Happy Birthday! It is the fifth birthday of the child of the overturning of PASPA, the Betting Baby. And a healthy child it is, growing bigger and getting stronger every day.
More than a birthday, May 14 is a watershed moment in the history of gaming in the United States. On May 14, 2018, the Supreme Court opened the door for states to legalize sports gambling by repealing the Professional and Amateur Sports Protection Act (PASPA), passed in 1992. A Congressional committee had determined that sports gambling was a national problem and needed to be controlled, reined in, and stopped.
The Act sought to stop gambling on sports and thereby protect sports, fans, and athletes from corruption. It prohibited sports betting, except in Oregon, Delaware, Montana, and Nevada. But in reality, only Nevada had legal full-fledged sportsbooks. If you wanted to bet on the Super Bowl, March Madness, the World Series, or any other sporting event, you had to fly to Nevada to place your bet. In might have been called the Las Vegas Sporting Act, as it made Las Vegas the sports betting capital of the world.
The Act provided for a one-year window that would have allowed New Jersey to be exempt from the provisions of PASPA if it legalized sports betting. New Jersey failed to take advantage of that opportunity. However, in 2014, New Jersey rethought its position. The casino industry in Atlantic City was in trouble. Casinos were closing and the future did not appear rosy. An appeals court had ruled that PASPA did not prevent New Jersey from repealing its existing law prohibiting sports betting; it would then be legal in Atlantic City to place a wager on sports.
New Jersey repealed its prohibition and authorized sports betting in Atlantic City casinos. The professional sports leagues and the National Collegiate Athletic Association (NCAA) sued and the case went to the U.S. Supreme Court. Opponents of PASPA argued that the Act violated the Tenth Amendment, the so-called states’-rights amendment, which states, “If the Constitution does not give a power expressly to the federal government, then that power is reserved for the states.” The Constitution was silent on gambling; therefore, it was left to the states to regulate.
Opponents further argued that PASPA had created and maintained a large illegal gambling industry. The Supreme Court in its infinite wisdom agreed that the Constitution did not give the power to govern gambling to the federal government and therefore it was left to states. Katy bar the door. In just five years, 70 percent of the states have legalized sports betting. It is not a one size fits all; each state has different regulations, taxes, and restrictions.
In general, legal sports betting in the United States comes in three flavors. “Retail” restricts wagering to in-person bets in brick-and-mortar locations, usually casinos. “Mobile” allows remote wagering via the internet or mobile-phone services. The third flavor is a mixture of the two. The most popular and profitable is the mobile variety.
The advent of remote wagering was a game changer. With the wagering, gross revenue, and tax numbers from mobile wagering available, lawmakers had a strong incentive to emulate those results for their state. New York is a good example and the most impressive. In fiscal-year 2022/2023, New York generated approximated $16 billion in gross wagers (handle), $1.5 billion in gross revenue (GGR), and $750 million in taxes.
Nationally, the numbers from the first five years are equally impressive. The handle is more than $200 billion, the GGR is $17.4 billion, and state and local governments have collected $3 billion in taxes.
One other number gives a wider perspective on legal sports betting and its impact on the national culture. Last year according to The New York Times, $1.8 billion was spent on sports betting advertisements. That demonstrates the competitiveness of sports wagering and the ubiquity of the advertising.
The bookmakers are fighting one another tooth and nail for every bettor and every dollar wagered. None of the major companies specializing in sports betting has made a profit yet. They promise a profit soon — if not this year, then next or at the latest, the year after that. But as long as the competition remains so intense, profit will continue to be sacrificed for market share. Well, that is not completely true. Many of the smaller companies have thrown in the towel already. And the middle-tier companies have cut back on promotional and advertising expenses. The competition is also bringing some unwanted attention from lawmakers, who think there is too much advertising and that the promotions may be deceptive.
This attention definitely presents a long-term risk. But that is in the future. In the meantime, the efforts to legalize sports betting in other states, primarily California, Florida, and Texas, will continue, as will the battle for the bettors wherever mobile sports betting is legal.
For now, let us content ourselves with lighting the candles on the cake and singing happy birthday to the betting baby born on May 14, 2018.
