How To End Illegal Sports Betting

The question of how to end illegal sports betting in the United States is more prevalent now than ever before. This is in part to sports gambling growing from a $40 billion industry in 1991 to an estimated $300-400 billion industry today. While such a number would typically indicate economic growth, this is not the case, as today’s figure represents how much is spent on the “illegal” sports betting market. With sports betting in the US being, until very recently, limited to Nevada, citizens were – and continue – spending billions of dollars with underground bookmakers or legal offshore sportsbooks (sometimes called “gray market” bookies). The growth of the sports betting industry even after the passage of the Professional and Amateur Sports Protection Act of 1992 (PASPA) proved that the erstwhile federal law was a complete failure by every measure. All PASPA really did was cause the US to lose billions (if not trillions) of dollars that could be better spent stimulating the economy and improving local communities.

With PASPA’s overturn by the Supreme Court in 2018, legal sports betting could be a major source of tax revenue used for public programs such as healthcare, law enforcement, and education. Today, almost overnight, legalizing sports betting has gone from a fringe discussion to a major initiative of industry leaders. Within just a few months of PASPA’s elimination, 7 different states offered sports betting lounges to the public, all before the end of the year. Going forward, sports wagering legalization in nearly 30 more states seems like a given, and there are dozens of sports betting laws currently on the congressional docket. Indeed, making it legal to bet on sports is about more than consumer enjoyment – it is about benefiting the economy and giving each state their right to choose. In assessing how to end illegal sports betting, it is clear that several factors will need to be considered. Three ways to end unlawful sports gambling activity include re-evaluating state sovereignty, protecting game integrity, and providing transparency.

Let The States Decide Whether Or Not To Legalize Sports Betting

No state spent as much time trying to figure out how to end illegal sports betting than New Jersey. The state most recently took two different approaches to get legalized sports betting up and running within its borders. The first attempt was a voter referendum that approved legalized sports gambling by an overwhelming margin. After the court sided with the sports leagues that filed lawsuits against this, New Jersey then repealed its laws that expressly prohibited sports betting. Again, the court ruled that NJ was in violation of PASPA. However, the state took its case all the way to the Supreme Court, citing the Tenth Amendment to the US Constitution, which reads:

“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.”

Determining how to end illegal sports betting begins with giving states the power to choose what best fits the interests of their people and their economy. This is currently what is happening, thanks to the overturn of PASPA. However, this is not stopping the federal government from attempting to take back its lost power, as various congresspersons have been filing bill frameworks to give the feds the last say on all individual state sports legislation. This would be a major step backward, but hopefully, enough states take the initiative to legalize their own sports wagering industries that the federal government can be overruled by a majority of representatives on this one.

Protect The Integrity Of The Games

One of the main justifications for enacting PASPA in the first place was to protect game integrity from match fixing and point shaving. Though this may have been an acceptable rationalization 25 years ago, research has shown that in today’s day and age, such federal laws may actually be counteractive. A study by University of Liverpool professor David Forrest and UK Sports Integrity Panel Chairman Rick Parry found that there are two conditions that are most likely to increase corruption: low paid athletes and officials, and a market with high liquidity yet minimal regulation.

Athletes in major US sports are paid more now than ever before, which makes it highly unlikely that they’d be tempted by bribes. Though college athletes are unpaid and are more vulnerable to point shaving schemes, the risks of participating in the crime far outweigh the benefits for those players. With the integrity policies that athletic programs now enforce, players know that they are liable to lose financial aid, scholarships, and their eligibility to play, costing them a chance to turn pro. The bribery and other illicit schemes of the past are far less prevalent today. A possible exception is with officials, who aren’t paid nearly as well as the athletes in their given sports. The NBA’s Tim Donaghy scandal proved this, though – regardless of sports betting laws – the perception that referees are corrupt is as old as sport itself. And historic blown calls in the NFL over the last few years paint an even more suspicious picture. However, generally speaking, demonstrable corruption on the officiating side in America’s big five sports (NFL, NCAAF, MLB, NBA, NHL) is very rare. Corruption is a bigger issue in individual sports like boxing, MMA, tennis, golf, and the like, and these sports represent a tiny slice of the overall sports betting pie.

