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[toc]With football season quickly approaching, sports gaming apps are queuing up once again for fans’ second-screen attention.

In-game options for consumer engagement won’t just stop at daily fantasy sports products offered by the likes of DraftKings and FanDuel.

They’ll also include games like the Chicago-based app Bait, which aims to offer viewers and fans something closer to a traditional wagering experience.

How it works

Bait is a sports betting platform for iOS that will allow users to bet on spreads of games across a variety of sports. It syncs with your phone’s contacts, identifying other Bait users who might want to take the opposite side of a bet.

For example, say you’re a Carolina Panthers fan who thinks your team will cover the minus-3 spread against the Denver Broncos in the season’s opening game, you can make this wager (Bait uses lines from Vegas sportsbooks). You can challenge your buddy to bet the opposite side, that the Broncos will either win or lose by fewer than three points.

As ChicagoInnonotes, Bait wants to provide users with not only a legal betting alternative to DFS, but one that customers feel comfortable engaging in.

It avoids pitting bettors against strangers over the internet, and it steers clear of any sort of unregulated, offshore sportsbook. Furthermore, an app purchasable from recognizable online retailers like the Apple Store could lend an air of legitimacy to the product.

The app is still in beta. Bait founder Ian Peacock said he expects the app to release during the NFL preseason, which begins with the Hall of Fame Game on Aug. 7.

Friends go further

By pairing two bettors up on opposite sides of a bet, Bait functions similar to a betting exchange, likeBetfair, except users who are paired up to bet ostensibly already know one another.

Pairing acquaintances to make bets could go a long way toward furthering this level of comfort, and not just out of a sense of familiarity.

After an underlying game is completed, the app directs users to each other’s Venmo accounts in order to settle up, while offering a unique twist: Losing bettors don’t have to pay up.

If this sounds like a platform rife for abuse and unpaid winnings, there are a few details to consider:

• First, a person could be more likely to pay out in a bet with someone they know as opposed to an anonymous name on the Internet.
• Second, there will be some measure of transparency with Bait. How do you know if your buddy reneges all the time on bets? All users will have a rating that notes when they don’t pay up.
• Third, by eliminating the obligation to pay up, Peacock says the site eliminates users from having to take a risk. Without risk, he says, there is no gambling consideration.

Ads are the new vig

There is another key difference, however, between Bait and a traditional betting exchange. The app doesn’t take a cut, or “vigorish,” that a bookmaker traditionally takes.

According to ChicagoInno, the site will use advertisements to make money instead of monetizing through vig.

While this is an interesting idea, it could prove challenging to pull off.

Research firms estimate mobile advertising click-through rates are generally better for in-app ads than for mobile web ads. Jupiter Research projects nearly $17 billion will be spent on in-app advertising in 2018, up from less than $4 billion in 2013.

Those percentages and revenue figures won’t mean much for Bait, however, if it can’t scale its user base.

Expanding through the tree-map of users’ cell phone contacts is a good start, but that type of exponential expansion can take time, consistency in the marketplace, and can be dependent on a positive user experience.

One app with a similar model is that of WinView Games. It also targets the friend-to-friend betting space and is also fueled by ad revenue. But WinView offers live, in-play prop selections (e.g. “Will Cam Newton throw at least 3 touchdowns today?”) as opposed to spread wagers, and uses its own virtual dollars system rather than real money. It received $3.4 million in venture funding earlier this year.

Peacock says that while Bait is entirely self-funded so far, it is in the process of raising money.

Illinois gaming landscape

Attorney General Lisa Madigan made (perhaps overlooked) headlines late last year, when just hours before Christmas Day she opined that FanDuel and DraftKings illegal gambling sites.

Those parties have been in a court battle ever since, and the gaming landscape for operators in Illinois hasat times felt uncertain.

Bait, though, is not a daily fantasy sports product. It is a sports betting product — one where the “book” doesn’t take a cut and wagers may or may not be paid out.

