Betting, beer and CBD – how U.S. leagues & teams are approaching new non-traditional categories for sports sponsorships

Published 02 September 2019 By: Christopher Chase

US Sports

With recent court rulings, modified laws, and reinterpretations of industry standards, new and expanded sponsorship categories for non-traditional products have emerged in the United States: namely, sports betting, beer marketing, and cannabidiol (CBD). Team sports organizations have taken a cautious but positive view of this, given that new categories potentially equal new revenue.

In light of the foregoing, this article will examine:

  • the historical reluctance to accept sponsorships in these three product categories (and the laws, rules, and regulations causing such reluctance);

  • recent deals in each of the three product categories, and

  • considerations for best practices going forward.

Sponsorships with Entities Offering Sports Betting

Historical Reluctance and Evolving Law

Just over a year ago, the U.S. Supreme Court’s decision in Murphy v. NCAA1 paved the way for broader authorization and regulation of sports betting in the United States2 – the result of which has increased opportunities for leagues, teams, and organizing bodies to benefit from sponsorships, marketing buys, and media integrations from entities that offer sports betting.

Indeed, although initially against the idea of widespread sports betting,3 all of the U.S. major leagues and several teams have signed sponsorships with such entities. For example, MGM Resorts International (MGM) became the “official gaming partner” and “official entertainment partner” of Major League Baseball (MLB), in a deal that provides wide exposure over MLB’s platforms and also gives MGM the right to use MLB’s trademarks in states that have legalized sports betting.4 While these league and team deals appear to specifically allow sportsbook promotion, the official partners may only do so in states where sports betting is legal. Additionally, some sponsorships allow the sponsor to refer to itself as an “official sports betting partner,” such as MGM Resorts’ deal with the National Basketball League (NBA) and William Hill’s sponsorship of the National Hockey League (NHL). However, league policies are mixed on whether call to action messaging for sports betting is permitted: whereas the National Football League (NFL) has prohibited its teams from rolling out call to action messaging,5 Major League Soccer (MLS) permits its clubs to use such messaging in order to encourage legal-age fans to bet on MLS games.6

These sponsorships will be costly though – in addition to the purchase of sponsorship rights, some leagues require the purchase of official data for any league or team sponsorship,7 which reportedly will come at a 0.25% royalty.8 While this controversial requirement will increase the cost of sponsorships, some purchasing sponsors welcome official data,9 finding that it is integral for in-play wagering.10

Considerations for Marketing Opportunities Moving Forward

Due to the increased marketing opportunities around sports betting, the American Gaming Association (AGA), the trade association for the US casino industry, recently issued its first voluntary marketing code for sports wagering. Entitled the “Responsible Marketing Code for Sports Wagering”, the code follows similar industry self-regulatory guidelines (such as the Beer Institute’s Marketing Code (which is discussed in more detail below) and the DISCUS Code of Responsible Practices for Beverage Alcohol Advertising and Marketing) and focuses on four key areas:

  • respecting the legal age for sports wagering;

  • supporting responsible gaming;

  • controlling digital media and websites; and

  • monitoring code compliance.

Considering the age requirement first, the Code prohibits practices that may be seen as appealing to those not of legal betting age, such as using cartoon mascots, using entertainers popular with those under betting age,11 and using sports wagering messages (including logos, trademarks, or brand names) on clothing, toys, or games intended for minors. Like those other self-regulatory guidelines noted above, the Code also forbids ads in any media where 71.6% of the audience is not allowed to place bets. By policing itself, the AGA’s constituents may be able to avoid direct Federal Trade Commission scrutiny, as the FTC recognizes the benefits that industry self-regulation brings to consumer protection.

Moreover, brands would be wise to follow the AGA’s Code, as it is unlikely that a league, team, or organizing body would approve any sports betting marketing materials that would be problematic under such Code. These entities will almost certainly adopt a standard that results in industry-accepted marketing materials, if not a standard that is even stricter than the Code.

