Sports betting casts a very large shadow across the landscape. It has become a major industry of its own in just five years.
In 2018, the Supreme Court struck down the federal legislation prohibiting betting on sports. The court’s decision opened the way for sports betting in any state that chooses to legalize it. Twenty-nine states have opted in and a total of $250 billion has been wagered on sports since 2018, generating $20 billion in revenue. Five additional states have legalized wagering as part of Indian gaming compacts, but the handle and revenue are not publicly reported.
Sports betting has more constituent and beneficial participants than other gambling activities. These include casinos, retail outlets, bookmakers, athletes, athletic teams, sports leagues, media and state coffers, and agencies that receive taxes and other fees. Other forms of gambling do not have so many entities participating in the revenues. In the casino business, the owners and employees benefit, while the host state and community receive taxes and gain from the other money that is spent in the local economy. Lotteries, racetracks, poker rooms, bingo halls, and freestanding video gaming machines are comparable to casinos.
Besides the $250 billion in legal wagers and $20 billion in revenue reported, an unknown amount of revenue is generated from other sources. There is no central source for the amount of revenue generated by the teams, leagues, and media by sports betting, but it is certain to be a great deal and very likely approaches the $20 billion number. The other participants, who are not compensated directly, except through advertising endorsements, are the athletes. The athletes are in a precarious position of being pawns in the betting game, but forbidden to make a wager.
The prohibition does not appear to be as well understood as the situation requires. Since March 2022, 10 professional football players have been suspended for gambling. It is a serious issue for the National Football League and its 32 teams. Each new incident has prompted the league, the teams, and the players involved to make promises to do better. There has been no hint that the gambling affected the outcome of a game. Unlike the players involved in the Chicago White Sox scandal of 1919, today’s players make too much money to be easily corrupted. One or two players, possibly, but not the eight it took in 1919.
College sports have also had a bit of a problem with gambling. In May, U.S. Integrity, a sports- betting monitoring service, reported suspicious wagering activity on a baseball game between Alabama and LSU. It caused a stir and ended up disrupting the careers of more than one person. The incident raised serious concerns. It is alleged that Alabama’s coach, since fired, was passing insider information to betting interests through a third party. The coach did not attempt to change the outcome of the play on the field, but he did share information that would be very useful to someone betting on the game. The incident had, and probably still has, the potential to create a major scandal. And it was not the only recent illegal college wagering event.Â
The University of Iowa and Iowa State Univeresity have 14 players under investigation for illegal betting. The charges range from underage wagering to manipulating official records and betting on their own teams. It appears that the young men were making bets through other people’s accounts, including three who used their mother’s account. They sometimes bet on their own teams and even on games in which they played. But as with the professional players, there is no indication that gambling affected the outcome of any game. Â
In both professional and amateur sports, the availability of opportunities to gamble on games has the potential to corrupt. And that poses a grave risk for the sports-betting industry and all of its players, partners, and participants. The risk is a national scandal that might lead to federal legislation limiting or even banning sports gambling.
In his 1986 book, Gambling and the Law, I. Nelson Rose described what he called three waves of gambling in the United States. Between 1790 and 1850, the first wave consisted of government lotteries used to fund the newly created governments. From 1864 to 1890, the second wave was also government lotteries that used the funds to recover from the Civil War. That wave ended after reports of corruption. In the aftermath of the scandals, one state after another outlawed lotteries, with many states putting anti-gambling language into the state constitutions.
The third wave began in 1964 with the legalization of the New Hampshire lottery. In 1986, Professor Rose thought the third wave would also end due to a scandal. You might argue the third wave might have already crested and that we are in a fourth or even a fifth wave with sports and igaming. However, even with the expansion of state lotteries, video lottery terminals, horse racing, bingo, and commercial and Native casinos, there have not been any signs of a scandal large enough to affect the future of the gaming industry.
Sports betting is on the verge of changing that. Nevada Representative Dina Titus sent a letter to the NCAA asking what the association was doing about the violations of betting prohibition among college athletes. NCAA President Charlie Baker replied that the NCAA has 17 active investigations related to sports betting; it has found 175 violations of its sports-betting policy since 2018. Titus has not suggested federal legislation. She is from Nevada and Nevada does not want the federal government to begin to regulate gambling in any way.
However, if the incidents continue, particularly like the one in Alabama, other lawmakers will contemplate national legislation to control sports and possibly other forms of gambling. As Nelson Rose said nearly 40 years ago, that is the most serious risk the gaming industry faces. That leaves the fate of sports betting in the hands of 18- to 22-year-old college athletes confronted with dangerous, but oh so attractive, temptations.Â
