Regulated Sports Betting In The USA – Why We Need It

One of the things we like to talk about the most at LegalSportsBetting is government regulated sports betting, which we are positive is coming soon. Yes, the Supreme Court has overturned PASPA (the Professional and Amateur Sports Protection Act, 1992), finally allowing any state in the US to offer its own legalized sports wagering industry. However, most states are still on the fence about whether or not to pursue this new market, and in some states, there are even various tribal compacts and other agreements that provide hurdles (if not total roadblocks) to instituting ubiquitous sports betting. It is our opinion (based on both financial reality and the fact that people ought to be free to spend their money on whatever safe, fun pastimes they wish) that all US states should regulate their own sports betting markets. If they do not – and do not do so quickly – there is a good chance that the federal government (the architect of the disastrous PASPA, remember) will step in and foist their own sports betting regulations on the states, potentially to the detriment of individual municipalities and even entire regions.

Sports Betting Is Extremely Popular In The USA

Betting on sports has grown from an occasional hobby to one of the most impactful economic activities in the world. Sports betting is a multi-billion dollar industry across the United Kingdom and in countries such as Spain, Australia, and Macau. In the United States, only Nevada and – so far – a handful of other states (like DE, MS, WV, PA, NJ, and a few others) – offer legal sports betting, leaving billions of dollars to be spent at offshore sportsbooks. Sports betting is very, very popular in the United States, and the lack of legal land-based options has not diminished the demand for the product in any way.

According to a report by UNLV’s Center for Gaming Research, the total amount bet on sports in Nevada from 1984 through 2018 was roughly $77.25 billion. If you add in the other post-PASPA legal betting states’ figures ($1.54 billion), you get a nationwide total handle of nearly $79 billion. While this may seem like a huge handle, it is peanuts compared to the “illegal” sports betting market. As a point of comparison to drive that point home, the American Gaming Association (AGA) estimates that over $10 billion is wagered illegally (or via overseas sportsbooks) on March Madness every single year.

The same group also estimated that over $90 billion is wagered through the same avenues during the annual NFL and NCAA football seasons. This means that in over 30 years of effectively having a legal sports betting monopoly in the US, Nevada (plus the few states currently also offering sports wagering services) took in a total handle that US bettors regularly surpass in a single half-year of sports betting. In other words, at best, NV accounts for 2-3% of all US sports betting on an annual basis (though there is not yet enough data to tell how much of the existing market other states will take from local bookies and overseas sites going forward).

The figures above prove that by not expanding government regulated sports betting, the states of the US – and the federal government itself – are depriving their coffers of billions of dollars in potential tax revenue. Americans want to bet on sports, and their spending behaviors show that the activity will be continued (and continue to grow) with or without regulations. Now that PASPA is no more, it is time for the states to overcome any obstacles that currently prevent them from regulating sports betting on their own soil.

Why Was There No Regulated Sports Betting In The USA?

Up until recently, outside of NV, there was no regulated sports betting in the USA. This is because PASPA, the 1992 federal ban on sports betting, disallowed state governments from being able to implement their own regulatory frameworks on the pastime. PASPA limited sports betting to only four states – Nevada, Oregon, Montana, and Delaware. These four states were grandfathered into PASPA due to pre-existing sports betting laws on their books. That said, only Nevada had legalized single-game wagering (aka full-service betting) at its sportsbooks, while the remaining three states had glorified sports-themed lotteries. After a short time post-PASPA, knowing there was no room for growth or increased profit (and due to various NCAA protests), these three states abandoned their meager sports betting products altogether, leaving NV with a monopoly.

Even with sports betting being effectively banned in 49 states, US sports fans still managed to wager at offshore sports betting sites. These sites are licensed in countries such as Costa Rica, Antigua, and Panama where remote sports betting is legal. As they operate outside of the United States, they are not subject to the limitations of PASPA or other federal laws (like the Wire Act of 1961 or the Unlawful Internet Gambling Enforcement Act of 2006, both of which are solely focused on service providers and not bettors). While many of these sites are safe for US players to use, unregulated sportsbooks hold no accountability to operators, are not overseen by law enforcement, and there is an absence of consumer protections. That’s not a problem for the best online sportsbooks in the business, as each of these has been operating for nearly three decades and has earned its lasting reputation on fair lines and timely payouts, but the vast majority of the thousands of available online sportsbooks don’t fit that bill and are exceedingly risky to use.

