The Effects of Legalizing Sports Gambling

sports gambling
Photo by Jim K. Decker

May 14th, 2018 was a historic day in the world of sports. By a vote of 7-2, the Supreme Court struck down the national ban on sports gambling and has opened the doors for the sports betting industry to be legal across the United States. The case was first brought to the Supreme Court in December 2017, when former New Jersey Governor Chris Christie challenged the Professional and Amateur Sports Protections Act (PASPA) on the basis that it violated the Tenth Amendment right for states to make their own policies on such topics not delegated to the federal government. The Act was passed in 1992 and made it unlawful for a state to “sponsor, operate, advertise, promote, license, or authorize by law” sports wagering. Only four states (Nevada, Oregon, Montana, and Delaware) were exempt from the federal ban.

To be clear, the Supreme Court ruling does not make sports betting legal in all 50 states. However, it does open up the doors for all 50 states to choose their own rulings on sports gambling. Polls suggest half of Americans support legalized sports gambling, so it won’t be surprising if many states quickly make room for the sports gambling industry to thrive.

The topic of sports gambling is not recent, especially to Chris Christie during his time as Governor of New Jersey. Christie signed the Sports Betting Amendment in January 2012 after a referendum concluded that voters supported sports gambling in the state of New Jersey by almost a 2:1 ratio. It was struck down a few months later after the 4 major sports leagues filed a lawsuit to a state district court on the grounds that it violated the now-defunct PASPA Act. An amended bill was passed and signed by Christie in October 2014. Again, the 4 major sports leagues filed a lawsuit for the same reason, and again they won. In October 2016, New Jersey appealed to the Supreme Court about the ruling, and the Supreme Court agreed to hear the case. Finally, the Supreme Court overruled PASPA on May 14, 2018, and delegated sports gambling laws to the states.

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Prior to the Supreme Court decision to legalize sports gambling, the affair had been very similar to marijuana: although technically illegal in all but the 4 states exempt from the federal ban, many people across the United States were engaged in it. According to the American Gaming Association, about 97% of sports gambling was illegal prior to the Supreme Court ruling. In addition, according to a Sports Illustrated article from April 1995, a Gallup poll from 1989 found roughly 81% of Americans had gambled on sports at least once in their life, with 31% of Americans gambling on sports weekly.

Estimates vary wildly due to the legality of gambling and restricted access to data, but the sports gambling industry was already reaping anywhere from $150 billion up to $400 billion prior to the Supreme Court decision. It’s safe to say this figure will increase rapidly in the coming months and years. Two of the biggest fantasy sports sites, FanDuel and DraftKings, already have the infrastructure and business model needed to take sports betting to another level. Don’t be surprised to see the creation of more fantasy sports sites and more competition in establishing partnerships with casinos.

Although the legalization of sports gambling may bring in a wave of economic activity and state tax revenue, those on the other side fear moral and social repercussions for such a decision, especially coming from social conservatives. Studies conducted suggest that a significant portion of sports gambling is prevalent among college-age men in fraternity housing. According to the same Sports Illustrated article cited above, nearly 1/4 of college students gambled on sporting events at least once a week. It has also historically been treated lighter than other activities like drug use, although the potential financial costs and tendency to overcommit are just as visible.

One thing to remember is that past Supreme Court decisions have an impact on the future cases that will be presented. The fact that the Court was willing to cede federal government control in favor of state government control is great news for those who lean socially liberal or libertarian. A variety of other cases like gun ownership, immigration law, and marijuana will certainly be affected by the Supreme Court’s decision to utilize the Tenth Amendment and put state government’s power to pass legislation that is not specifically granted to the federal government.

About Alex Glasier 10 Articles
I'm a graduate student of economics at Buffalo State College.

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