Sports Betting Raises Legal Concerns for Employers

​With March Madness coming soon and sports gambling now legal in the majority of states, employers need to be aware of the legal ramifications of office betting pools—and the potential loss of productivity as employees keep up with the progress of this year's National Collegiate Athletic Association (NCAA) Division I college basketball tournament.

"While it is unlikely that law enforcement cares about an office NCAA bracket, the company should still understand the potential legal risks associated with offering an office pool," said Karl Rutledge, an attorney with Lewis Roca in Las Vegas.

Office pools are potentially unlawful, depending on the employer's location and the design of the activity. Maintaining a written company policy on gambling can be helpful to prevent violations of the law.

"A written company policy is a best practice, and many employers simply say, 'No betting' and have reasonable discipline for violations," said Joseph Valenti, an attorney with Saul Ewing in Pittsburgh.

Such a policy "may include setting forth considerations in terms of who can participate, the use of company computers and other company resources to participate in the pool, as well as ensuring that the pool does not interfere with an employee's work time," Rutledge said. "The policy may also want to address potential ramifications if the policy is violated, how complaints can be filed and even require approval from HR before the pool is launched."

Some companies are concerned about loss of productivity, especially because websites and apps now make it so easy for employees to follow basketball games and gamble.

"It is certainly more challenging now than ever before for employers to effectively prevent gambling during work time, given that a number of states now have legal online sports gambling," said Nandini Sane, an attorney with Cozen O'Connor in Houston. "A well-crafted Internet use policy and a workplace gambling policy, as well as closely monitoring employee productivity, may help employers curb the negative effects of gambling in the workplace."

HR may get roped in to referee if arguments about the office betting pool get heated.

"Placing bets with a licensed sportsbook, using an app in private during the workday, is less of a concern than office pools where employees could be engaging with each other, taking each other's money, making hostile comments or getting into arguments," Valenti said.

With a large number of employees now working remotely, it's more difficult for employers to enforce their gambling policies. However, "many company IT departments can block gambling websites from being accessed with work resources, even if employees log in remotely," Valenti said. "What people do on their own devices or outside of work e-mail [systems] is far less likely to be imputed to the employer."

Some workers may oppose sports gambling for religious reasons or because they have had a gambling addiction. Employers should be aware of this, and "[p]articipation in these office pools should be strictly voluntary" as a result, Sane said.

Follow State Laws

The legality of office betting pools varies by jurisdiction. Sports betting is authorized in at least 33 states, Washington, D.C., and Puerto Rico, according to the National Conference of State Legislatures.

Some states allow in-person betting but not online betting. Even in states that have legalized online sports gambling, it might be limited to licensed casinos, Rutledge said.

"There are states that make an exception for social gambling … where no one receives a profit for running the event, and the individuals participating in the pool had a social relationship prior to entering the pool," he said. "There are restrictions on how such pools can be conducted. For example, some states may have limitations on how much prize money can be awarded in such a pool."

Alternative Options

Companies could explore alternatives to a traditional betting pool. An office pool is less likely to run afoul of state laws if prizes are nonmonetary or there is no entry fee.   

"If a company wants to create a morale booster or a way to follow sports, it can have optional participation in a bracket challenge or the like where employees don't pay any fee but could win prizes paid for by the company," Valenti said.

Sane noted that legal issues usually can be avoided if you keep money out of the pools, so you should consider offering nonmonetary prizes, such as time off work, lunch for the team or other work-related benefits.