Sports betting has been around since ancient times. Over the years, the sports may have changed, but society’s desire to be part of the fun hasn’t.
Everyone wants a piece of the action.
The big problem is that in the majority of the United States, sports betting was illegal.
There are many arguments why it’s illegal. Some of the reasons include:
- Allowing people to bet on games could lead to rigged or fixed games
- Betting and gambling targets lower income people who think of it as an easy way to make money
- Sports betting is a prime target for organized crime.
The conversation about legal sports betting has been reignited by two factors:
First is the ongoing argument of the benefits of it.
Second is a recent decision from the United States Supreme Court (SCOTUS).
Professional and Amateur Sports Protection Act (PASPA)
Before I get into the recent SCOTUS decision, I want to discuss a federal law passed in 1992 known as the Professional and Amateur Sports Protection Act (PASPA) or the Bradley Act.
PASPA was created after a congressional committee studying sports betting determined that “sports gambling is a national problem. The harms it inflicts are felt beyond the borders of those states that sanction it.”
Congress enacted the law, justifying it under Article I, Section 8, Clause 3 of the US Constitution known as the Commerce Clause. The clause states: “The Congress shall have power…to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”.
The Commerce Clause is a logical argument since most teams travel across state lines for their games and so the money used to bet would also.
The law outlawed sports betting in all states with the exceptions of Oregon, Delaware, Montana, and Nevada. They also added a 1-year window for any state that had licensed casino gambling to pass laws allowing sports betting in the previous 10 years, thus exempting the state from PASPA as well.
No state passed a law allowing sports betting in the following year, so everyone was locked into the PASPA.
Murphy v. National Collegiate Athletic Association
The original 1-year window in PASPA was written with New Jersey in mind. Atlantic City is a well-known gambling mecca in the US. Adding sports betting to the available gambling options in the state would is a logical step.
But, they didn’t act.
Over the years, they regretted it, and starting with attempts in 2010, New Jersey looked to finally add sports betting in the state.
The first attempt was when 2 state senators tried to sue the US government on behalf of the State of New Jersey. The court stated they did not have the standing to pursue such a lawsuit.
The next attempt gauged how residents felt about sports betting. A non-binding referendum appeared on a 2011 ballot. Voters were overwhelmingly in favor of allowing sports bets.
This led the state legislature to pass the Sports Wagering Act (also known as the 2012 Act) the next year. Immediately, the NBA, NFL, NHL, MLB, as well as the NCAA to sue New Jersey stating that the 2012 Act violated PASPA. Eventually, the US Justice Department would join the suit on the side of the major sports organizations.
Over the next 6 years, the case would appear before the US District Court and the Third Circuit Court of Appeals. New Jersey lost in both venues prompting them to appeal to the US Supreme Court.
The crux of the case for the sports organizations relied on the Commerce Clause.
New Jersey relied on 2 principles. The first was the 10th Amendment to the Constitution. This states “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The second principle was that the federal government violated the anti-commandeering principle. Commandeering is when the federal government takes actions which would force a state government to take some action that it otherwise wouldn’t take.
SCOTUS had set a precedent that commandeering violates principles designed to prevent the federal government from becoming too powerful and is therefore unconstitutional.
On May 14, 2018, the SCOTUS overruled the other courts and handed New Jersey the victory. PASPA violated the anti-commandeering principle. The vote was 7–2 vote. The entire law was declared unconstitutional by a 6–3 vote.
The Aftermath
The 2012 Act is now a valid law in New Jersey. Arguments have started in many other states about legalizing sports betting.
While major sports organizations still don’t like the prospect of sports gambling, they’re proceeding cautiously. Some calling for a federal law to have uniformity among the states to avoid issues.
Some individual owners have hailed the ruling as a huge win–notably Mark Cuban, owner of the Dallas Mavericks. He stated that after the ruling, every sports franchise had effectively doubled in value.
The Benefits of Sports Betting
Armed with the overturning of PASPA, sports betting advocates have begun making the case for legalizing the practice.
