’ll give you $2,000 free dollars? Like, what am I missing here?

But I guess that part of what I was missing, a, first of all, it's a loss leader because if you download the app and some percentage of those people become really, really high volume gamblers, they make it back, and b, it's a tax write off for them. So, they're not, you know, they're not paying taxes on that money so, they're sort of saving.

Eric Lipton: New York State actually did not offer the tax free promotional bets.

Chris Hayes: Oh, okay.

Eric Lipton: But --

Chris Hayes: They were just eating that. They were just eating that as a loss.

Eric Lipton: I mean, the biggest thing going on right now is there is a lot changing at the moment in sports betting. And, you know, we'll perhaps get on to talking about some of the shifts that are happening in terms of backlash against some of the excesses in advertising and the promotional bets.

There is a fair amount of backlash going on right now in the United States where things are starting to shift, because we went through a phase, of the startup phase, where all of a sudden, more than half the United States, the population of more than half the United States, can now bet on their mobile phone, the single biggest expansion of gambling in the United States history, because it's in your phone.

It's not just that at the brick and mortar casino. It's not at your convenience --

Chris Hayes: Yeah.

Eric Lipton: -- store where you buy your lottery ticket. It's in your pocket. It's available 24 hours a day. Now, there has been black market sites for a long time. But now, legally sanctioned by the state, you can bet 24 hours a day on your phone on sports. So, that's the first phase was the rollout of this.

But now, we're starting to get into a backlash phase. It's just started in the last couple of months. But, going back to your issue on promotional betting, one of the state legislators I was talking to about this New York State was making the point that we don't allow companies to give out free alcohol. We don't allow free marijuana in New York State. So --

Chris Hayes: Yeah.

Eric Lipton: -- and both of them are, you know, potentially addictive products. And so, why are --

Chris Hayes: Right.

Eric Lipton: -- allowing, even if we're not giving them a tax break, why are we allowing the free distribution of incentives to gamble? And he did introduce a bill; the bill didn't go anywhere this year. But there are an increasing number of states that are starting to say that this language around risk free or free bets that you shouldn’t, and the companies themselves have started to pull back on that language because they realized that they're incentivizing an activity particularly for a person that's vulnerable to potentially addictive behavior, that's dangerous.

And so, both around the promotions and the advertising, there are some changes that's going on right now.

Chris Hayes: So there’s sort of two, I mean, let me just sort of stop and put my kind of priors here on the table. Like, it seems to me, my basic feeling here and I don't have any specific expertise, I'm just like a person who is observing this and living in the world, is that I can understand the logic for legalizing it, particularly because it's, you know, it's going to be a black market otherwise and there is tax revenue.

I'm sort of ambivalent about it, but I can see the argument. But it seems to me like, again, this is true, I think, about marijuana legalization as well. There are things that I think should be legal, but also, like, have some friction to get them, right? So, it’s like, to your point about, like, we don't give out free booze, right, you can't run free booze promotions, like, you know, the U.S. with alcohol went through a whole bunch of different ways of dealing with it, from being one of the drunkest countries on the planet to prohibition, to a regime of fairly heavily regulated legal alcohol.

And it remains fairly regulated. Liquor licenses, you know, you can’t just, they don't give them out like candy. You still can't advertise certain kinds of alcohol over the airwaves. There is an intense regulatory regime around it. And there is some friction in terms of someone being able to go and get alcohol. And I think that probably makes sense. It seems to me, like, that would be the ideal regime for gambling.

But like, what we have now is just stunningly frictionless. Like, the idea that you can just gamble on your phone, it's so easy and it’s there that I just, what do we know about what the repercussions are of the ease of access and particularly, with folks that are disposed to have really intense addictive relationships to this?

Eric Lipton: The best information that really exists comes from the U.K. where sports betting and mobile sports betting has been around for some time, and particularly just sports betting in general. And there is increasing evidence in the U.K. of, you know, social consequences particularly for young men. And the National Health Service has been, you know, wrote letters to the sports betting platforms expressing concerns about the mental health consequences.

