ADVERTISEMENT

Why U.S. Sports Betting Was Mostly Illegal, Until Now: QuickTake

How U.S. Sports Betting Is Rampant and Mostly Illegal: QuickTake

(Bloomberg) -- Betting on sports holds a peculiar place in American recreation: Only in Nevada has it been broadly legal, even though it happens pretty much everywhere. Now a Supreme Court ruling on a challenge by New Jersey could bring the activity into the open, complete with regulation, taxation and competition. 

1. Why was sports betting illegal in most of the U.S.?

The Professional and Amateur Sports Protection Act of 1992 halted the spread of legal sports betting beyond states that then allowed it. Nevada, where sportsbooks have been a part of casinos since 1975, was grandfathered in, as were more limited state-run sports lotteries in Oregon, Delaware, and Montana. New Jersey, home to Atlantic City’s casino industry, was given a year to adopt sports betting, but a push back then to amend the state constitution failed.

2. How big is sports betting in America?

Nevada’s Gaming Control board reported a record $4.8 billion bet at its sportsbooks in 2017, with the house keeping $248.7 million in revenue. But legal betting is just the tip of the iceberg, and nobody really knows how much money is bet illicitly. A 1999 study commissioned by Congress put the range at $80 billion to $380 billion annually. Research firm Eilers & Krejcik Gaming puts the number at $50 billion to $60 billion and estimates that bookies keep up to $3 billion of that.  

3. What happens now that New Jersey won its case?

New Jersey will need to settle questions about tax rates and rules for mobile gaming as it decides how to license and regulate sports betting through its casinos and tracks. Delaware, which has a sports lottery that consists of NFL parlay bets, also may move fast into this new market. Five other states passed laws to enable sports betting in anticipation of the Supreme Court lifting the federal ban: New York, Connecticut, Pennsylvania, West Virginia and Mississippi. Fourteen other states, including California, are considering legislation to do the same. Eilers projected that if the law is overturned, 32 states will authorize some form of sports betting by 2023, with annual revenue by then of $6 billion. Sports leagues, casinos, state lotteries, Native American tribes, overseas sportsbooks and daily fantasy sports operators may all compete for a share of the pie -- though customers who already use illegal online services or local bookies might not necessarily move to legal providers. 

4. What do sports leagues say?

League commissioners have long argued that gambling can sully sports and raise the risk of games being fixed. But the leagues have softened their positions since New Jersey began its push in 2011. A watershed moment came in 2014, when Adam Silver, commissioner of the National Basketball Association, wrote in an op-ed that sports betting "should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated." He urged Congress to craft regulations and safeguards that states could adopt, if interested. In a sign of the leagues warming to the gambling industry, the National Hockey League added a team in Las Vegas last year, the city’s first from one of the four major U.S. leagues, and the Oakland Raiders of the National Football League are scheduled to relocate there in 2019.

5. What’s in it for the leagues?

The NBA wants sports leagues to collect a 1 percent fee on all bets placed on their games, as compensation "for the risk and expense created by betting and the commercial value our product creates for betting operators." Major League Baseball supports that idea. The casino lobby, not surprisingly, disagrees, saying leagues already stand to gain because legalized sports betting will drive interest in games. The American Gaming Association, which advocates for the casino industry and supports the spread of legal sports betting, argues that a 1 percent fee would amount to 20 percent of the revenue collected by sportsbooks, since they generally keep only about 5 percent of wagers after paying out to winners. For now, Connecticut, Kansas, and New York have settled on a fee of 0.25 percent.

The Reference Shelf

  • Bloomberg’s story on the Supreme Court ruling.
  • Bloomberg’s coverage of oral arguments in the case.
  • A history of New Jersey’s efforts to legalize sports betting.
  • Bloomberg tried measuring illegal betting on college basketball’s March Madness in 2015.

To contact the reporter on this story: Ira Boudway in New York at iboudway@bloomberg.net

To contact the editors responsible for this story: Janet Paskin at jpaskin@bloomberg.net, Laurence Arnold

©2018 Bloomberg L.P.