With the category open and leagues, teams, and organizing bodies increasingly keen on marketing relationships with sports betting entities (a position that has evolved over time), such sports properties can offer these lucrative rights but must weigh the benefits against the risks.12 Following the AGA Code and leagues’ rules should balance all parties’ interests and help accomplish the goal.

Use of Team Sport Athletes in Beer Marketing

While not a new category by any means, a new form of beer marketing has arisen. The NBA, NFL, and Major League Baseball (along with their respective players associations) have all recently allowed active athletes to appear in beer13 advertising in uniform in the U.S. – a change in position from the past few decades.

The historical prohibition on allowing active team sport athletes to appear in malt beverage and other alcohol advertising arose from a combination of a 1995 ruling by the Bureau of Alcohol, Tobacco, and Firearms (ATF) (now called the Alcohol and Tobacco Tax and Trade Bureau (TTB)), broadcast network guidelines, beer industry self-regulation, and "unwritten rules"14 by the various team sports leagues.  Over the subsequent two decades, however, those guidelines and rules gradually relaxed the prohibition, and leagues and their beer sponsors have taken advantage (indeed, Budweiser has successfully parlayed the NBA’s recent allowance of the use of players in uniform by creating one of the more memorable commercials of 2019: This Bud’s for 3,” which honored Dwyane Wade’s final season).

Historical Prohibition Arising from an ATF Ruling

In 1995, the ATF issued Ruling 95-2 to address the use of athletes in alcohol marketing in the context of the ATF’s enforcement abilities under the Federal Alcohol Administration Act (FAA). In Ruling 95-2, the ATF did not outright prohibit the use of active athletes in alcohol advertising, but it expressed concern with respect to certain portrayals.

The ATF stated that it would be

"especially sensitive to whether such labels and advertisements would be likely to deceive or mislead youth to conclude or believe that consumption of an alcoholic beverage will increase their athletic prowess, enable them to perform at a level comparable to that of a famous athlete or, conversely, likely deceive or mislead youth to believe that such consumption will not inhibit athletic performance."15  

The ATF offered examples of what it would consider unacceptable:

  1. any advertisement which states that consumption of the alcoholic beverage will enhance athletic prowess, performance at athletic activities or events, health or conditioning; and

  2. any advertisement that depicts any individual (famous athlete or otherwise) consuming or about to consume an alcoholic beverage prior to or during an athletic activity or event. 

Conversely, as long as the advertising does not contravene the aforementioned principles and examples, the ATF would deem acceptable advertising that included

  1. depictions of or references to athletes, whether in motion or not and whether in uniform or not,

  2. team logos, or

  3. schedules of athletic events. 

Nevertheless, the ATF stated that it would review all alcohol advertising depicting athletes and athletic events on a case by case basis when enforcing the provisions of the FAA.

Broadcast Network Guidelines

Historically, broadcast networks’ advertising guidelines also prohibited the use of active athletes in advertisements broadcast on such networks; however, these guidelines relaxed such prohibitions over the years.

For example, according to ABC’s June 1996 Advertising Standard and Guidelines, the network found beer advertising that included “current professional athletes or actors representing such persons” to be unacceptable; the same prohibition was in place in ABC’s July 2002 Guidelines as well, although it then allowed for an exception for the use of current professional athletes or actors representing such persons in responsible drinking messages where there is no product promotion.

However, that changed the next year, as ABC’s October 2003 Guidelines allowed advertising depicting current professional athletes or actors representing such athletes (but such advertisements would have to be reviewed on a case-by-case basis).16  ABC’s most current Guidelines (from 2016) contain the same language.17

Similarly, NBC’s Advertising Standards from 1993 stated that “Active professional athletes or prominent amateur athletes may not be depicted” in alcoholic product advertising (although NBC would consider, on a case by case basis, the appearance of an athlete in alcohol moderation messaging.)18  However, NBC Universal’s current 2019 Advertising Guidelines no longer have such prohibitions and seemingly allow the use of current athletes, but state that advertising that portrays a professional or amateur athlete promoting alcohol before or during their participation in an athletic event is unacceptable.19

