Balancing Entertainment and Addiction: The Challenges of Social Sports Betting

In 2018 the Supreme Court made a decision that allowed for the legalization of sports betting, what followed was an absolute frenzy. The market for sports betting has since grown from a 430 million dollar industry to one projected to be worth over well over 22 billion dollars in 2030. This surge has been fueled by the rise of online betting platforms and "social sportsbooks" that allow users to wager virtual currencies on sports. While these social books claim to be a safe alternative to gambling, research shows that this claim may not hold. This piece examines a specific social book, Fliff, its recent legal troubles and explores the future of this sector.

In 2018, the Supreme Court struck down legislation prohibiting sports betting in the United States, opening up the floodgates for a new form of legalized gambling, which involves betting money on the outcome of sporting events. Central to its function are sports books – the entities that facilitate and manage these bets. They hire statisticians to estimate the probability that certain outcomes will occur and then set odds based on their perceived probabilities. Let's say you think the Commanders are going to win the Super Bowl; you can bet 100 dollars that they will. If they win, you would get paid out at a rate determined by the odds set by the book. The less likely said event is to occur, the higher the payout. Additionally, you can bet on certain players' performances. For instance, if you are a Steph Curry fan, you can bet that he will score over 30 points on a given night. If he does so then you will get paid. Sports betting has brought about a fundamental change in the way in which Americans interact with their favorite teams. Fans don’t just root for a win; now they cheer every time Curry hits a three, hoping that his overcashes. You can also bet that certain things will not occur, called taking the “under.” These fans pray for a miss, hoping Curry won’t hit this threshold. Sports betting adds real stakes to each game. In a sense, it brought about a new excitement for viewers, and Americans love it. Sports betting has grown from a 430 million dollar industry to one that generated roughly 11 billion dollars in 2023 alone [3]. Not only is this growth rampant but it is not projected to stop anytime soon. Market research suggests that revenues will continue to increase at a compounded annual growth rate (CAGR) of 10.4 percent over the next seven years [4]. To help contextualize this rate, this model projects the market for sports betting to double in the next 7 years.  

This rapid growth can likely be attributed to the increasing ease at which Americans can place bets. Just ten years ago, placing a bet was no simple task. To place said wager, you needed a physical casino to facilitate this financial transaction. Thus, one had to fly out to Las Vegas if they wanted to make a bet. Alternatively, you could go through a traditional “bookie.” These individuals or organizations ran off the record sports books that individuals could sign on to. However, there were significant transaction costs associated with finding a bookie. Additionally,  these books were typically run by criminals, as this practice was illegal in most states. They were also unregulated, thus you ran the risk of not being paid out. 2018’s legislation changed everything; today, you can place a bet with the click of a button. 

This ruling opened the door for online betting services. These platforms serve as online books, offering their services to any twenty-one-year-old with a smartphone. Today, over half of qualified Americans have placed a bet in their life, and that number is rising [1]. Potential profitability in the sector is astounding, but the market is already congested. DraftKings and Fanduel quickly emerged as the dominant players in the space, their apps boasting 15.7 million combined downloads in 2022 alone [5,6]. Together, they account for over 70% of the market share, dissuading new firms from trying to open a book [4]. Companies have thus turned elsewhere to capitalize on this surge. Younger sports fans, under the twenty-one-year threshold, share a similar hunger for this kind of entertainment. Legislation prohibited these individuals from directly placing money on these games, however, there were other ways they could still enjoy its thrill. 

Now, let me introduce the idea of a social casino. They function similarly to other online betting platforms, allowing users to engage in various activities such as slots, blackjack, and poker. However, they do not involve real money transactions. Instead, users wager a virtual currency - coins that are not exchangeable for real cash. In this sense, social casinos attempt to limit the financial risk imposed by gambling. They aim to provide a safe space for those who wish to enjoy gambling’s thrill, without the potential of inflicting real financial loss. The court's decision in 2018 allowed sports books to adopt a similar social model. Thus, the creation of social sports books became inevitable. These social books include the traditional elements of a modern sports book – moving lines, player props, and conjoined bets – without any real money transactions. 

While this market is still new, Fliff quickly emerged as one of the most dominant social books in the field. It maintains its “social” status as it allows its users to gamble Fliff Coins, a virtual currency with no real value.  Users are given these coins upon downloading the app which can then be gambled, grown, and lost. Their accumulation serves as a way for players to show their success; users build up their collection of coins, working their way up leaderboards and battling their friends. The graphic below is taken directly from the app store, giving insight into Fliff’s model:

While Fliff may seem like a safer alternative to traditional gambling, research suggests this platform may still pose significant risks, especially given its young user base. Wagering fake currency may create a false sense of security and control, while still resulting in harmful gambling behaviors. Studies have shown that the instant access, constant availability, and social elements of mobile sports betting apps can facilitate increased betting frequency, impulsive wagering, and the chasing of losses – even when no real money is at stake [7]. Additionally, Fliff serves as a gateway into the world of sports betting for many individuals. 