Reasons To Regulate Sports Betting In The USA

Regulating sports betting in the United States presents benefits from state, federal, and consumer standpoints. One main argument against PASPA was that it violated the constitutional rights of the states (the 10th Amendment specifically and the traditional “Equal Sovereignty Doctrine” generally). A report by the Competitive Enterprise Institute explains exactly how the ban on sports betting undermines the 10th amendment by infringing on state sovereignty. With all other forms of gambling (casino gaming, poker, horse racing betting, etc.), states have been able to determine legality and regulation. Allowing state-government-regulated sports betting would restore power where it arguably belongs.

Numerous research studies and reports have shown the economic impact that government regulated sports betting markets would have on their respective states and the US itself. GamblingCompliance, an international gaming research firm, projected that a US betting market with legal casino, online betting services, and retail betting locations would produce up to $5.2 billion in annual tax revenue. Tax revenues could, in turn, be used for education programs, healthcare, and other public services in each state where sports wagering is supported. In terms of overall economic impact, Oxford Economics estimates that legal sports betting would generate $21.9 to $26.6 billion dollars. The estimate accounts for the aftereffects of the money spent by consumers on sports betting (i.e. money spent on ancillary services and money put back into the local economies in questions).

Sports enthusiasts want more legal sports betting options for their enjoyment, but there are consumer advantages that would address other issues in the industry. Many of the sports leagues have argued that the widespread regulation of sports betting would damage the integrity of the games. In reality, regulated bookmakers would be more incentivized to report any questionable betting behaviors or corrupt practices, and they would be infinitely more scrutinized as a matter of course than black market or gray market bookmakers. Without regulation, there is no line of communication between offshore online sportsbooks and law enforcement (albeit, again, the most reputable offshore books do not engage in match-fixing or betting fraud of any kind). Regulated US markets would also make it easier to handle the issue of problem gambling. The government would be able to establish programs that better monitor problem gaming patterns and also implement more effective treatment protocols.

Current Initiatives For Legalized And Regulated Sports Betting

Though the options to bet on sports in the United States are still limited, proponents of government regulated sports betting have been taking legal action to push the agenda. The state of New Jersey just wrapped up a 6-year push to establish legalized sports betting within its borders. Starting in 2011, the state has doubled down on its attempts to pass sports betting laws, all of which were struck down at the circuit court level. Finally, however, NJ got its PASPA challenge picked up by the Supreme Court, which expectedly found the law to be wildly unconstitutional, thus overturning it and opening the door to state-by-state sports betting legalization.

Now, the onus falls to each individual state to establish its own sports wagering legislation, and they should be encouraged to do so as soon as possible. The more states that legalize and offer land-based and online sports wagering to their residents and guests, the less clout the federal government will have in stepping back in and trying to override those states with sweeping national rules and regs. Within 6 months of the overturn of PASPA, seven states opened their sports betting lounges, while three others have legalized the practice but not yet opened any front-facing commercial betting options. Meanwhile, nearly 30 states have submitted proposals to legalize sports betting going further, and that number is only expected to grow in the future. Regulated sports betting is here, and it’s here to stay. With strong support across the majority of the US, there is hope that sooner than later, most states will have their own land-based and online sports wagering laws in place.

Could There Be A New Federal Sports Betting Law?

Absolutely, there could be a new law for regulated sports betting in the USA at the federal level. While unfettered state regulation is the best option, there is movement in the US Congress to take back the power they lost when PASPA was overturned. While the federal government has no authority or charter to dictate sports wagering laws in the first place, that hasn’t stopped them before, and it likely won’t stop them now. Senator Orrin Hatch (R-UT), one of the chief proponents of the blatantly illegal PASPA law, has teamed up with New York Senator Chuck Schumer (D) to introduce the “framework” for what they’re calling the Wagering Market Integrity Act of 2018.

In addition to a host of unnecessary regulations, this proposed legislation would give the federal government complete authority to approve or disapprove any state’s sports betting legislation. Essentially, this law – despite the precedent of PASPA and its overturning on constitutional state’s rights laws – would allow the US government to withhold sports betting from any individual state at its sole discretion. Hopefully, the state representatives in the US house and senate have learned their lesson and will work to protect their states’ interest, rejecting any such federal proposal. For that to work, however, it will take a majority of states acting fast to get their own sports betting laws in place and their regulated sports betting products and services up and running.