Beer Institute Advertising/Marketing Code

Perhaps unsurprisingly, the self-regulatory guidelines for the beer industry, the Beer Institute’s Advertising/Marketing Code (the Code), has not traditionally included a prohibition on using athletes (whether active or not) in beer advertising; but as far back as 1997, the Code has consistently stated that beer advertising and marketing materials should not contain claims or representations that individuals cannot obtain social, professional, or athletic success or status without beer consumption - which arguably might be suggested by an athlete’s appearance in marketing materials (depending on how the athlete is portrayed).20 

The most relevant change in the Code affecting athletes was the addition of language in the 2015 version with respect to the age of models and actors in advertising.  The Code has historically stated that models and actors employed to appear in beer advertising and marketing materials should be a minimum of 25 years old and should reasonably appear to be of legal drinking age – but in 2015, the Code added language noting that the 25-year-old restriction no longer applies to generally recognizable athletes, entertainers and other celebrities who are, and appear to be, of legal drinking age.21

Considerations for Marketing Opportunities Moving Forward

The constant theme with respect to the concerns about using active athletes is the promotion of alcoholic beverages as enhancing or causing athletic prowess or personal success (which includes the use of beer contributing to the athlete's athletic achievements).  With that in mind, team sports leagues (and, more importantly, the beer marketers) should in the author’s view take the following into consideration when allowing the use active athletes in uniform in beer marketing as such considerations are based on the Code-based guidelines:

  • The active athlete should not be shown consuming the product in the advertisement, or at least not consuming the product prior to or during an athletic event.

  • The beer advertising featuring an active athlete should not state or imply that consumption of beer will enhance athletic prowess, performance at athletic activities or events, health, or conditioning.

  • Active athletes should not make direct endorsements of the beer products themselves.

  • The advertisement should not portray beer drinking before or during any activities that require a high degree of alertness or coordination (whether that is playing the sport or otherwise).

  • While use of active athletes between the ages of 21 and 25 is now acceptable per the Beer Institute Advertising/Marketing Code, avoiding the use of rookies or other young players is recommended (as they may appeal more to persons below the legal drinking age).

  • Avoid giveaways/promotional items (e.g. bobbleheads) or child size/small adult apparel featuring the active athlete where the beer sponsor’s brand/logo is used.

  • If a brewer signs an active athlete as an endorser and wants to use the athlete’s social media channels for marketing purposes, it should determine whether the athlete’s social media followers are 71.6% above legal drinking age.

Sponsorships from CBD Brands

Opening the Door

The Agricultural Improvement Act of 2018(commonly known as the 2018 Farm Bill),22 among other things, amended the Controlled Substances Act to remove hemp-derived CBD – a popular additive in wellness products because it is said to have calming and pain relieving effects.23 Hemp-derived CBD contains only trace amounts of THC, the chemical compound in marijuana that provides psychoactive effects and which is still illegal under federal law.24 However, even though hemp-derived CBD is legal under federal law, the sale and use of hemp-derived products is heavily regulated: the federal agencies that regulate the distribution and advertising of consumer products, such as the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC), will also regulate CBD products.25 Indeed, both the FDA (which has not given blanket approval for CBD products) and the FTC have issued warning letters26 to companies making CBD products, with the former challenging the safety of such products and the latter challenging the marketing of the products’ benefits.

Even though there is a great deal of uncertainty as to both the efficacy and the legality of CBD products, the CBD industry is predicted to become a multi-billion dollar business27 and several major U.S. retailers, including American Eagle Outfitters, Abercrombie & Fitch, Walgreens, CVS, GNC, and Ulta Beauty, have already introduced CBD products to their stores in several states.28