And just last week, a study came out from the government in U.K. that was talking about some changes in, you know, advertising and also a potential requirement that the sports betting platforms start to have risk measures where if an individual starts to lose more than a certain amount of money in, you know, in a certain period of time, that they have to interact with that player and you know, and perhaps limit that player's ability to lose more money. So, that's a proposal that's just put out there for the first time in the U.K.

And in other nations where they already actually have restrictions on, and in the U.K., they actually have restrictions currently on, you know, from whistle to whistle. Advertising is not allowed around sports betting from the start to the end of the game. And so, that's the conversation that I think is getting started in the United States right now.

The American Gaming Association, which is the trade association for the casinos, has put out a statement recently to talk about some advertising standards. A number of states, Pennsylvania, New York, Maine, Massachusetts, New Jersey, are some of them, are looking at potential limits on advertising around sports betting. Maine is already talking about perhaps limiting it entirely.

And also, particularly of concern is that the advertising can appear even on children’s shows. I mean, there is no limit right now. You can be targeting, you know, college students, even though many of them are underage and they shouldn't be betting.

So, I think that we're in a transition period right now where we're going to start to see either the industry self-imposing some limits on this advertising and free bets, or the states starting to step up and do it themselves.

Chris Hayes: This strikes me as the kind of thing that would be particularly, that certain kinds of teenager or college kids would be very susceptible to. Like, do we have any data about that?

Eric Lipton: Not in the U.S. yet because it's so new. And I think that in the U.K., they show that the biggest problem area is young men. I mean, one of the things that was most incredible when we worked on this topic and my colleagues, I did not write the story about this part of it, was, we were looking at these marketing arrangements that they had with, you know, like almost a dozen schools from Louisiana State University, Michigan State University, University of Colorado, University of Maryland, where the sports betting platforms had promotional deals with these universities to get them to market their sports betting platforms to their communities, which meant effectively their students. And the universities got paid.

Chris Hayes: Wait. Really?

Eric Lipton: Yes. The state universities got paid money to market these sports betting apps, when at the same time, many of these students were underage and not legally allowed to bet. And so, they were being, getting, you know, million-dollar checks from the sports betting. So that has also caused a backlash.

And the industry itself, one of the universities just pulled out of one of the deals. I think it was the University of Colorado pulled out of the deal, even though it was only, you know, two years in. But the notion of incentivizing universities to push sports betting to their communities was pretty bold.

Chris Hayes: More of our conversation after this quick break.

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Chris Hayes: Let's talk a little bit about how the leagues are dealing with this. I mean, I think there was, if I'm not mistaken, a football player recently who got, I think, busted for betting.

Eric Lipton: Right.

Chris Hayes: And was suspended. I suspect that the way that he was caught was that verification system you were talking about before. But are the leagues getting cut in on this? I guess my question is like, why do they all seem so eager to, like are they signing promotional deals with these places? Like why have they gone in on this? They were the source of resistance. Why wouldn't they be the source of resistance now?

Eric Lipton: There's revenue that's coming to them, not directly in most cases, because they generally are not owners. I mean, like Bob Kraft, you know, the Patriots is an investor, for example, and in some of these platforms. But for the most part, the teams are not owners of the sports betting platforms.

But they have like sponsorship deals with some of the sports betting platforms.

Chris Hayes: Right.

Eric Lipton: Individual players now and Major League has authorized individual players and national hockey has authorized individual players to be sponsored just like a race car gets stickers. These guys can be sponsored by betting platforms.

They also sell some of their sports data because this question of, you know, how many assists, steals, rebounds, points, the data, it becomes valuable, having accurate data that isn't going to be disputed.

Chris Hayes: Right.

Eric Lipton: So, the Major League Baseball in particular has been trying to push its data to be the official arbiter of all of these, you know, various prop bets. And so, they make some money on the data. And then they make a lot of advertising money on their, you know, there's a lot of money coming in.

And I think another thing for baseball, in particular, is that they see this as, I spoke with Kansas City Royals executives about this. And they were explaining to me that, you know, this is a way, I mean, it's an engagement. I mean, if you have money riding on a game --

Chris Hayes: Right. Yes.

