‘Social sportsbook’ apps are luring young fans — and raising alarms

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In the days leading up to kickoff, users of Fliff, a popular mobile gaming app, placed more than 200,000 “bets” on last month’s NFL conference championship games. They bet on Patrick Mahomes throwing for at least 240 yards, on Christian McCaffrey scoring the first touchdown and on the usual array of money line, point spread and over-under offerings.

They did it, in many cases, without verifying their age or even spending a dollar.

That’s because Fliff is not a traditional online sportsbook. It’s a “social sportsbook,” and a pillar of its business model involves users making bets with “virtual currency.” That has enabled Fliff and apps like it to operate with little interference from state or federal authorities that regulate sports betting despite being marketed in some places as “suitable for ages 13 and up” and easily downloaded by even younger users.

The apps, advocates warn, can essentially groom underage people, training them to gamble at ages when they are more susceptible to addiction. And though the apps are mostly played using virtual money, Fliff and some like it allow users to make in-app purchases with a credit card and wager actual money. Fliff claims it functions as a legal sweepstakes contest, not a sports-betting enterprise, a distinction that troubles many stakeholders in the industry.

“The people who have gambling problems, who are vulnerable to gambling problems and especially youth, can develop gambling problems based on usage of these apps,” said Keith Whyte, executive director of the National Council on Problem Gambling.

Fliff launched in 2019, shortly after the Supreme Court struck down the federal law that banned sports wagering in most of the United States. As gambling operators rushed to market and as state regulators focused their attention on traditional sportsbooks, quasi-gambling companies sprang up in their shadows. They include social sportsbooks such as Fliff and daily fantasy apps including Underdog Fantasy, Dabble and PrizePicks, which say they are sweepstakes contests or fantasy games, not subject to the regulatory or cost hurdles faced by sportsbooks.

Unlike online sportsbooks, these apps can take money from users in states where sports betting is illegal, including Texas and California. And in states where it is legal, these platforms avoid taxes levied on gambling revenue, which sometimes top 50 percent.

In an interview, Fliff CEO Matt Ricci stressed that most players never deposit real money and that users must be at least 18 to make those deposits. His company is not trying to sidestep rules, he said. He called it an “introductory tool” and said it’s especially popular among people who are curious about sports gambling.

“We wanted to build kind of like a virtual sportsbook experience,” he said. “We wanted the product to have kind of the look and feel of a sportsbook but just to do it with the virtual currency in a lot lower-stakes and free-to-play format.”

But experts say young people are particularly susceptible to problem gambling and advertising that is now commonplace on sports broadcasts and elsewhere. Young users spending real money could be dangerous, but problem gambling advocates said they’re equally worried about the potential for future gambling problems.

“There’s a reason there’s not candy cigarettes anymore, right? And there’s a reason nobody gives kids [nonalcoholic] beer,” said Amanda Winters, problem gambling administrator with the North Carolina Problem Gambling Program. “But that’s exactly what we’re doing with some of these activities.”

Sports gambling is now legal in 38 states and D.C. While regulations vary from state to state, most include firm safeguards to protect against underage gambling, levying heavy fines on operators who run afoul of the law. The minimum age to bet on sports is 21 in all but five of the states where it’s legal. It’s 18 in the others.

But there are no restrictions on who can download Fliff or apps like it.

“What a lot of these social gaming — social casinos, social sportsbooks — have found is that the regulators … either don’t feel like they have the jurisdiction or the time or energy to go after every single app that springs up,” Whyte said.

Cesar Fernandez, FanDuel’s head of state government relations, publicly called out these operators at a conference last summer. “There are companies today posing as fantasy sports operators, and they are running illegal sportsbooks,” he said, according to reports.

Some states have started cracking down. At least eight have sent cease-and-desist letters in recent months to daily fantasy operators such as PrizePicks and Underdog Fantasy, whose contests bear strong resemblance to parlay betting. Users predict how several athletes will perform If the user hits on all the picks, they pocket a cash prize.

“Your business purports to offer fantasy sports contests,” the Wyoming Gaming Commission wrote the operators in July, as first reported by Legal Sports Report, “but, in reality, the offering appears to fall under the exact definition of ‘sports wagering.’ ”

PrizePicks is still the top-downloaded free sports app in Apple’s App Store, and Underdog Fantasy is No. 6. Eight of the top 10 sports apps are gambling-related.

Regulators in Maine levied a $392,000 fine in October against Underdog Fantasy for offering unlicensed sports betting in the state, and Michigan sent a cease-and-desist letter to PredictionStrike, which bills itself as a stock market for fantasy sports.

“We do not want businesses who skirt the law having access to Michigan citizens and leaving them … with no recourse,” Henry Williams, executive director of the Michigan Gaming Control Board, said in a statement. Especially, he added, when those businesses “siphon funds away from communities because they are not paying taxes like a regulated, legal gambling establishment.”

But the apps are still operating, fueling fear among industry stakeholders and advocates that underage people will learn the basics of sports betting on a free-to-use gaming app and then graduate to higher stakes.

“This is the type of activity that can absolutely … be potentially harmful,” said Brett Abarbanel, executive director of UNLV’s International Gaming Institute. “It might not be for everybody, but there will absolutely be people, especially youth, who transition especially into real money gambling.”

Fliff’s growing influence

Fliff had 1.4 million downloads last year — 101 percent year-to-year growth, according to Apptopia, an analytics and research firm. It’s the 12th-most-popular sports app in Apple’s App Store, ahead of familiar sports brands including the NFL, MLB, Caesars Sportsbook and the Athletic. It has more than 100,000 downloads in the Google Play Store, where it has a “Teen” rating, meaning it is “generally suitable for ages 13 and up.”

