The Next Frontier for Sports Betting: Your TV

Featured in The Information, By Daniel Kaplan

August 11, 2023

For all the ways sports gambling has infiltrated American life since the Supreme Court legalized the industry five years ago, there was one area where betting still did not exist: within actual sports broadcasts. Bettors couldn’t watch a game on Fox or ESPN and point their remote at an on-screen button to place a wager. But all that is about to change. Tappp, a New York–based payments processor, has been working to develop an integrated streaming and TV betting system over the past four years. Last week it formalized an agreement with Major League Rugby to provide in-game betting on the league-owned Rugby Network for the 2024 season. The finalized deal, which has not been previously reported, marks the first time a professional sports league has greenlit the ability for fans to simultaneously watch games and place bets from their TVs, phones or tablet screens. Tappp executives believe this will be the first of several such deals with professional leagues and their network partners in coming months. “What we are trying to do has not really been done before,” said Harry Hardy, chief commercial officer of Major League Rugby. “When we talk with other players in the sports betting industry, their eyes kind of open wide: ‘Wow, this is something significant.’” The undertaking is enormously complex, and that’s in part why Tappp and the 12-team MLR delayed the launch of in-game betting for the 2023 season (there were some erroneous reports that the feature had begun during the league’s February-to-July campaign this year). First, beyond developing the technology, Tappp needed the approval of betting regulatory agencies in states that allow sports gambling, and had to work with connected device makers to ensure its products could be geotracked. Regulators also insisted on the inclusion of responsible gaming messages and in some cases caps on bettors’ spending, said Sandy Agarwal, Tappp’s founder and CEO. (The agencies require sportsbooks to post these messages cautioning bettors about the dangers of gambling.) “In our discussions with regulators, they’ve asked us to do some extra things” to protect users, Agarwal said. Sitting in a conference room in his office high above Lexington Avenue in Manhattan, Agarwal walked me through how the new in-game system works. A big-screen TV hung on the wall, with a replay of a soccer game streaming and a “Bet button” graphic visible in the lower-right corner. Using the TV’s remote control, Agarwal clicked the button, and a series of sportsbook logos, including those of FanDuel, DraftKings and BetMGM, appeared. After choosing the preferred sportsbook, Agarwal told me, the user inputs their login information to authenticate the account. During a game, a series of betting prompts will appear. There is the standard bet on which team will win the match, with odds determined by the user’s preferred sportsbook, but as the game goes on, the system also offers a series of microbets, or props. During the upcoming rugby matches, for instance, bettors will get the chance to wager on whether a team will score a try (the rugby equivalent of a touchdown) on the ensuing series. In a hypothetical NFL game, viewers might be prompted to put money on how many yards a particular player will net during the first half, or whether a team will get a first down on the next series. The betting button is not constantly on screen, but it appears every few minutes, with viewers having the option to disable it. Nevertheless, gambling addiction experts warn that this technology could unlock a dangerous Pandora’s box that will only worsen gambling addiction. “The abundance of apps like these, coupled with excessive advertising, coupled with the fact that people don’t have to get off their couch, as well as just the social acceptance…it’s really doing a disservice to the public,” said Felicia Grondin, executive director of the Council on Compulsive Gambling of New Jersey. “It’s a very difficult animal to try to put down or to control.” But the concerns of Grondin and others seem unlikely to slow the spread of this coming technology. Today, wagering on sports is legal in 35 states and the District of Columbia; sports betting companies spent more than $314 million on advertising last year, according to iSpot; and more than $220 billion has been legally gambled since the Supreme Court decision. Just this week, ESPN announced it would license its brand to sportsbook Penn Entertainment for $2 billion over 10 years, creating ESPN Bet and marrying one of the top consumer brands in sports with a casino company. Tappp, which also provides payments service for players in the sports space, including Major League Baseball and sports book BetMGM, already has integrated betting agreements or is currently negotiating them with several leagues, including the NFL, market sources said. Agarwal declined to comment on these dealings. “This is a company that is essentially enabling betting to converge with media at scale,” said Michael Proman, a managing director with Scrum Ventures, a Tappp investor. “And that is, to me, one of the most exciting storylines that the betting space is going to see for years to come.” The technology has to account for a mountain of variables. For example, it must incorporate different taxes levied by states, be unusable in states where online sports gambling is prohibited, and account for the enormous number of permutations bets can take. For in-game betting, the odds are changing all the time based on the action that has occurred, Agarwal said. Tappp’s technology has to reflect the constantly gyrating betting lines, and the CEO estimates a single game has over a million permutations of bets.   One critical hurdle is latency, the lag between live game action and when it is broadcast on screens, which is typically anywhere between 6 and 45 seconds. For wagering on final outcomes, the lag is not a great problem. But if a prop bet asks whether a hitter will strike out on a full-count pitch, the action may have concluded by the time the bettor places the bet. The ability to offer live betting over a latency-marred streaming service “has been viewed as something of a white whale for some time,” said John Holden, a business professor at Oklahoma State and an expert on sports gambling.   To account for the latency issue, the prop bets offered through Tappp will for now only allow viewers to wager on a future outcome, like whether a team on defense will score when it returns to offense. (In a slide in the company’s patent application, a typical prop bet is, “Will Chuck bogey the 15th hole?”) “The bigger thing for us to solve is not to screw up your viewing experience,” Agarwal said. The company wants to avoid creating spoilers due to latency; for instance, if the screen posts real-time odds, a viewer watching a slightly lagged stream might deduce what is about to happen.   The MLR deal will begin by offering bets on the league’s streaming Rugby Network, which Hardy said has 170,000 subscribers. The league also has a broadcast deal with Fox Sports 1, which airs a game of the week on Saturdays, and Fox also broadcasts the league’s championship game in July. To date, Tappp has not had talks about integrating live betting with Fox, which just recently began unwinding its Fox Bet venture with Flutter Entertainment, parent of FanDuel.   While MLR did not have in-game betting last season, for the last few weeks of the season Tappp did provide a free-to-play system, which is similar to betting but without a financial outlay. Even that feature provided a big uptick in engagement among viewers, MLR’s Hardy said. Sports leagues often position betting as a way to keep fans engaged, an obvious selling point for Tappp.   Given recent suspensions over player gambling in the NFL, it is highly unlikely the nation’s most popular sports league would sign off in the near term on integrating Tappp’s betting technology for, say, the NFL Network games. But there is optimism within Tappp that rugby is just a start, and that by the time MLR’s season rolls around in February, there may be other sports lined up to enable in-game betting. “The rugby deal is the first of what I would classify as many deals, both domestically, as well as on a global level,” said investor Proman.   Indeed, Agarwal was in South America this week talking to sports leagues on that continent about using Tappp’s technology. And domestically, he predicted, it’s only a matter of time before bet buttons become a part of the sports experience: “In 2024, we are pretty certain that this experience will have populated the U.S. television landscape