This article was originally published by the Sports Business Journal on May 5, 2022.
In January, the Washington Nationals opened the BetMGM Sportsbook at Nationals Park, becoming the first active brick-and-mortar retail sportsbook at a Major League Baseball ballpark. This development marks a growing trend among professional sports teams to offer fans the opportunity to participate in sports betting in and around their stadiums. For many teams, sports betting has become a way to increase fan engagement and counteract the declining share of in-stadium revenue in recent years. As such, dozens of professional sports teams across the country have partnered with sports betting operators to integrate mobile and retail sports betting into the game-day experience.
Stadium betting deals generally involve a sponsorship partnership with sports betting operators, such as DraftKings or BetMGM, to transform a particular area of the stadium into a comfortable and upscale lounge for fans to watch sports on television. The structure of these deals — and the betting opportunities the lounges provide fans — has taken several forms. Many teams have opted to create stadium lounges that cater exclusively to the mobile sports betting crowd, providing Wi-Fi for fans to bet from their mobile devices. Other teams, like the Nationals, have opted to open a full-fledged retail sportsbook, complete with several betting windows and kiosks, often in addition to mobile-betting lounges.
The variance in in-stadium betting approaches is largely a consequence of state sports betting laws. Of the 31 U.S. jurisdictions that have legalized sports gambling, only four contain provisions in their laws explicitly permitting their professional sports facilities to open in-person retail sportsbooks: Illinois, Arizona, Maryland, and Washington, D.C.
These regulatory carve-outs for stadiums generally contain a few common elements. First, the regulations classify stadiums under the same or equivalent category of operator license as large casinos. This approach treats stadiums like casinos in that they are able to become fully-licensed partners with sports betting operators, allowing them to launch branded in-person retail sportsbooks. Additionally, these regulations contain geographic exclusivity provisions, providing professional sports facilities the sole right to offer sports betting within a certain radius of their premises. While the scope of the geographic exclusivity zones range by state — from a two-block zone in Washington, D.C., to up to 1.5 miles in Maryland — the zones are designed to encompass the professional sports facilities and their ever-expanding real estate interests.
Aside from state gambling law, there are many further regulatory considerations that teams should evaluate in deciding to open up a sportsbook in or around their stadiums. Notably, a team must be aware of any existing real estate restrictions where its stadium venue is located, such as its zoning classification and other municipal regulatory constraints. It is common for property in and around metropolitan areas to be subject to and encumbered by covenants, conditions, and restrictions that are filed in public records. Teams would be wise to run thorough title searches on their property and study the documents encumbering the property to ensure there are no prohibitions on gambling or other “noxious” uses, a term which can often be defined broadly. In addition, some teams lease their stadium and surrounding areas from the local municipality or from a private third party. Those leases could contain provisions stating that gambling is not permitted on the leased premises.
Given the revenue and engagement potential, the rise of in-stadium sportsbooks — and the corresponding pressure on state legislatures to permit them — seems imminent. Indeed, the emergence of sportsbooks is only the latest iteration of the broader trend of professional sports teams growing their enterprise development. From the investment in regional sports networks to the real estate boom of ballpark villages, professional sports teams over the last two decades have concentrated on growing ancillary revenue streams. And now, with in-stadium sportsbooks, teams may have found their next jackpot.
Zack Flagel and Vincent Pulignano are members of the Sports Gambling Task Force at law firm Foley & Lardner LLP.