Fan engagement is a vital aspect of the sports and esports industries, as organizations strive to strengthen their relationships with fans and provide unique experiences that bring them closer to the action. Thanks to the advancements in artificial intelligence, fan engagement has reached new heights, revolutionizing the way sports buffs interact with their favorite teams and athletes. Part of this more interactive fan experience can be attributed to AI’s provision of resources and opportunities to expand wagering on sporting events through more dynamic, predictive, and tailored betting experiences. However, with these technological advancements come significant legal implications that businesses must navigate with care. These issues span data protection and privacy, licensing, intellectual property rights, regulatory compliance, and responsible gaming.

Still, these challenges should not be allowed to overshadow the positive contributions AI will continue to make to the enjoyment of our favorite sports and pastimes. An experienced Web3 attorney can assist sports and esports businesses in protecting themselves from criminal and civil threats while implementing intriguing AI technologies into their game plans:

Real-Time Footage

AI can enhance fan interaction through the analysis of real-time game footage. AI algorithms empower fans, coaches, opponents, and players to evaluate every play to glean detailed insights and statistics while games are being played. This level of interactivity not only fosters a sense of involvement but also creates a deeper connection between fans and the game. With access to instant feedback, fans can better understand the strategies employed and appreciate the skill and athleticism displayed on the field or in the virtual arena.

Generative AI-programmed interactive chatbots have become increasingly popular in engaging with fans. These chatbots provide insider information on upcoming events, answer frequently asked questions, and even engage in light-hearted trash talk. By offering this personalized and interactive experience, organizations can strengthen their relationships with fans and create a sense of community.

Customized Experiences

AI has proven adept at collecting and categorizing data volunteered in fan surveys and interactions with platforms and sports organization websites to customize offers and activities for each user. Teams can use this information to target ticket sales, bundle game-and-food packages, offer getaways to road contests, and make other overtures that show fans that they are appreciated. Mass customization of marketing efforts made possible through the power of AI rewards loyalty and maximizes each fan’s lifetime value to the organization.

As an example, the Los Angeles Dodgers use AI-powered systems within the stadium to assist fans in finding their seats, providing directions to restrooms, food vendors, souvenir shops, and other amenities, and pointing out the best spots for photos. By removing the barriers associated with navigating a large venue, fans can focus on enjoying the game and immersing themselves in the atmosphere.

Other organizations are exploring AI facial recognition technology to ease the stadium entry process and aid in security and crowd control. This application, of course, raises thorny privacy concerns which we will address below.

Gambling

AI technology has added a new dimension of excitement for both punters and bookmakers. This enhancement of the betting experience is achieved through AI’s ability to analyze complex data in real time, providing valuable trend analysis that contributes to more informed decision-making.

This is particularly apparent in in-game betting. Utilizing advanced camera systems and player tracking technology, AI can identify subtle cues and movements that might otherwise go unnoticed. These insights offer a deeper understanding of game strategies and performance levels. For bookmakers, this translates to the ability to offer more accurate odds, thus enhancing the credibility of their platforms. For bettors, this means they can incorporate more perfect information when contemplating betting decisions, increasing the possibility of successful wagers, and adding an extra layer of thrill to the game.

As exciting as these developments are, AI advances in betting and fan inclusion in sports and esports also raise important legal issues for both sports and esports. By embracing the benefits of AI while performing due diligence to safeguard the rights of players and fans while protecting their own and others’ intellectual property, organizations can enhance the excitement of fandom and maintain fairness.

Data Protection and Privacy

AI systems used to enhance the fan experience, especially those used in betting and marketing customization platforms, amass extensive volumes of personal and behavioral data. This data spans a wide range, including demographics, financial details, betting history, purchase preferences, and more. While this information helps streamline processes and provides more complete and accurate information for gamblers and fans, the processing of such data introduces substantial privacy and data protection challenges.

Whether as a result of intentional or unintentional programming processes, biased training data, or human manipulation of AI output, the availability of all this personal information opens the possibility that it could be misused for criminal, fraudulent, or unethical intent:

• Invasive Advertising: Parsing personal data to create detailed user profiles used for directing advertising tailored to the recipient’s interests, which could be perceived as intrusive.
• Unconsented Data Sharing: Personal and biological information collected by AI might be sold or traded to third parties without the owner’s knowledge – a direct violation of privacy rights.
• Discrimination: AI algorithms trained on biased data can perpetuate and amplify these biases by favoring certain demographic groups in ticketing and other promotions.
• Identity Theft and Fraud: If not properly secured, data could be stolen and used to hack into users’ accounts, make unauthorized purchases, and raid bank accounts.

