Legalized Gambling: What Employers Need to Know

Employers throughout the country are facing new challenges because of many states’ efforts to legalize conduct previously prohibited by criminal law. While this conduct has long been illegal, the changes to state law mean employers must now confront the intersection of what is now legal and permissible behavior with impacts on work performance. No, we aren’t talking about the legalization of medicinal or recreational cannabis. Instead, we’re talking about the widespread legalization of sports gambling.  

As of September 7, 2023, 35 states and the District of Columbia have legalized sports gambling, with 3 additional states to come soon. While employers have spent countless hours becoming acquainted with the myriad decisions and policy considerations related to cannabis, there has been a shortage of discussion regarding the risks associated with gambling. Employers should therefore act now to avoid these issues before the risks materialize.

The Risks of Employee Gambling to Employers

While many individuals can engage in gambling responsibly, the widespread nature of sports gambling coupled with the ease of accessing sports gambling from one’s phone or computer means employers are more likely to run into problems. There are several potential risks associated with the prevalence of gambling. Namely, employees who have a gambling problem may create a threat to their employer’s finances. While most employees who are under personal financial pressure won’t steal from their employer, the risk of embezzlement shouldn’t be ignored. This risk is a good reminder for employers that may need to give more attention to their financial controls to revisit such processes and ensure structural and procedural protections are in place to prevent employees from having unfettered access to company funds.

As mentioned above, most employees will refrain from resorting to theft. However, individual gambling debts could lead those in decision-making positions to put personal interests ahead of the best interests of their employer. Specifically, one could easily imagine how a short-term cash grab or a distribution to key executives would better serve an individual than the employer. This type of challenge is harder to guard against than a direct threat that improved financial controls can protect. However, employers can take steps to guard against this risk by keeping an eye out for irregular or erratic behavior and, where feasible, ensuring multiple executives need to approve changes of this nature.  

Though not on the same level in terms of risk, sports gambling can undoubtedly lead to inefficiencies in the workplace and lost time. Sports betting applications are designed to make sports betting fun and effortless. Like other social media applications, it’s easy for individuals to lose track of time when on them. Additionally, with many sporting events taking place during the traditional workday, it’s likely employees engaged in sports betting will want to spend working time gambling, opening these applications frequently to update their bets based on new information. With many sporting events occurring during the traditional workday, employees engaged in sports betting will likely want to spend time gambling during working hours. To mitigate this risk, specific gambling websites can be blocked on employers’ servers.

Employment Policy Considerations

Beyond tightening up the previously referenced practices, employers should also consider adding a gambling policy to their employee handbook. While such a general policy will most likely be limited, it can restrict conduct during work hours and the use of company equipment to engage in such conduct. In drafting such a policy, employers should carefully consider the differences between gambling problems and things like office pools and fantasy sports leagues that enhance employee engagement. 

One way for an employer to distinguish between employer-sponsored activities and gambling would be to avoid entry fees and monetary prizes in sanctioned activities. The avoidance of money in employer-sponsored activities will not only draw this distinction but also keep the employer compliant with applicable laws. Furthermore, an employment policy on gambling should also provide resources for employees who need them. While this may be as simple as a reference to an employee assistance plan for some employers, it may also include a listing of available resources.

In conclusion, with the rise of legalized gambling and its presence online, employers should assess how this may impact their operations. Along these lines, it’s always a good idea to regularly review financial controls and the decision-making process for critical financial decisions to ensure they are independent and in the employer’s best interest. Employers can take more proactive steps by preparing a policy to provide guidelines to employees, as well as ensuring employee engagement initiatives are compliant and consistent with their policies.  

Russell Berger is a principal with Offit Kurman in Columbia, Maryland. He can be reached at rberger@offitkurman.com.

Sarah Sawyer is a principal with the firm in Baltimore. She can be reached at sarah.sawyer@offitkurman.com.

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