Eric Lipton: -- you know, you're going to see it through. I mean, and it's a way to increase engagement for sports fans. And the same thing for casinos. It's another way to bring in a younger demographic to casinos. Casinos, the Penn National, when they were testifying in Missouri, was talking about, you know, if you look at our average casino person that comes in and plays, you know, pulls the slots, it's above 50.

The demographics are, you know, not affluent player, but the demographics on, and most of the sports betting is done in the phone, Foreign Ex (ph), you know, 70% to 90% depending on where you are in the United States. It's being done on the phone.

Chris Hayes: Right.

Eric Lipton: The demographic, the average player, sports better on their phone is young and more affluent than the average brick and mortar casino gambler. And the casinos --

Chris Hayes: Right.

Eric Lipton: -- love having these customers in their databases because it's --

Chris Hayes: Right.

Eric Lipton: -- it’s changing the demographics of all of their customers in a way that they were quite worried about how things were changing.

Chris Hayes: Let me ask a technical question. One of the things that blows me away when you go through these apps, like I was saying before, is how many bets are available? And just to do a little like gambling 101 for people like, let's say you are running a book on the Super Bowl, right? So, one team is considered way better than the other team, right? So, more people are going to want to bet on the team that's favored, the team that everyone thinks is going to win.

And what you do as an oddsmaker, the bookie, is you set a line, right, for that game where you say the team that's favored actually has to win by five and a half points, above five and a half points, right, six points or above for the bet to cash. And that line is just determined by the supply and demand basically.

You've got money coming in and bets and that line moves around so that you can set the two bets in equilibrium so that you can take as many bets on each team. That's a little quick gambling 101. Now, in the case of the Super Bowl, right, that's an incredibly liquid market, right? You get like tons of people betting.

And also, people know a lot about the team by the end of the season. And this, what I find crazy is they have odds set on incredibly obscure bets on every sort of sport in the world. And I just think to myself, like, how do they have these odds? Is the market liquid enough to bet on the rebounds that the seventh man on UCLA is going to get in this game? Or do they have some data that like, how do they actually do that? I don't understand.

Eric Lipton: I actually don't have insight into that one, I'm sorry to say. And what I do know is that sports betting is not nearly as profitable for the gambling companies as a casino gambling is. And because they don't know, when you play, you know, they know the odds that, you know, not every roulette, you know are blackjack.

They don't know exactly how every game is going to come out, but they generally know, especially with slot machines, they --

Chris Hayes: In the aggregate. Yeah. Yeah.

Eric Lipton: Right. They largely control over the long term how much profit they're going to make, with some exceptions. But with sports betting, their margin is much smaller because they can't really control the outcomes. They can't control who's going to win or lose the game.

Chris Hayes: Right.

Eric Lipton: And so that's one of the reasons why the industry has been pushing states to not only legalize sports betting, but they also want to move it to what they call iGaming, which is essentially full casino gambling on your phone. But to short answer your question, I don't know how they do some of the handicaps on the obscure parts. I mean, it's a bit easier when it's who's going to win or lose.

Chris Hayes: So, you just said that they want to move. I mean, that's the other thing about this that I think gets people's back up. And mine, too, is that it just doesn't seem like it's ever going to stop where it is, right? Like the idea of having a slot machine in your pocket at all times seems terribly to me dystopian, personally. I mean, in some ways we already have a slot machine in our pocket all the time.

It's called the phone. And it actually works a lot like a slot machine. But you think that they are not going to be content just with this, but there will be a push for essentially all gaming on your phone.

Eric Lipton: There's no question. And so, I think from the start of daily fantasy sports, the movement from daily fantasy sports to sports betting to full casino on your phone has been their plan. And they are, you know, two-thirds of the way through right now.

But I think that the broad casino gambling on legalized state sanctioned is going to be much harder because there are so many sports fans in the United States that are willing to push their individual state legislator to say, I want to be able to bet on sports. There's not nearly as much of a constituency for, you know, blackjack on your phone, legalized state blackjack on your phone.

Chris Hayes: Right.

Eric Lipton: So, I think it's going to be a harder sell.

Chris Hayes: To go back to what you just said. Was there, I mean, this obviously has been an intense lobbying effort. But has there been any grassroots constituency for this in terms, in these states? Like how does that work?