Signing up is, by design, relatively easy. After downloading the app, users need only fill in a few fields and then click a box certifying they are at least 18. No ID or age verification is required.

The app functions just like a sportsbook, only with “virtual currency.” Ricci said it is technically a sweepstakes contest because no purchase is necessary to play and because users can exchange their virtual winnings for real cash prizes, unlike a traditional sportsbook, which is a simple cash transaction. Those who choose to deposit money and make wagers using “Fliff Cash” can withdraw winnings after they have accrued at least $50.

The majority of users, Ricci said, opt to play with virtual currency.

“DraftKings or FanDuel, I would say they’re going after more of like the core sports bettor kind of person,” he said. “That’s their market. … Most of our users don’t spend any money at all. But then even among the users that do spend money, they’re on average spending, you know, multiples less than they would [on other platforms].”

If Fliff users choose to deposit or withdraw money, Fliff asks for slightly more information, including a birth date and the last four digits of a Social Security number. And before they can cash out, users are required to submit a live photo of their ID, along with a video selfie. Ricci said the company’s know-your-customer protocols go beyond what is required of a sweepstakes game.

“We didn’t have it initially,” he said. “But I think what we saw is that we didn’t realize a kid may want to use their parents’ ID card and stuff like that.”

Fliff, headquartered in Pennsylvania, is available in 45 states, including many that have not widely legalized sports wagering. The platform looks similar to those of traditional sportsbooks that are licensed by states, providing updated odds, in-game betting possibilities and the option to easily move between gambling with virtual currency to making wagers with real money.

“I would definitely say that this is very much a point of confusion for consumers,” UNLV’s Abarbanel said. “And that is something that should be of interest to a gambling regulatory body.”

While Fliff is seeing a surge of recent activity, there are other social sportsbooks available, including Betr, SharpSide and ParlayPlay. Betr, which specializes in in-game betting, has a free-to-play version available in 48 states and functions as a traditional sportsbook in Ohio, Massachusetts and Virginia.

Last year, Fliff was subject to a federal class-action lawsuit that alleges it skirts state laws and misleads consumers and regulators alike by calling itself a sweepstakes or a social casino. “In the real world, alleged sports prediction games are nothing more than online sports gambling,” the complaint alleged. The lawsuit was filed in California, where sports betting is still outlawed.

“We believe they are operating illegally under California law,” said Abou Amara Jr., the attorney who filed the proposed class-action case. “Part of that is through calling it a sweepstakes. As we say in the complaint, you can call it a sweepstakes, but it functions akin to sportsbook.”

The case was moved to arbitration by a federal judge. Meanwhile, Fliff has caught the attention of industry leaders who track and encourage responsible gambling. A spokesperson for the Ohio Casino Control Commission said it contacted Fliff last year and “provided information on Ohio’s laws and regulations for fantasy contests and sports gaming.”

According to Securities and Exchange Commission filings, Fliff raised $15 million in investments in August 2022, and its known investors are active in the gambling space. They include Raine, EKG Ventures and Courtside Ventures.

Ricci said the company has no designs on someday becoming a licensed sportsbook.

“Not to say that we would never do that,” he said, “but I think we want to try to stick to what makes us different.”

The rise of ‘social casinos’

The app’s rising popularity comes as “social casinos” have seen increased scrutiny. In 2018, a federal appeals court ruled Big Fish Games, which invited users to wager virtual currency to play casino games such as blackjack, roulette and slots, constituted illegal online gambling and violated state law in Washington. The judge found Big Fish Casino’s virtual chips are a “thing of value.” Two years later, a judge approved a settlement in which Big Fish Games agreed to pay $155 million to users.

“It can be misleading when you play social casino games because they think that if they keep winning virtual coins that that habit or those skills can be transferred to actual gambling, which is not the case,” said Paul Andrew Gorgonio, an adjunct professor at Golden Gate University who co-wrote a recent study on the gambling intentions of social casino game players. “That’s why they tend to lose a lot of money when they move to actual gambling.”

There has been a push for more research, but studies suggest young people are particularly susceptible to sports gambling and social casinos. A survey of Canadian adolescents found more than 12 percent had played a social casino game, and other studies have found adults and adolescents who play social casino games are more likely to engage in traditional forms of gambling later. While social casinos market themselves as free to play, most encourage users to pay for upgrades or to use real money to purchase virtual currency.

“Many researchers, through their research and through understanding the mechanics behind some of these social games, they do see them as primers,” said Alison Wood-Drain, youth prevention coordinator at the North Carolina Problem Gambling Program. “Also, if you look at the industry, the gaming and gambling markets have not just confirmed but converged. And it’s like this ecosystem of marketing and advertising and business interests.”

Researchers such as Gorgiono believe social casino advertisements “glamorize and normalize” gambling. Some jurisdictions have tried to clamp down; lawmakers in New York, New Jersey and Massachusetts proposed new regulations in recent months. But so far there is little regulation for social casino advertising.

Fliff’s Ricci acknowledged a key part of its audience is people who are trying to learn the ropes of sports betting. But, he said, the company doesn’t actively try to recruit underage users and is aware of the risks of problem gambling, particularly among young people.

“It’s not like we’ve never thought about it before,” he said. “Another thing to note is that we aren’t the only company that’s offering any form of sports gaming to somebody that’s 18. DraftKings and FanDuel both have fantasy sports products, and they offer those to everybody that’s 18 as well. For us, we would rather have them playing on Fliff where they don’t actually have to spend money.”

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