Legalized sports betting is a relatively new industry in the United States. With the Supreme Court overturning the Professional and Amateur Sports Protection Act (PASPA), more states have taken the approach to legalize sports betting. This was a long process, and the industry continues to expand every year.
Background of the PASPA
The Professional and Amateur Sports Protection Act, an anti-gambling federal law, was signed in 1992. It went into effect as soon as the calendar flipped to January 1, 1993. The goal was to stop the expansion of sports betting throughout the United States.
To simply put everything together, the PASPA ruled it unlawful to wager on events that involved professional or amateur athletes. This Act made it extremely hard for potential bettors to place wagers on sporting events throughout the year.
There were only a few states that were exempt from following PASPA. The four states included Delaware, Montana, Nevada, and Oregon. Nevada became the betting capital of the United States. It was the only one permitted to have straight bets. Delaware and Oregon only had parlays, while Montana had legal bar pools and fantasy sports contests. A 2009 federal court ruling declared these states could only have the type of sports betting allowed when PASPA went into effect.
However, some bettors found other ways to wager. Many people took the illegal route and placed wagers through a local bookie or on an offshore sports betting site headquartered in foreign countries. These offshore sportsbooks do not have to abide by the rules and regulations set by the United States.
There were several issues with all this as local bookmakers were legally responsible for paying out their customers. On the other hand, funding an offshore sportsbook account was difficult due to the Unlawful Internet Gambling Enforcement Act of 2006. Still, users on some sites were able to fund their existing accounts through the use of cryptocurrencies.
What is the Interstate Wire Act?
The Interstate Wire Act, enacted in 1961, cut off the use of any communications equipment to transmit any insider sports betting information across state lines. Sports betting and any other form of gambling do not have a clean history. Just a few decades before, Al Capone controlled the biggest gambling rig in Chicago.
At the time, Attorney General Robert F. Kennedy took any measure possible to crack down on those involved in the illegal gambling business. The groundwork was very simple as it was more seen as an effort to reduce these types of crimes. Those caught accepting wagers or giving credit as part of wagers will be subject to fines or imprisonment of two years or less.
The Wire Act’s main focus was not entirely geared towards sports betting. Its main purpose was to preserve state monopolies on lotteries. State lotteries became more popular and mainstream in the United States.
Four years after the PASPA was introduced, the Big Game now known as the Mega Millions started as a multi-state lottery. This lottery is available in 44 states.
Understanding Where PASPA Came From
The Act structure is traced back to the Dowd Report published in 1989. It described that Pete Rose was placing wagers on games while he was a player and manager in Major League Baseball. Seen as an issue for baseball, the league banned Rose.
This led to bad publicity for the sport. Sports betting was considered a problem. Professional sports leagues and the NCAA supported the Act. After a year of hearings, the support was very lopsided with a margin of 88-5 as it was signed into law by George H.W. Bush.
Democratic Senator Bill Bradley of New Jersey, a former NBA player for the New York Knicks, backed PASPA. On the opposite side, the state battled for years battling sports leagues to overturn the law.
Bradley was a huge contributor to putting the wording in the PASPA. It would essentially give any state with at least ten uninterrupted years of gambling, the opportunity to establish Vegas-style sports betting markets within the time frame of a year of the PASPA going into effect.
New Jersey ended up being the only state that qualified to start the sports betting operation. During the allotted window, the New Jersey government was not able to pass any sports betting initiatives or bills to allow the operation to take place.
As January 1, 1994, came around, the Garden State was prohibited from offering any sports betting products or ways to bet. Las Vegas, Nevada was the monopoly in the casino industry, which brought financial struggles for gaming facilities across the United States. As part of the failed attempt, Atlantic City struggled for many years to come.
The Uphill Battle to Legalize Sports Betting in the United States
PASPA has certainly faced a lot of legal disputes over its time of standing tall for over two decades. However, this one Supreme Court case had the opportunity to shake up the entire sports betting industry. It was known as Murphy vs National Collegiate Athletic Association.
A non-binding referendum was conducted in New Jersey in 2011. This was essentially a vote on whether to create an amendment to the state’s constitution. At the moment, Governor Chris Christie signed legislation that would allow sports betting to take place in the state.
For decades, leagues have reiterated that sports betting would harm the integrity of their sport. Immediately professional sports leagues and the NCAA sued the state under PASPA. Sports wagering was deemed illegal once again even though the public heavily supported the business venture.
In 2014, the Governor did not want to give up on the operation. He pushed another bill that would decriminalize sports betting in some locations throughout the state. The state believed that it did not go against PASPA as its main goal was to decriminalize it.
Once again, the sports leagues sued the state, and it became a very long legal process. Fast forward to May 14, 2018, which was the most important date for the sports betting industry for quite some time.
The Supreme Court agreed with New Jersey’s claim that PASPA violated the anti-commandeering principle. The Supreme Court overturned PASPA but stated that Congress can oversee and regulate sports betting directly. If they choose not to do so, the state will be given the right to choose whether they want sports betting within its borders or not.
Post- PASPA
When PASPA was enacted, some groups benefited from states not being able to allow sportsbooks to operate. Tribal casinos have been able to have a monopolistic hold on some markets, blocking any attempt to allow providers from entering. This has made it hard for some states to allow reputable sportsbooks to conduct business in several states.
Other states across the nation did not have to deal with this type of issue as they easily developed a sports betting market to be a part of the industry.
After the law was overturned by the Supreme Court, Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania, Rhode Island, New York, and Arkansas all offered their residents some form of legal sports betting. Numerous states after that introduced both retail and mobile sports betting.
Some states just offer one form over the other. Many sports betting markets that only offer retail sports betting have conducted studies to see whether offering mobile sports betting would be the right approach moving forward.
Post-PASPA, there were many more concerns regarding betting on collegiate sports as athletic directors across the country decided to speak on this matter. A plethora of athletic directors and others involved with the numerous Division 1 programs believed that betting on collegiate sports would bring detrimental effects to the student-athlete.
These drawbacks could include negative exchanges from fans at the game. They argued that the concerns could extend to the classroom and among teammates. Because of this, some states will not allow bettors to place wagers on collegiate prop bets or games.
More Growth in Sports Betting
The good news with the Post-PASPA is numerous markets have entered or are looking to enter the industry. New Jersey surpassed Nevada as the poster state as the record holder for the overall handle for October 2021 and the year.
This was before New York entered the sports betting industry. The first 30 days of the launch were a success as sportsbooks brought in a handle that exceeded $1.98 billion. This has been a common theme throughout the sports betting industry as numerous states keep toppling previous records.
The sports betting industry will continue to grow in 2022 as more sportsbooks look to extend their reach. California is another potentially lucrative market that looks to have several propositions or initiatives on the 2022 ballot. It will not be an easy battle as the bills are facing opposition from the state’s tribal committee and other anti-gambling groups.
Anything in regards to wagering or any other type of gaming will also face heavy opposition from the other side. However, establishing a sports betting market has quite a few benefits.
Employment has gone up with the addition of new gaming facilities, and remote jobs in regards to the addition of sports betting. States receive revenue in the form of taxes. These taxes may be used towards funding education, gambling education and treatment, infrastructure, helping veterans, and other positive things that could help the state and even the local level.