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Sports Betting Finally Legalized (June 2018)

Updated: Jan 5

May 14, 2018, was a great day for American sports fans. That day the Supreme Court overturned the federal law that prohibited states from legalizing sports betting. It was a complicated case, but here is a basic breakdown and some links for more information:

In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA). The law did not ban sports betting at the federal level, but it did prohibit states from passing laws to legalize sports betting. It was not very controversial when passed because there was little appetite among states to legalize sports betting and Nevada was grandfathered in so things there didn't change.

Fast forward to a few years ago when New Jersey wanted to revitalize its ailing horse tracks and bring new people and investment to Atlantic City. Its legislature decided to pass a law legalizing sports betting at existing casinos and horse tracks, knowing that it would have to fight it in the courts. The law went all the way to the Supreme Court, where it was struck down. So the legislature passed a different law that they believed was on more solid legal ground. The professional sports leagues and NCAA sued, and New Jersey lost case after case but kept appealing the rulings, hoping for a hail mary. They got their touchdown when the Supreme Court surprisingly agreed to hear the case last fall. In May, the Supreme Court ruled in favor of New Jersey and struck down PASPA. This means that every state can pass laws legalizing and regulating sports betting in their state as they see fit.

It is hard to over-state the significance of this ruling. A multi-billion dollar industry has just been created overnight! Sixteen states have already held hearings or passed legislation related to sports betting legalization. A few are expected to have legalized betting before the NFL season. New Jersey could be taking bets within two weeks!

It is important to remember that Congress could pass a law regulating sports betting that the states would have to follow, but no action is expected anytime soon. The ruling means that it was illegal for Congress to prevent states from legalizing sports betting but it was not illegal for Congress to regulate sports betting at the federal level. Since Congress has not taken action since passing PASPA in 1992, states are now free to regulate sports betting as they see fit. Here is the money quote from Justice Samuel Alito, author of the majority opinion:

“Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not,” he said. “PASPA 'regulates state governments’ regulation' of their citizens. The Constitution gives Congress no such power.”

I know this is complicated and you are probably either bored or confused by now, so I will give you some articles for additional information put together by experts rather than me, a non-expert. But first, here are some predictions:

1. Congress won't pass legislation regulating sports betting before the 2018 elections

2. New Jersey will begin taking legal sports bets by July 4

3. Few states will legalize sports betting in 2018, but at least four will (Mississippi, Delaware, West Virginia, and New Jersey)

4. Indian tribes are going to be the driver of sports betting legalization in states with Indian casinos. They will be influencing state legislatures to pass legislation allowing them to offer sports betting while still prohibiting it statewide. This will give Indian casinos a monopoly on sports betting. My guess is that Washington will have sports betting in Indian casinos within three (3) years but will not legalize it statewide at that time.

5. The major sports leagues will lobby Congress to pass legislation outlining federal guidelines for sports betting, but Congress will likely go slowly and wait to see how things play out in the states. States will not give the sports leagues their 1 percent "integrity fee" (1 percent of gross gambling revenues going straight to the leagues) that they are seeking, which is why they will oppose most sports betting legislation.

6. The big debate among states will be whether to allow mobile betting. Big media companies and daily fantasy sports sites (Draftkings, etc) are betting big bucks that many states will allow mobile betting, and they already have brands and infrastructure in place to immediately take wagers. The daily fantasy industry was just a trojan horse to enter into the sports landscape. They were always eyeing sports betting being legalized. They are very happy people today.

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