When the U.S. Supreme Court repealed the Professional and Amateur Sports Protection Act (PASPA) four years ago, on May 14, 2018, writer Elizabeth J. Howell Hanano warned the decision would create “a new economy built on vice.”
But Ted Leonsis, owner of the Washington Wizards and Capitals, said it would bring “a multibillion dollar industry out of the shadow and into the sunlight, where its integrity can be guaranteed and consumers can be better protected.”
Opponents to the removal of PASPA, which cleared the way for states to legalize sports betting, fretted that gambling addiction and corruption would follow. But advocates, like New Jersey Governor Chris Christie, noted the absurdity of corruption concerns when he said, “Who do you think is more likely to try to bribe a kid; a state government or the mob?”
Four years later, the U.S. sports betting market is booming and providing tax revenues to several states. Contrary to sky-is-falling prognostications, sports have not been hounded by gambling-related scandals.
Before PASPA was overturned, the U.S. Government estimated that the illegal sports betting market was worth $70 billion. Since June of 2018, the regulated sports betting market in the U.S. has handled more than $125 billion in wagers, according to industry estimates, with the figure rising quickly each month.
How We Got Here
Once New Jersey decided to challenge the federal ban on sports betting, it was evident a landmark decision would come. After the Supreme Court ruled in Murphy v. National Collegiate Athletic Association, PASPA was gone and states were no longer restricted from establishing regulated, legal sports betting markets.
Ironically, to the Justices, the issue was never a matter of whether people should be allowed to bet on sports outside of Nevada. The issue was the broader principle of whether the federal government can compel states to pass or not pass certain laws. The court deemed PASPA unconstitutional.
“A more direct affront to state sovereignty is not easy to imagine,” Supreme Court Justice Samuel A. Alito Jr ruled.
Connecticut, Mississippi, New York, Pennsylvania, and West Virginia had passed bills before PASPA was repealed. As states lined up to introduce sports betting bills, experts speculated on the impact culturally and financially.
What’s Happened To Sports Betting Since 2018
Some industry experts wondered if Las Vegas would be negatively impacted by a nationwide spread of legal sports betting. That has not been the case. The COVID-19 pandemic derailed tourism for about a year, so numbers are hard to decipher, but data from 2019 and 2021 do not show a significant decline in Nevada tourism or revenue at the Las Vegas casinos.
Instead, each state that’s launched sports betting is experiencing growth and seeing citizens flocking to wager legally on their favorite sports teams.
States With Legal Sports Betting
As of May 14, 2022, the fourth anniversary of the U.S. Supreme Court’s decision that repealed PASPA, 30 states plus the District of Columbia have legal sports betting, including 19 states that have legalized sports betting online and allow licensed commercial operators:
- Arizona
- Colorado
- Connecticut
- Illinois
- Indiana
- Iowa
- Louisiana
- Maryland (launched at retail, not yet online)
- Michigan
- Mississippi
- New Jersey
- New York
- Nevada (had sports betting prior to 2018)
- Ohio (not yet launched)
- Pennsylvania
- Tennessee
- Virginia
- West Virginia
- Wyoming
A total of 40 states, in addition to the District of Columbia, either permit or have introduced legislation legalizing sports betting in some form.
Three states: New York, New Jersey, and Nevada, have had at least one month where they handled $1 billion in total sports betting handle.
Tax Revenue From Sports Betting
Most states have set their tax rate somewhere near the national average of about 10 percent. New York and Rhode Island have the highest tax rates at 51 percent, and in Nevada and Iowa the rate is only 6.75 percent.
A few states have already adjusted their tax rates with subsequent legislation, in most cases closing loopholes that allowed sportsbooks to not be taxed on money used in promotional offers.
While some in the public view tax revenue as the best reason to legalize sports betting, for the most part the monies that flow to state treasuries are small when compared to other sources. In Michigan, for example, sportsbooks have accepted in excess of $5.5 billion in sports wagers since February of 2020, but the state has received approximately $13.8 million in taxes, a small figure when compared to other sources of income. Hunting licensure for example, delivers $40 million annually to the Michigan budget.
But some supporters have pointed to consumer safety as a chief concern for states, regardless of the revenue that comes from sports betting. “The biggest reason we wanted an online sports betting bill to be passed in Michigan was to safeguard citizens,” former Michigan state representative Brandt Iden, who sponsored the bill that became law, told Gaming Today earlier this year.