So does that make it legal?

Section 28-1(a) of the state’s criminal code lists (among many others) three such violations of wagering that theoretically could pertain to the game:

“A person commits gambling when he or she: (1) knowingly plays a game of chance or skill for moneyor other thing of value, unless excepted in subsection (b) of this Section; (2) knowingly makes a wager upon the result of any game, contest, or any political nomination, appointment or election;…. (5) knowingly owns or possesses any book, instrument or apparatus by means of which bets or wagers have been, or are, recorded or registered, or knowingly possesses any money which he has received in the course of a bet or wager.”

One of the many exemptions to subsection A, however, are “games of skill or chance where money or other things of value can be won but no payment or purchase is required to participate.”

Peacock says this exemption ensures Bait’s legality.

To book make, or not to book make

Illinois defines bookmaking as follows:

“A person engages in bookmaking when he or she knowingly receives or accepts more than five bets or wagers upon the result of any trials or contests of skill, speed or power of endurance or upon any lot, chance, casualty, unknown or contingent event whatsoever, which bets or wagers shall be of such size that the total of the amounts of money paid or promised to be paid to the bookmaker on account thereof shall exceed $2,000. Bookmaking is the receiving or accepting of bets or wagers regardless of the form or manner in which the bookmaker records them.”

Bait, it would appear, does not accept or receive wagers. Its software allows two potential bettors to connect. Bait provides the lines, sourcing Las Vegas sportsbooks.

Similar logic, however, did not stop one state supreme court from finding a similar company guilty of bookmaking.

Bet With Friends App

A Washington state-based exchange that also allowed bettors to opt out of bets was found in 2010 to be in violation of state betting law because it operated as a bookmaker. Peacock said the site, Betcha.com, served as inspiration for Bait.

The ruling came despite its lawyers’ insistence that the pairing up of two bettors on a platform did not amount to “accepting” bets.

Familiar federal triumvirate

The federal frameworks governing sports betting are all too familiar: PASPA, the Wire Act and UIEGA.

As one industry source noted, NFL attorney Paul Clement commented during oral arguments earlier this year in the New Jersey sports betting trial that, under the Professional And Amateur Sports Protection Act, which outlaws single-game wagering in all states but Nevada, casual bets between friends of up to $1,000 could potentially be legal.

The same industry source noted that the Wire Act, which prohibits the transmission of betting information across state lines,pertains not only to gambling, but often refers to bookmaking specifically. This reinforces the potential importance of a favorable interpretation of the state’s bookmaking statute.

It’s unclear if Bait, individual bettors, or others would be found in violation of the Unlawful Internet Gambling Enforcement Act, which prohibits payment providers from knowingly accepting funds for unlawful gambling-related transactions.

Bettors on Bait will be prompted to facilitate payments through Venmo. Venmo is a subsidiary of PayPal, which for the past several years has tried its best to identify and stop all NCAA Tournament pool-related payments made using its service every March.

Tracking informal P2P betting

Of little doubt, however, is that betting between friends remains popular.

One in four Super Bowl viewers surveyed earlier this year by the Mellman Group said they’d placed a bet with a friend on a sporting event the past year. One in three said they had bet on the Super Bowl itself at some point.

Casual betting between friends, which likely comprises a significant portion of the $145 billion the American Gaming Associationestimates was wagered illegally in 2015, is also difficult to track. Bait could be among the first apps to help do so.

Even if regulators were to make a case that Bait violated state or federal law, they would likely only do so once the app gained significant exposure and took in sizable amounts of money on bets. That could be a ways off.

Regulators and attorneys general raised claims with DFS operators, for example, in 2015 — nearly a decade after the industry first formed.

Is It Legal To Bet With Friends

One thing remains certain: If Bait establishes itself in the mobile sports gaming space, it could be well-positioned in the event a forthcoming federal, sports betting legalization effort is successful.