Eric Lipton: Yeah. I mean, when I was in Kansas and watching this day by day and sports betting is very popular. And there's a very --

Chris Hayes: Yes, extremely.

Eric Lipton: Yeah, there's a very vocal, you know, state legislators that I spoke with said they heard more about people saying, when are we going to have sports betting? You know, in states where you have really intense university, you know, sports communities --

Chris Hayes: Yeah.

Eric Lipton: -- are that follow professional sports really closely. The legislators heard this a lot. And it was almost, it was sort of an easy thing for them to vote on and to celebrate is that we're going to let you legally bet and we're going to collect some taxes on it.

So, yes, there was a lot of, you know, grassroots, you know, and it was also, you know, the industry mobilized those people just as any, you know, lobbying group would and had them, you know, tweet at or send emails to. And they were definitely active.

Chris Hayes: So, you talked a little bit about backlash. So let's talk about backlash. I mean, it was really striking to me when I just said this thing on Twitter that I find the in-game promotion like really distasteful. It just went crazy, like people, clearly, it tapped a vein of how people are feeling.

And it also seems to me like a rare thing that like, there's not a particular political valence on that, liberal, conservative, whatever. Just it's almost orthogonal to our political divides. Like how do you feel about them announcing that there's an updated over underline in the game you're watching?

You know, and so I'm curious like what is this backlash looking like? Where is it coming from? How is it manifesting?

Eric Lipton: The first, it has to do with advertising. And the individual states are experimenting with different ideas. New York State, you know, is the notion of free or free of risk is, you know, some that would prohibit statements like that. There's also any, you know, advertising that is aimed at people under the minimum age, sort of like a, you know, Joe the camel, this, you know.

Chris Hayes: Right.

Eric Lipton: And so, each state, there's a bunch of states now that are that are different language either by the gambling regulators or by legislators, has started to emerge in recent months around that. The other thing that's happening is that there's been a lot of nasty social media against individual players, particularly in college sports.

If the team loses by like two points and so therefore, they just missed the handicap, even if the team wins, there has been a number of coaches that have been like outraged at the attacks that their players have gotten in social media, because they were just under the handicap, even though they won.

And so, there's a lot of, you know, bettors who have become really nasty social media kind of attackers against individual players. And there's a backlash happening around that. There's some discussion in some states about, you know, prohibiting players from betting if they are going to be aggressively, you know, bullying, you know, which would be a hard thing to enforce.

Chris Hayes: Yes.

Eric Lipton: But that's happening right now as well. There's been a fair amount of discussion in recent weeks around concern about the bullying that's going on of players.

Chris Hayes: Yeah, like there's a whole genre of video now. You see them on TikTok all the time. And there's a very humorous feature on Scott Van Pelt show on ESPN called Bad Beats. And the basic premise is, a game that the outcome doesn't matter, but the spread between the two teams does matter, and you're going to win $1,000 if team A wins by 10 points and they're up by 11 points with two seconds to go and Team B, which is not going to win the game, someone chucks a three pointer from half court, it goes in, you've now lost the bet that you were going to win.

Eric Lipton: Right.

Chris Hayes: And there's a million permutations of that. A star player for a basketball team misses two free throws that are meaningless in the context of the game, but matter for the spread.

And then that player is on the receiving end of like bettors online who are ticked off because that individual did this thing. And then you see that over and over. It's also part of like the weird cultural, subculture that's grown up around sports betting, which is very ubiquitous to me and intense, and sort of seems like it came out of nowhere. And then all of a sudden, it's everywhere, right?

People are talking in these terms all the time. People are talking about, you know, I missed the parlay because this, you know, didn't like, didn't hit this free throw. And it's the double-edged sword of what you're saying before. It's like the leagues are like, well, we like the engagement. Like you're watching a random, you know, West Coast game at 12:15 a.m. because you want to see this guy if this guy gets three steals.

But the downside is then like people go online and they scream at, you know, your player metaphorically because they didn't get enough steals. Like, you know, it's sort of like this is what you signed up for, guys.