Licensing and Intellectual Property Rights

Intellectual property rights in esports encompass a variety of content. Unauthorized use of this copyrighted, trademarked, and patented content such as game footage, player images, and team logos can lead to infringement claims that bring severe legal and financial consequences. When AI systems generate new content or insights, questions regarding intellectual property ownership may arise. It’s crucial that businesses respect these rights by obtaining necessary permissions before using copyrighted content. Familiarity with applicable intellectual property laws is also key to avoiding legal pitfalls.

AI tools used in sports and esports betting often necessitate licenses from vendors. Non-compliance with these licensing agreements can trigger legal disputes and hefty penalties. Betting, memorabilia, and promotional events piggybacking on sporting events, team popularity, or the use of certain data for AI analysis may require specific licenses from sports leagues or individual teams. The unwillingness to pay for or the inability to obtain these rights is why Las Vegas casinos host “Big Game” watch parties in early February when the NFL championship is decided.

Contractual agreements serve as the backbone of relationships between stakeholders in both sports betting and esports. Licensing game content for esports events and partnering with AI vendors for sports betting platforms necessitates contractual terms that address liability, intellectual property ownership, and data protection. These agreements establish a framework that safeguards the rights and interests of all parties involved. The esports industry, in particular, introduces unique dynamics. The use of virtual assets such as in-game items and skins brings intellectual property rights into play. Navigating the intricate landscape of these rights is vital for esports organizations to protect their proprietary assets and ensure legal compliance.

Regulatory Compliance

Sports- and esports-related businesses must be diligent in complying with the laws and regulations of the jurisdictions in which they operate. Incorporating AI into their business models adds a layer of complexity as governments often cast a wary eye toward the technology and its potential for opening the playing field to cheating, fraud, compulsive gambling, money laundering, and other chicanery.

Globally, regulatory bodies are striving to keep abreast of rapid developments in AI. In the context of sports and esports betting, non-compliance with regulations can lead to hefty fines, license revocation, and significant reputational damage. Only a handful of states in the US permit esports betting, and it is subject to strict licensing and regulation where it is legal. The Federal Trade Commission (FTC) has provided guidelines to prevent unfair or deceptive trade practices related to AI use.

To navigate these complexities, businesses should implement regular reviews of their licensing agreements, intellectual property practices, and jurisdictional permits to ensure ongoing compliance and help identify potential areas of concern early on. They also should adhere to anti-money laundering and know your customer (AML/KYC) best practices that will help them prevent, identify, curtail, and prosecute illegal betting activity, attempted fraud, and match-fixing/point shaving to maintain the integrity of the games.

Responsible Gaming

The importance of practices aimed at preventing and mitigating the potential harms associated with compulsive and underage gambling is magnified when bookmakers incorporate AI into their marketing and odds-making due to concerns that the technology could encourage excessive gambling through personalized marketing and predictive analytics.

AI’s ability to analyze a player’s behavior, tendencies, and preferences in order to deliver targeted promotional messages personalizes user engagement and experience, it may inadvertently lead to problematic gambling behavior. The personalization capabilities of AI can create an environment where players are enticed to bet more frequently or on a larger scale than they otherwise would, thus potentially fostering addictive behavior.

Furthermore, inflated confidence in the power of AI’s predictive analytics to predict outcomes can give players an irrational sense of control or certainty over their betting choices. This perceived predictability of outcomes can lead to an escalation in gambling activity as players allow themselves to be seduced by a “sure win.” This illusion of control can further exacerbate problem gambling-related financial stress.

Safeguards

Sports and esports businesses can rely on an attorney specializing in AI to formulate a business plan compliant with all laws and regulations while ensuring a pleasurable fan experience. A Web3 lawyer with experience in AI, video games, and IP rights will ensure the company adopts stringent user agreements and terms of service, obtains consent to collect and use fan data, properly licenses any third-party IP it uses, implements responsible gaming measures, and adheres to fair and unintrusive marketing practices.

Gamma Law is a San Francisco-based Web3 firm supporting select clients in complex and cutting-edge business sectors. We provide our clients with the legal counsel and representation they need to succeed in dynamic business environments, push the boundaries of innovation, and achieve their business objectives, both in the U.S. and internationally. Contact us today to discuss your business needs.