Pro Leagues, Colleges Embrace Sports Betting
While pro leagues and the NCAA backed PASPA, NBA Commissioner Adam Silver broke that mold when he penned an op-ed in the New York Times in November 2014 urging the legalization and regulation of sports betting.
Though the NFL was hesitant and fairly silent after the PASPA repeal, the league soon passed rules enabling its teams to enter into marketing partnerships with sportsbooks in states where the activity is legal. Multiple NFL teams now have an “official sports betting partner,” and commercials for sportsbooks apps dominate NFL broadcasts. High-profile figures Peyton Manning and Drew Brees have signed multi-million dollar deals to be ambassadors for sportsbooks.
Major League Baseball, the NHL, and NBA, also have several teams with sports betting partners, and the leagues themselves have even entered into agreements. The same goes for the PGA Tour, LPGA, WTA, UFC, and most other professional sports entities in the United States.
The NCAA has been more cautious about sports betting, understandably considering their position as the caretakers of what many still view as the last “amateur” area of athletics. But, while the NCAA itself has yet to enter deals with sportsbooks, schools themselves have not been so reluctant.
In 2020, PointsBet inked a five-year sponsorship with the University of Colorado, the first for an NCAA school with a sportsbook. Colorado legalized sports betting in 2019. Last year, several schools followed suit, including LSU, which entered a deal with Caesars Sportsbook, becoming the first SEC school to negotiate such a deal. Louisiana opened its sports betting market earlier in 2022.
Problem Gambling Has Increased Slightly
Michigan launched sports betting in February of 2021, and one year later according to state officials, there was a rise in problem gambling based on calls to problem gambling hotlines. Incidents of individuals being referred for gambling addiction treatment increased by 42 percent in that state in the first year after sports betting was legalized compared to the previous year.
Problem gambling and gambling addiction treatment and resources will continue to be an important part of the industry, and thus far sportsbooks, legal jurisdictions, casinos, and professional and college sports leagues have shown efforts to keep that issue at the forefront of marketing sports wagering, although not to the extent some deem necessary. But just as in other regulated sectors of the economy, such as liquor sales, there will always be some level of excess.
The Future of Legal Sports Betting In The U.S.
Market Share and Competition
Some observers expect the market to thin from the current level of sportsbooks. BetMGM, BetRivers, Caesars, DraftKings, FanDuel, PointsBet, Unibet, and Barstool Sports are among the most prominent brands operating in multiple states.
With competition for customers so fierce, how long can the market sustain that many sportsbooks? Will markets consolidate? Will there be mergers and acquisitions to shake up the industry? How long can sportsbooks burn through marketing and promo dollars to acquire customers? The answers to those questions are uncertain, but one thing is for sure: the more sportsbooks that compete for market share, the better for customers.
A handful of prominent active athletes have already signed deals to be ambassadors for sportsbooks, including Hart Trophy winner Connor McDavid and Charlie Blackmon, an outfielder for the Colorado Rockies. More athletes will ink similar deals in the near future, especially as more states open their markets.
Change In Marketing, Broadcasting And Technology For Sporting Events
Consumers will see changes to the way sporting events are presented and who sponsors them. In 2020, Sinclair Broadcast Group sold the naming rights of their regional sports networks to Bally’s Corporation. In the future, consumers may also see well-known sports brands like ESPN launching their own sportsbooks. Streaming services, which have so far largely ignored sports betting content, could also launch their own networks or shows to leverage the popularity of sports + sports betting.
In the Collective Bargaining Agreement agreed to in March of 2022, Major League Baseball allowed for players to endorse sports betting companies and for sportsbook ads on uniforms starting in 2023. It shouldn’t be a surprise when sports teams soon have sportsbook or casino names on their jerseys.
Technology exists to offer fans real-time experiences where they can “watch” sporting events while wearing virtual reality equipment. By interacting with apps and servers, fans can see betting offers, and real-time odds layered on top of their live feed of the event, with the ability to place bets with one tap through their sportsbook account. It’s likely that such technology will be available at retail sportsbooks on-site at sporting events, so fans can choose to interact with the game they’re attending in “betting mode.”
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