On the platform, individuals are also allowed to bet with an alternative currency: Fliff Cash. While not holding direct value, users can exchange Fliff Cash for real-world dollars. In a sense, this violates the terms of a social sportsbook. Any user, including those under the age of twenty-one, can bet with this money. The company claims this doesn’t violate the social sports book model for the following reasons: (1) Users can only pull their Fliff Cash out after they are twenty-one years old, and (2) Users can not purchase more Fliff Cash; it is strictly given to users on a scheduled basis. Fliff claims that this feature does not function as a sports book, but instead should be viewed under a sweepstakes model. However, this definition has been called into question by Bishoy Neisom, one of the app's users, who has filed a class action lawsuit claiming that Fliff is operating as an illegal sports book in the state of California [9]. 

At the heart of the sweepstakes model is the idea that real monetary prizes can be won without requiring some initial purchase [11]. This is satisfied by Fliff, thus validating their claim. However, it is far more complicated than that. There are different legal definitions and regulatory practices across state lines. Fliff was founded in Pennsylvania, operates in Texas, and offers services in all 50 states [9]. The situation is not simple. As it played out, the lawsuit was brought to court and then struck down and sent to arbitration [9]. This means that the court deemed that it could not rule on the matter, and thus sent it to a third party to decide. This was viewed as a legal victory for Fliff, as the maximum payout from Arbitration is far lower than that pursued by Neisom’s class action. 

What does this all mean? Essentially, Fliff’s model of a social sportsbook is not going anywhere. It has shown to be not only extremely profitable but also legally permissible. We live in a world in which twelve-year-olds can place bets on sporting events just as easily as their parents. While this process looks different, the “safer” alternative offered to kids is by no means harmless. Gambling addiction is already on the rise, with the NCPG estimating that addiction grew by 30% from 2018 to 2021 [12]. This will likely just serve as more fuel to the fire. It forces us to ask, what should be done? Should social sports books be held to the same standards as their traditional counterparts? Do they need to be guarded by a similar age restriction? A social book creates the same biological responses as a traditional one does. While they do eliminate the financial burden gambling creates, they still impose similar risks. The age restriction was put in place to protect younger individuals from gambling - individuals who are significantly more susceptible to addiction. Thus, social books should be bound by the same kind of protective policies. There is no reason we should allow a twelve-year-old to be sports betting. Even if no money is involved, it is best that they wait until they are twenty-one so as to promote safe habits and prevent psychological damage as a symptom of premature gambling behaviors.

All content is the intellectual property of the Virginia Undergraduate Business Review.

REFERENCES

[1] Wertheim, J. (2024). Technology has fueled a sports betting boom and a spike in problem gambling, addiction therapist warns. CBS News. https://www.cbsnews.com/news/technology-fuels-sports-betting-boom-and-problem-gambling-spike-addiction-therapist-warns-60-minutes-transcript/

[2] Klawans, J. (2023, February 15). Is the legalization of sports betting a good thing?. The Week. https://theweek.com/sports/1020784/is-the-legalization-of-sports-betting-a-good-thing 

[3] Greenberg, D. (2024). Sports betting industry posts record $11B in 2023 revenue. ESPN. https://www.espn 

[4] Sports betting market size & share analysis report, 2030. Sports Betting Market Size & Share Analysis Report, 2030. (2021). https:/www.grandviewresearch.com/industry-analysis /sports-betting-market-report

[5] DraftKings revenue and Usage Statistics (2024). Business of Apps. (2024, January 8). https://www.businessofapps.com/data/draftkings-statistics/ 

[6] FanDuel revenue and Usage Statistics (2024). Business of Apps. (2024b, January 8). https://www.businessofapps.com/data/fanduel-statistics/#:~:text=Source%3A%20Company%20data-,FanDuel%20Downloads,downloading%20the%20Sportsbook%20%26%20Casino%20app.

[7] Hing, N., Thorne, H., Russell, A. M. T., Newall, P. W. S., Lole, L., Rockloff, M., Browne, M., Greer, N., & Tulloch, C. (2022, October 10). “Immediate access ... everywhere you go”: A grounded theory study of how smartphone betting can facilitate harmful sports betting behaviours amongst young adults - International Journal of Mental Health and Addiction. SpringerLink. https://link.springer.com/article/10.1007/s11469-022-00933-8 

[8] McQuillan, S. (2024, January 4). Fliff California sports betting lawsuit sent to arbitration. Legal Sports Report . https://www.legalsportsreport.com/160610/fliff-california-sports-betting-lawsuit-sent-to-arbitration 

[9] Contributor. (2024, January 12). Fliff earns wins in court as judge sends lawsuit to arbitration - EGR North America. EGR North America - US and Canadian online real-money and social gaming industry insight. https://www.egr.global/northamerica/news/fliff-earns-wins-in-court-as-judge-sends-lawsuit-to-arbitration/ 

[10] Altman, C. (2024, April 12). Fliff Promo code April 2024: Vibonus for 600,000 Coins & $100!. VegasInsider. https://www.vegasinsider.com/sportsbooks/fliff/ 

[11] “A ticking time bomb”: Gambling addiction is at an all-time high (and it’s about to get worse). Money. (n.d.). https://money.com/gambling-addiction-all-time-high/ 

[12] Casu, M., Belfiore, C. I., & Caponnetto, P. (2023, May 3). Rolling the dice: A comprehensive review of the new forms of gambling and psychological clinical recommendations. MDPI. https://www.mdpi.com/2673-5318/4/2/14