Eric Lipton: You're getting it I think something that is fundamental here, which is just this transformative change in the nature of sports. It's become, effectively, a gambling enterprise. And it, you know, that sports was always a big corporate operation, you know, that was a moneymaking operation. But it was still, it was a game and it was a pastime. But it is now a part of a gambling enterprise. And it has changed the relationship that Americans have with sports in a pretty fundamental way.

And even if you're not betting, you're seeing it constantly. And so, I think that's what you're getting at, that it is societally quite interesting.

Chris Hayes: So, you've got some of this backlash from the, so some from the sort of both schools, I think like, you know, college level sports where I think they really take this to heart, like their players getting dragged online for, you know, a meaningless play that happened at the end of a game to someone, you know, missed the spread. You've got the leagues themselves. You've got the advertising issue.

I mean, I'm curious, is there organized sort of anti-vice interests, right? Like, you know, when you think about other thing or go back to my prohibition analogy, right, about how the U.S. has gone through this very complicated long relationship with alcohol, in which we've tried a bunch of different things, that there were organized forces obviously for, you know, over a century, in fact, that were agitating against complete prohibition of alcohol. They were mobilized.

I guess my question is like when we're talking about these folks in the state legislature, right, if you're in the state legislature in Missouri or New York, who's on the other side? Like, is there anyone mobilized on the other side?

Eric Lipton: Very little. I mean, there is generally speaking, you know, one or two lobbyists from the problem gamblers of America kind of groups. And then in certain states, and, you know, there's a number of states, Oklahoma, Texas, Georgia, that have not passed sports betting. And for the most part, the thing they have in common is that a significant religious conservative, you know --

Chris Hayes: Right.

Eric Lipton: -- anti-gambling, you know, that that's immoral kind of approach.

Chris Hayes: Right.

Eric Lipton: And so, California is an exception to that, obviously. But there is a religious anti-gambling community that is opposed to it. But generally speaking, when you go into these state capitals, you see like maybe one or two lobbyists for the problem gamblers and then dozens of lobbyists for the industry that's trying to get it passed. So, they're just outnumbered by enormous scale.

Chris Hayes: We'll be right back after we take this quick break.

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Chris Hayes: So, then our state legislatures are getting a lot of calls from people being like, I don't like all this gambling promotion in the middle of every sports broadcast I watch.

Eric Lipton: I think that there is an increasing awareness of that, and it's particularly among the state regulators that are starting to hear complaints about the intensity of the advertising and how it's potentially capturing use and that they may be actually, you know, creating an addictive problem that's going to, you know, manifest itself in the coming years.

So, I think it's particularly the state regulators in New York State. It's the gambling commission that just approved new rules in Ohio. It's the Casino Control Commission in New Jersey.

It's also the regulators and the attorney general's office that have just announced some new rules. And in Massachusetts, it's also the state regulators that are looking at this. So, I think that it is increasingly the regulators who are concerned about it and are starting to act on it.

Chris Hayes: So, you've got, so in all these states, there's some state regulatory agency who now have this in their portfolio, right?

Eric Lipton: There is. But for the most part, I mean, just like I mentioned, GeoComply. Most of the compliance work is done by contractors that the companies hire and then they self-report effectively violations because the states don't really have the capacity. I mean, they don't, they're not behind the screens looking at all of these bets as they're happening.

Chris Hayes: No, I mean, there's millions of bets out there.

Eric Lipton: Yes. Right. So, the companies have contractors that have to do compliance and monitoring and look for fraud. And so, they're tracking all this. And then they self-report to the regulators that then decide what to do, if, for example, in Tennessee, their contractor accidentally was taking credit card bets, even though they're not allowed to do credit card bets and then they fine the company for that.

But that was only after the company notified them that they, through an oversight, they accidentally took credit card bets.

Chris Hayes: So, they actually raised their hand because their compliance contractor alerted them to this.

Eric Lipton: Yes.

Chris Hayes: But they're not actually, the capacity doesn't really exist --

Eric Lipton: It does not.

Chris Hayes: -- on the part of these gambling, the state agencies do not have the capacity to actually real time monitor what the heck is happening?

Eric Lipton: They do not. They don't have anywhere near the resources to actually have visibility into it. They're relying mostly upon contractors and the companies to self-report.

