Monday, April 10, 2006

The Beauty of Bets: Wagers as Compensation for Professional Athletes

Professor Jeffrey Standen of Willamette University College of Law has posted on SSRN a fascinating article that will be published in a forthcoming issue of the Willamette Law Review. The article is entitled "The Beauty of Bets: Wagers as Compensation for Professional Athletes." It may be downloaded at this link (the link goes to the abstract, and you can download the article for free through "Document Delivery" -- all you will need is an SSRN account, which is free). The article examines athletes betting on games and it concludes that such betting is a good thing.

Here is the article's abstract:

Professional and amateur leagues prohibit athletic participants from wagering on the outcome of the games in which they play. Most also prohibit wagers on any aspect of the sport; some even prohibit wagers on any sporting contest. At the same time, these leagues typically allow teams to compensate players based on individual performance outcomes and team victories and championships. Certain non-league tournament sports, particularly professional golf, even allow players to bet on pre-tournament practice contests.

This paper outlines the advantages of allowing athletes to bet on their games. Betting aligns player incentives with team incentives, encourages team-oriented play, helps sustain fan interest, lessens the nominal costs of owning teams or ticket purchases, and reduces the likelihood that players will conspire to throw games or beat the point spread. In light of this advantages of betting, the widespread prohibition on participant gambling seems problematic.
And here is an excert from the article's introduction that rings so true:
Some fans also appear to enjoy financial aspects relevant to professional sports as much as they might enjoy the sport itself. For instance, some fans enjoy playing general manager, filling web sites with their analyses of how potential player trades or free agent acquisitions would comport with salary cap limitations. Likewise, many fans consume their taste for sports fantasy leagues, gambling on fictitious games made up of fictitious teams populated by real players playing in real games. Finally, some fans consume their sports viewing enjoying through gambling directly on the games themselves. Presumably, these fans’ taste for “financial sports,” such as fantasy trades, fantasy leagues, or wagers, shifts these spectators’ attention away from the pure competition of the sports themselves. Despite this possibility, the American professional leagues appear to tolerate side action by fans and fantasy league participants, and indeed welcome the added attention these financial fans bring to their players and leagues. The sports leagues produce the product that these financial sports fans consume; the leagues, however, do not capture the gains from their product.
Jeff delivered an excellent talk on this article at the Future of Sports Law symposium held at Willamette Law last month.

This is fascinating topic. Should athletes bet on games? And is it a good thing for the parties involved?

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