While there may still be a federal law on the horizon to create uniformity of the practice, it won’t be anytime soon. Therefore, most advocates are lobbying at the state level. These advocates make great arguments that tout the benefit of regulated sportsbooks.
1 – It Takes Betting Away From Organized Crime
Let’s face it, sportsbooks aren’t just being kept in Las Vegas and New Jersey. They are all over the country. The problem is, in areas where isn’t legal, organized crime may be involved.
Sports betting can be lucrative for organized crime. Money collected from illegal bets can be used to facilitate other criminal activities. Bets that are uncollectible due to an inability to pay subject bettors to bodily harm or worse.
In the world of legal gambling, the betting is back by legitimate revenue streams. They aren’t supporting other illegal ventures. If a person can’t afford a bet, the bet usually can’t be placed. If a casino extends a courtesy of a line of credit to bet, they have legal recourses to go after the person civilly.
Any tool that can be used to take money out of the hands of organized crime is something that should be seriously considered.
2 – It’s Already a Thriving Industry
The ancient Greeks would bet on Olympic Games. The Romans would bet on gladiator events. In the Middle Ages, people would bet on jousting and fencing. Today, people bet on every sport under the sun. In other words, it’s popular. The fact that it’s illegal in most areas doesn’t deter the popularity of it.
Approximately $4 billion was bet last year alone legally in Nevada. That number is expected to increase to over $6 billion by 2023 only accounting for currently legal avenues.
The American Gaming Association states that illegal sports betting accounted for $150 billion in bets.
By making it legal, even more people would place bets as the barriers to doing so would be removed.
3 – Taxes
By making sports betting legal, states and the federal government would be able to monitor and collect taxes on winnings. People who bet would be able to claim their losses against any winnings they accrued during the year.
Using the numbers provided by the American Gaming Association of $150 billion in illegal bets, the federal government alone could look forward to a boost of about $37 billion in taxes. States could see several hundred millions of dollars in tax revenue. Counties and localities could also see revenue increases based on their tax structure.
4 – Increased Revenue for Sports Organizations
I mentioned Mark Cuban stated he believed that the SCOTUS ruling essentially doubled the value of any sports team. The statement makes a lot of sense. After all, betting makes a game or event more exciting. The reason is that when you place a bet, you have now have a personal stake in the outcome.
As a result, you will at least watch the game on TV which will increase the ratings. When rating increase, the price of commercials go up. When the price of commercials goes up, sports organizations as a whole can charge networks more to broadcast the games or events.
But you might feel you have more of a personal stake in the game, so along with the money you spend on the bet, you buy a ticket to the game. When you get to the game, you pay for parking. You buy food. You buy a memento or 2. This money goes to the team increasing their revenues.
But that’s not the only way they can benefit. In an “if you can’t beat them, join them” maneuver, sports organizations are asking state legislators to have a piece of the action given to them. Referred to as “integrity fees”, the sports organizations claim they will be used to prevent any type of game fixing. The reality is that they will be used as a new revenue stream.
5 – Decreasing Taxes Dedicated to Stadiums
Every few years a team tries to lobby for a new, state of the art stadium. The team or the organization makes the argument that the new venue will increase tax revenue. As a result, the team convinces the city to partner with them.
The result is facilities that financed with future tax dollars via bond issues for billions of dollars.
The problem with this is that these bond generally take 20 years to pay off. In that time, a new stadium is needed and a new bond issue has to be launched when the old one is still being paid off.
By allowing legalized sports betting, revenue streams can be generated for construction. If a bond needs to be issued, a special sports betting tax or fee can be created to pay off the bonds. This prevents the use of a property tax or a sales tax having to be used. Once the project is paid off, the tax or fee could be either eliminated or used towards another bond to create a new stadium.
6 – Teams Can Use Sports Betting as a Way to Re-Engage Fans
Despite the mention of point spreads and odds during games, coming out and talking about betting on a game is taboo. With the legalization of sports betting, teams can use it as an opportunity to engage fans or re-engage fans who have lost interest.