Though there is no way to 100% eliminate corruption in sports, there are more ways to monitor illicit activities in legal sports betting markets. Bookmakers are incentivized to share any suspicious betting activities with authorities. For example, after a match-fixing incident in German soccer, the German Federation and the Bundesliga signed an agreement with Sportradar, which would provide an early alert system to the leagues and authorities upon detection of any aberrant line movement or betting activity. FIFA has also signed a contract with the betting odds data company in order to improve the integrity of the game. In the United States, however, there is no information on suspicious betting patterns because bettors use unregulated sites or backstreet bookies. If a bettor were to notice something questionable via one of these avenues, there would be no impetus on their part to share such information with law enforcement due to the risk of being personally investigated or accused of wrongdoing.

When considering how to end illegal sports betting, protecting the integrity of sports is essential. State licensed sportsbooks in a regulated environment will make it easier to implement an early warning system for corrupt betting trends. That said, please do not conflate industrial interests in protecting the integrity of sports with recent league demands for a cut of US sports betting revenues as “integrity fees.” This latter is a total cynical cash-grab, as the leagues have each for decades maintained sports fraud watchdog agencies and protocols, and there is actually less need for such with regulated sports betting than without it.

Transparency In The Sports Betting Industry

With the mix of legal sports betting, legal-but-unregulated offshore betting sites, and illegal bookmakers, there is a definite lack of transparency in the market. To end illegal sports betting, each state’s market will need to be regulated with clearly defined goals and laws. There will need to be mandatory auditing and reports that will pick up any unusual line movements. Each state should have its own licensing requirements and application processes for operators wishing to enter the market. Geolocation and other verification systems should be in place to prevent underage sports gambling and violations of things like the Federal Wire Act. Various consumer protections, such as the separation of operational and player funds, should be in place. Problem gambling is an important issue to address, which is why there are always an abundance of responsible gaming resources and treatment programs available in any regulated sports betting environment. Transparency is key in all aspects of sports betting regulations, and this – along with the above considerations – should be all that’s needed to ensure world-class sports wagering in any state that wishes to open up the industry to the public.

Ending Illegal Sports Betting FAQs

Does The U.S. Government Have The Power To Stop Online Offshore Sportsbooks?

The short answer is no. The US federal government can not stop the operations of sportsbooks that are located overseas, even if those sites accept American bettors. Currently, most federal laws that are against offshore sports betting seem to be around the area of making and receiving payments. The UIGEA makes it illegal for US financial institutions to knowingly accept payments from sportsbooks deemed illegal and that has simply limited the number of withdrawal options for US bettors to choose from. However, safe offshore sportsbooks have been able to mitigate this law.

Will An Increase In Legal Sports Betting Threaten The Integrity Of Games?

This is a common misconception that many people have over the legalization of sports betting. The fact is that the ability for match-fixing and corruption was already there long before any regulation, licensing, or legalization has occurred. The perfect example of that is the Tim Donaghy – an NBA referee that pleaded guilty to betting on games he officiated. If anything, being able to see the industry as a whole opens more light into how money is moving.

Can States Ever Enact Laws To Permanently Ban All Sports Betting?

It is very improbable that this would ever happen. When the PASPA was abolished, there was no longer a federal ban on sports betting, which gave states the option to regulate sports betting if they should approve it. There is really no reason for a state to make it impossible for future legislators to make laws that would regulate sports betting. States like Hawaii, and Utah who have no legal gambling including lotteries, casinos, horse betting, charitable gaming or even bingo in their state, would still not create a law that would outright block any future legislation from happening.

How is legalization affecting the illegal sports betting market?

According to the American Gaming Association, Americans wager approximately $150 billion in illegal sports bets every year. While that figure is not exact, even the lowest estimates put the revenue at around $60 Million. However, as more states begin to legalize, it will continually lure customers away from online betting formats. Things like tax reporting will always keep the books alive, but we are already seeing a drastic decline in illegal action in the states that have introduced legal options.

Can States With Legal Sports Betting Markets Still Use Legal Offshore Sportsbooks?

Yes, offshore sportsbooks are legal no matter what the status of sports betting is in the state where a sports bettor resides. Gamblers can legally be members of both state-sanctioned sports betting platforms as well as offshore internet sportsbooks simultaneously. There are no repercussions for engaging in both types of outlets for gambling on sporting events.