Sports Betting Updates
Various forms of gambling have been legal in most US states for many years but the most popular, sports betting, was out of reach. That changed last year when the Supreme Court ruled that the Professional and Amateur Sports Protection Act was unconstitutional. Within the last 12 months almost half the US states have either legalized sports betting or have introduced legislation that would introduce sports betting to their jurisdictions.
States, casino operators and investors are investing hundreds of millions of dollars in the belief that sports betting will pay off. How do financial analysts expect sports betting to develop in the coming years?
Last year, New Jersey’s fight to overturn the federal ban on sports betting went before the Supreme Court. Under review was the Professional and Amateur Sports Protection Act (PASPA), which Congress had passed in 1992 to outlaw sports betting in all states that didn’t have pre-existing sports betting laws (such as Nevada). SCOTUS agreed that outlawing sports betting was unconstitutional and overturned the law, opening the floodgates for states to legislate sports betting in their own jurisdictions.
Now over 10 states have sports betting operations running and additional states have sports betting laws in place for which the infrastructure to enable sports betting needs to be created. These laws were designed to create safe and secure sports betting, either at land-based casinos, through online venues or both.
For the states, there’s more at stake than giving people the chance to enjoy the gambling entertainment. Tens of millions of dollars will be made available to the states from licensing fees, taxes on the sportsbooks’ income and taxes on winners’ payouts.
When PASPA was in effect it didn’t actually eliminate illegal sports wagering. Rather, the federal ban hamstrung state officials from addressing the growing $150 billion illegal sports betting market. The ban left consumers vulnerable to organized criminals, siphoned billions of dollars from the legal economy and put sports integrity – the stated reason for passage of PASPA – at even greater risk.
Convenient and Competitive
Consumers have, by and large, supported the new legal products that are being marketed.
The first state to legalize sports betting after the SCOTUS ruling, New Jersey (where a state referendum from 2011 was already in place which approved the introduction of legalized sports betting) reported that, in the first 3 months of 2019, more than $1 billion had been wagered legally across the states. In March alone, the sports betting handle in New Jersey accounted for a third of the total legal sports wagers across all states with legal markets.
Nearly $20 million in new tax revenue has gone into state coffers since the ban was lifted.
(Many observers note that, as of today, sports betting isn’t available to the majority of New York residents. Legal sports betting is only available in a few upstate casinos so much of the New Jersey handle is coming from NYC and other downstate New York communities. New York is one of the states that is considering sports betting legislation this year. If it passes, New Jersey’s revenue from sports betting will decrease).
Casinos and other sportsbook operators are focused on making sports betting convenient and competitive. Probably the most important aspect of the new sports betting opportunities involves its legality – today, bettors are protected in ways they never were before.
In the past, if a sports fan wanted to place a wager on the outcome of a single game, the only option available involved wagering in an unregulated and unsafe illegal market. That meant putting personal information and finances at risk. Now, there are multiple opportunities to place bets on sport without worrying about putting data and trust in the hands of criminals and having no oversight authority to whom to turn in cases of dispute.
Today, in sports betting states, anyone can walk into a legal brick-and-mortar sportsbook or make a bet online with assurance that all data and activity is safeguarded by state regulators and gaming operators.
States that are in the process of legalizing sports betting would be wise to look at New Jersey as an example of a state that has been successful in its first year of sports wagering. Observers note that the legal market has, from the outset, operated with the best interests of the local consumers. Seventy percent of NJ sports bettors who presently participate in the illegal market said they are planning to move some or all of their business to legal markets. That is mainly due to the state’s focus on offering a competitive product.
From the outset, New Jersey lawmakers rejected special interest demands that would have diminished the competitiveness of the state’s legal sportsbooks. They include demands that the state impose league-proposed integrity fees, collect high taxes and impose mandated data monopolies. Instead, New Jersey choose to emphasize convenient mobile access and private business agreements between operators, gaming companies and leagues. The market is thriving thanks to the availability of multiple betting options.
New Jersey is not the only state to enact successful legal sports betting legislation. There are legal, single-game sports betting operational in Pennsylvania, Rhode Island, West Virginia, Mississippi, Delaware and New Mexico. Those are in addition to the sports betting operations in Nevada which have been operating for decades. There’s been almost $3 billion in legal wagers since last May in these states alone, with eight additional states plus the District of Columbia ready to act on sports bills that have been passed but not yet implemented.
Observers believe that 10 additional states will legislate sports betting this year and up to 20 in 2020. Even those politicians and officials who originally opposed sports betting have come to understand that the demand is high and if the state governments can’t provide sports betting opportunities, other, non-legal sources are ready and willing to step in.
As additional states and tribal nations pursue legal sports betting, analysts are encouraging policy makers to create laws that emphasize policies that promote consumer protections, reject narrow interest group lobbying, deliver valuable tax revenue for states and tribal nations and enable fair market competition to eliminate the illegal market.