Betting is exciting. It makes people feel like they have “skin in the game”. By supporting and encouraging betting on their teams, organizations will create a buzz around the team, even if they’re on a losing streak. Winning money is exciting. So if I think you’re going to lose and I bet on that fact, I will watch the game and feel involved. I believe that most people will feel the same way.
7 – Leagues Have a Unique Opportunity to Shape the Rules
Aside from Las Vegas, legal sports betting is a new venture for both governments and sports organizations. While the tendency may be to look at Las Vegas as a model, no one has to. Sports organizations know this. Even before SCOTUS ruled on PASPA, they were lobbying state legislatures and Congress in anticipation of New Jersey winning.
One example is the integrity fee that organizations are floating to lawmakers.
But that’s not all they can do.
They can set up the framework for how betting is to be done, the infrastructure of who can take the book, and what bets can and can’t be placed. For example, they could lobby to only allow professional games to be bet on and not amateur or college level games.
It’s all in their hands.
8 – More Revenue for Casinos
It seems to go without saying that sports betting will increase casino revenues, but it won’t—at least not in the way that you think. Sports betting in Las Vegas isn’t a high-profit area for casinos.
But, by legalizing sports betting, they will get more people in the door.
Casinos would see an increase in visitors. With longer hotel stays, higher food sales, and casino game usage, revenues will increase.
9 – Jobs
To accommodate more attendees, stadiums will need to hire more staff such as security, ticket takers, and concession staff.
Also, city services that support these events will need more workers. Police, road workers, and tax collectors will be needed to meet the changing needs created by the increased attendance and revenue.
Casinos will need to hire more staff to attend to the guests.
State officials will need to hire people to tend to the infrastructure of adding sports betting and increased revenue
By allowing sports betting, jobs in some states could be increased by tens of thousands.
10 – Cheating Will Be Less Likely
In today’s system, bookies can “shave points” and lead bettors to wager based on false information. Legalized sports betting, takes the odds out of the hands of criminals and puts them into the hands of legitimate oddsmakers.
Also, the likelihood of games being “fixed” will all but be eliminated as the need won’t be there.
11 – Legal Recourse for Abnormalities
With a legal sports betting infrastructure, legal venues will be created for issues that involve cheating. A legal process can be created to investigate issues involving possible irregularities. Criminal, civil, and industry penalties can be instituted to punish those who do violate the rules.
12 – Betting Can Be as Easy as Going to the Store
Casinos aren’t the only possible avenue to place bets in a world where sports betting is legal. Most states are set up with a lottery commission and have electronic lottery machines in stores in every city and town.
This infrastructure could be used to allow sports betting at the store. You could walk in get your lottery tickets and bet on who is going to win the big game that night. If the person wins the bet, they come back the next day to collect. Large amounts can be paid at lottery commission offices where taxes can be taken out.
13 – Betting Can Be as Easy as Going Online
Part of the legalization process would be to create rules for betting online. I mentioned that most states have lotteries. Some of these state lotteries allow for the online purchase of lottery tickets. With that option available, the ability to place a legal sports bet online would be a simple process.
Also, legal sports betting could be opened up to legal casinos in the US. Although with this method, taxes would be harder (but not impossible) to track.
14 – It Brings Betting Out of the Dark and Into the Light
By removing the stigma of illegal sports betting, it makes the practice socially acceptable. Bettors wouldn’t be seen as criminals.
Also for those with an addiction to gambling, by legalizing the practice, it will make seeking help more acceptable. Most states now have some sort of language about a Gambler’s Anonymous hotline for their lottery posters and forms. It wouldn’t be hard to extend the same language for legal sports bets.
15 – People Want It
New Jersey proved it in their referendum. $150 million dollars in illegal bets support the idea. People want to be able to bet on sports legally. They believe that it will help them financially as well as their state.
Conclusion
Sports betting has been around for thousands of years. The excitement of being involved and the possibility of a financial windfall has driven these bets and will continue to do so. It’s time to look at the positive impact that legalization can provide. Decades-old arguments that no longer apply in today’s society need to be set aside.
