The U.S. Supreme Court on May 14 opened the door for U.S. states to legalize and regulate sports betting when it found the Professional and Amateur Sports Protection Act (PASPA) unconstitutional. PASPA, a federal law enacted in 1992, had effectively prohibited sports gambling across the country except in four states. The Court’s decision was based on a challenge brought forward by New Jersey and its former Governor Chris Christie, who began the legal fight in 2012. The Garden State was a proxy for numerous other jurisdictions: eighteen other states had filed court briefs in support of New Jersey’s case. Many of those states – and others – are expected to initiate legislative action to legalize and regulate sports gambling within their borders.
In fact, gambling industry analysts predict that as many as 32 states will enact legislation permitting sports betting within the next five years to capitalize on the estimated $150 + billion spent annually on illegal sports wagering. Sports Organizations Lose, Shift Focus The National Collegiate Athletic Association (NCAA), the National Hockey League, the National Football League, and Major League Baseball all had opposed New Jersey’s action. The National Basketball Association, however, has expressed a willingness to work with legal betting under the leadership of Commissioner Adam Silver. The sports organizations opposition to sports betting had already begun to soften over the last few years.
The NHL now has a franchise (the Golden Knights) in Las Vegas and the Oakland Raiders of the NFL will move to Las Vegas in the next few years. With so much money being wagered illegally, the focus shifted to the potential of sports betting to generate profit for the benefit of sport franchise shareholders. The sport leagues also may pressure Congress to formulate a nationalized legal betting framework to mitigate against the possibility of having to manage different regulatory requirements on a state-by-state basis.
“An Affront to State Sovereignty” In writing the 6-3 majority opinion for the Supreme Court’s ruling, Justice Samuel Alito called PASPA “an affront to state sovereignty” and said the principal problem with the federal law was that “state legislatures are put under the direct control of Congress.” Specifically, the Court relied on an “anti-commandeering” doctrine, which holds that Congress can set federal policies but cannot dictate to the states what their individual policies must be. A Business Boost for Gambling The Court’s announcement was good business for many gambling concerns.
Stock prices for casino companies and technology providers in the sports-betting space all gained in the immediate wake of the ruling. Daily fantasy sports companies Draftkings and FanDuel also found encouraging news in the Court’s decision.
“This ruling gives us the ability to further diversify our product offerings and build on our unique capacity to drive fan engagement,” said Jason Robins, CEO of DraftKings, in a statement. A spokesperson for FanDuel said the company is “exploring all avenues.”
What Types of Betting Will Be Allowed?
The Supreme Court opinion means that states can offer the same betting options as other sportsbooks, including college and professional sports, horse racing, golf, combat sports, and international events (e.g. the World Cup). However, the sports leagues have expressed concern over permitting certain types of bets, predominantly the situational kinds that can be impacted by a single player or decision without materially affecting a game’s outcome. For example, the leagues oppose betting on such activities as which player will commit the first foul of a basketball game or whether the first pitch of a baseball game is a ball or a strike. Such things can be easily manipulated by players without necessarily jeopardizing the integrity of the entire competition.
Such betting features as live in-game and in-arena are likely to vary by state. States to decide how to manage the sports betting industry – and who will benefit financially State governments view the opportunity to regulate sports betting as a pathway for new revenues. Once the legislature decides that it wants to regulate sports betting, then begins the business of clarifying the regulatory model it wants to implement. A clear contender is to empower its own trusted state Lottery to operate sports betting with the goals of preserving the integrity of sports, protecting the consumer and minimizing problem gambling, and maximizing economic benefit for society and the Good Causes that Lottery supports. If those are the objectives, the state Lottery is the obvious choice to operate sports betting.