Chris Hayes: And is there any regulation built into these, the laws that get passed in these places to make it legal on things like, it just seems like the advertising, like the whistle to whistle regulation you mentioned in the U.K., that just seems like a no brainer. But I guess the question is would that have to be passed into law? Or is that the kind of thing that the state gambling agencies are empowered to do themselves, like to put in necessary and reasonable limits?

Eric Lipton: That one really differs state by state. The different states, the gambling commissions have greater authorities and leeway to make changes in, and so that there's no single answer to that. Every state has a different kind of distribution of power.

Chris Hayes: You talked about a little bit like the sort of startup phase and a kind of backlash phase. I guess, like what as best you can tell, as someone who's been reporting really in depth on this for a number of years now, what equilibrium do you see this achieving? Or is there no equilibrium? Like what is your understanding of where this sort of ends up?

Eric Lipton: I mean, I think that you'll have more states. You know, you still don't have Texas and California and Georgia, you know, that still have not legalized sports betting. And the industry is continuing to look at those states that they want to bring on board.

So, I think that, you know, that the progress towards legalizing states has also significantly slowed down. The easy ones are now on board. So, I think you'll continue to see a certain number of states gradually come on board and more betting.

And I think you're going to see a summary considerations of, you know, is there enough oversight of this? And then there will be a lot of studies of just how severe the social consequences are of addiction. And, but that's going to take a number of years for, you know, whatever problems there are with addiction to emerge.

And then just like in the U.K. last week where you have a government agency make a number of recommendations for changes, you know, that's several years out before we reach a phase in which there's a government agency. And there is no, one of the things that the industry likes now is that this is entirely state by state.

The federal government is playing no role. And the industry wants to keep it that way. They want to keep it state by state because they have greater influence in the state legislatures than they do with like, say, the Federal Trade Commission. If the federal agency were to play a regulator role, I think that that would be a problem for them.

Chris Hayes: Yeah, that was just actually going to be my sort of follow up for a policy question. I mean, presumably, just this is just a hunch on my part that I would imagine U.K. gambling is more centrally regulated --

Eric Lipton: It is.

Chris Hayes: -- European, yeah. European countries tend to be a bit more centralized than we are in terms of these kind of regulatory regimes. You know, I mean, to sort of come full circle, right, there's a federal law that was, you know, you could only do this in Nevada. The court strikes that down and then it's a sort of free for all in the states.

You know, one way to sort of come back to something that might provide, you know, to me, a sort of a better middle space between, you know, completely making it illegal and the sort of free for all we have now, would be some sort of federal regulation. But I don't know if anyone's talking about that.

Eric Lipton: There was a proposal from a New York State House of Representatives member to have a limit on advertising. It was introduced in the last, you know, six months or so. But that's gone nowhere. And, you know, Congress, you know, I can't see it in the foreseeable future Congress taking up something like that.

It's possible that a federal regulatory agency may look at this and at some point, decide it needs to activate on this subject if it sees, you know, interstate play, that's problematic.

Chris Hayes: Yes.

Eric Lipton: But right now, I don't see Congress doing anything. And the industry is determined to make sure it stays that way. But a federal regulator could decide to start to move on this.

Chris Hayes: Eric Lipton is a Pulitzer Prize winning journalist. He's an Investigative Reporter for The New York Times, where he has been reporting on sports betting for years. You can, of course, read his work at TheNewYorkTimes.com. Eric, thanks so much. That was great.

Eric Lipton: Thank you so much.

Chris Hayes: Once again. Great thanks to Eric Lipton. You can send us your feedback on this. I'm curious to hear what people have to say if they have been using the sports betting apps, if they've been encountering the ads and having the same reaction I had or don't have that reaction at all. Curious either way. Send us your feedback. You can tweet us at the #WITHpod, email WITHpod@gmail.com. And be sure to follow us on TikTok by searching for WITHpod.

"Why Is This Happening?" is presented by MSNBC and NBC News, produced by Doni Holloway and Brendan O'Melia, engineered by Bob Mallory and featuring music by Eddie Cooper. You can see more of our work, including links to things we mentioned here by going to NBCNews.com/whyisthishappening?