Three academics have authored “Fraud on Any Market” that will appear in an upcoming Indiana Law Review, that argues that the standards of “fraud on the market” that applies to the stock market should be extended to sports betting when cheating is found.
The authors are John Holden of Oklahoma State University, Gregory Day of the University of Georgia and Brian Mills of the University of Texas at Austin. According to Holden, “The idea is that the stock price encompasses all available information. If the company does something to hide or inflate the stock price by not disclosing something, or attempting to conceal it, that’s the fraud. You’re withholding that information and it will have an effect on the price on the market.”
One of the more compelling arguments used for many years against sports betting is that if cheating happens, bettors are the victims more than anyone else.
In the Review article the authors argue: “If gamblers could plead fraud-on-the-market, we argue that it would counterintuitively enhance sports integrity and recognize that the same injuries affecting securities plague other investable markets. This is because both securities fraud and sports cheating create an identical problem where misinformation distorts prices.”
The article continues, “As it stands, outside of protecting the so-called and oft-cited ‘integrity of the game,’ sports leagues have little incentive to ferret out cheating. But if they knew they could be held liable … well, ‘hot foot’ practical joke-playing baseball players wouldn’t be the only gumshoes lurking about.”
The professors say that allowing bettors to sue leagues in such instances just as those who lose money on the stock market through insider-trading violations are able to sue. This would then require the leagues to police their own organizations.
The paper concludes: “Our argument recognizes the inequity of denying sports bettors and DFS users a remedy. Whereas the leagues had traditionally benefited from gambling indirectly, today, the NFL, NHL, MLB, and NBA have partnered with DFS and other gambling industry companies. Since the leagues benefit directly from gambling, and lucratively so, they should owe their fans a truly competitive landscape.”