With that, several CBD companies are trying to bring their products to professional sports – and are using sponsorships and endorsements to do so. For example: Defy, a CBD product company co-founded by NFL hall-of-famer Terrell Davis, recently signed John Isner to an endorsement deal, thereby making him the first professional tennis player to endorse a CBD product;29 Abacus Health Partners, the makers of the CBDMEDIC topical products, recently signed former NFL All-Pro and three-time Super Bowl champion Rob Gronkowski as an endorser;30 cbdMD partnered with golfer Bubba Watson,31 who will endorse their line of CBD products that include hemp-extracts, gummies, and topicals;32 and Aurora Cannabis partnered with Ultimate Fighting Championship (UFC) in a long-term deal that aims to advance research on the relationship between CBD products and athlete wellness and recovery33 and also makes Aurora’s ROAR Sports brand the official CBD product of UFC.34

Considerations for Marketing Opportunities Moving Forward

The CBD category is a great revenue opportunity for sports leagues, teams, and organizing bodies but also poses unique challenges. Unlike traditional consumer package goods brands, CBD companies face many hurdles in marketing their products.35 This extends to marketing in the sports space as well.

Because the FDA will not provide blanket approval for CBD products but rather will evaluate them on a case by case basis and because the FTC is carefully watching any advertising claims being made about CBD products, the category is in a state of regulatory flux. Additionally, although both the World Anti-Doping Agency and the United States Anti-Doping Agency removed CBD from their banned substances lists,36 the NFL, the NBA, and Major League Baseball still currently prohibit CBD use.37 Moreover, CBD companies will have to convince team sports properties to get over the stigma of being associated with cannabis-adjacent products, which may not be an easy task.38 As such, it is unlikely that team sports organizations will embrace the CBD sponsorship category yet – at least not until CBD products gain widespread approval from the FDA and CBD use is allowed for team sport athletes.39

* * * * *

Although each of these categories present potentially significant revenue generators, leagues, teams, and organizing bodies have to balance the risks and the rewards of accepting sponsorships in such categories and address circumstances where these sponsorships result in marketing that may not appeal to all of the sport’s fan base.

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Author

Christopher Chase

Christopher Chase

Partner, Frankfurt Kurnit Klein & Selz

Christopher Chase, a founder of the firm’s Sports Industry Group, is an intellectual property and transactional attorney for the marketing and entertainment industries, with a specific focus on the sports and event sectors.

Chris routinely counsels major sports leagues, teams, and governing bodies on intellectual property, branded entertainment, and promotional matters; advises both sponsors and properties on the structure and negotiation of sponsorship and endorsement arrangements; counsels agency clients that activate sponsors’ marketing campaigns (including for major events such as the Super Bowl, World Cup, and the Olympics); advises major sports apparel, footwear and fitness companies on marketing campaigns and intellectual property matters; and advises high profile athletes on their on-field and off the field activities, including endorsements, appearances, film and TV production, trademark development, brand protection, and transfer agreements within Major League Soccer.

Chris also has a strong knowledge of Major League Soccer and National Women’s Soccer League rules and regulations and has assisted with player transfers, sponsorships, endorsements, and investment and ownership advice.

A frequent speaker and prolific writer, Chris has been a go-to source on several sports industry topics for a number of significant media platforms, including Sports Business Journal, the Associated Press, USA Today, Washington Post, New York Times, Chicago Tribune, L.A Times, and Fox Business.

Within the broader advertising and entertainment industries, Chris counsels entities and individuals in the advertising and entertainment industries on all aspects of their businesses, including rights clearance (such as copyright, trademark, and rights of publicity), regulatory matters, and risk assessment. He structures and negotiates creative services agreements, commercial production agreements, brand and celebrity licensing agreements, sponsorship and event promotion agreements, celebrity talent and on-camera agreements, content distribution agreements, media agreements, and content releases and licenses. He also counsels clients regarding potential and actual litigations arising out of commercials, print advertisements, sweepstakes, contests, and other promotions, magazines, films, television productions, and websites. Further, he has vast experience addressing music issues, including structuring and negotiating master use and sync licenses for commercials, video games, television productions, and films, music distribution agreements, artist/band services, appearance, and promotion agreements, and concert sponsorships.

Chris began his career as a litigator at Clifford Chance Rogers + Wells.

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