The Thrill of it All: Sports Gambling in the U.S.  

Your heart begins to flutter, currents of adrenaline start flooding through your veins, the laughter and jeers of your friends who surround you fail to quell the creeping anxiety rising up through your chest… as the final buzzer sounds, the harsh reality of not being able to pay this month’s rent comes crashing down on you. However, this overwhelming dread is merely fleeting, as the next game is scheduled to start in twenty minutes – providing the perfect opportunity to win it all back. As your friends start to order Ubers, and people start trickling out of the bar, you are fully aware of a single fact: you are no longer having fun. You have a gambling addiction. Unfortunately, in Australia, gambling is engrained into sporting culture – and as a young man from Sydney’s eastern suburbs, I found myself, like my friends, succumbing to a world that feeds off one’s hopes for a ‘quick buck’, or in worse cases, a dependent income. Following the legalization of sports betting in Australia, the latest statistics put the nation at the top of the list for spending on legal sports betting per capita – a whopping $209 billion in the 2016/17 year. Moving to New York in early 2016, I was lucky enough to escape a hobby that was quickly becoming a problem. However, following the Supreme Court’s decision to eradicate a federal ban on sports wagering in the United States earlier this year, with the power to legalize sports gambling in the hands of each state, one question still remains: do the potential economic benefits of legal sports gambling jeopardize the integrity of sports spectatorship? Could a single vice poison an industry that prides itself on integrity, respect, and elite sportsmanship? In order to answer this question, one has to trace through the history of sports wagering, deciphering where it works, and where it does not.

For a quarter of a decade, the Professional and Amateur Sports Protection Act of 1992 (PASPA) has prohibited any state that had not already legalized sports gambling at the time of the law’s enactment from ever authorizing the legality of the activity. Since then, Nevada has essentially conducted a form of monopoly on legal sports wagering, as an exemption from the law. However, the enactment of the law did little in the actual prevention of sports wagering in the U.S., as the National Gambling Impact Study Commission of 1999 estimated that $80 to $380 billion was being spent on illegal sports betting by Americans annually, a far cry from the $2.8 billion amassed from legalized gambling in Nevada. Thus, illegal sports gambling was hailed as “the most widespread and popular form of gambling in America.” In recent years, further evidence has surfaced suggesting that rather than tightening regulation on sports gambling in the U.S., PASPA has effectively driven the market underground. In 2017, it was reported that while gamblers spent $4.9 billion legally gambling in Nevada, this figure only amounted to 4% of the total sports wagering activity in the U.S. – placing the illegal, illicit industry’s revenue at over $120 billion annually, a shocking twenty times the amount of the legitimate industry. Thus, there is no denying that despite the inability to obtain exact figures from the underground, illicit side of gambling, there is a major market for sports gambling within the United States. Those in support of the legalization of sports gambling argue that by driving the market underground, PASPA and other lawmakers are putting citizens that engage in this activity at an incredibly high risk, the very same citizens the law was meant to protect. Exploitative online gambling sites turning a blind-eye to underage gambling, little incentive for operators to discourage problem gambling, and ultimately the lack of protection of player data, are all risks that come with the underground industry. The proposed regulation of this ‘illegal activity’ draws parallels to the debate surrounding ‘safe injection sites’ for heroin users amidst the opioid epidemic, with advocates arguing “the sites can lead to major public health benefits.” Furthermore, rather than reducing the amount of match fixing within sports, PASPA’s prohibition of sports gambling only makes it easier for this kind of behavior to occur: “if you create a black market you make everything twice as hard – monitoring, regulating, licensing, customer protection…” (Alex Inglot, Sportradar). According to an article published in September of 2017, by having no legal platform for betting within the U.S., underground bookmakers are targeting typically ‘low-tier’ sports for betting markets, as it is considered easier to coax athletes earning a lower income into participating in match fixing.

Through the assessment of the potential economic benefits of legalized sports gambling, by delving into the full scope of the underground wagering market, and by comparing the history of economies in sport with what the future may hold, I hope to provide a cohesive study into the nature of sports spectatorship, attempting to determine whether or not the legalization of gambling in America is right, wrong, or somewhere in-between.

Games of Chance: A Brief History in Gambling Regulation.

Throughout history, deeming an activity as ‘il/legal’ or ‘il/licit’ behavior has been a direct reflection of the fluid, constantly evolving nature of societal morality – what the general public deem as ‘good’ or ‘bad’. There is evidence of gambling and risk-taking that actually predates all forms of sporting events, some as far back as 50,000 BCE. Within the U.S. (dating back in some cases to the 1600s), as federal law affords state control over gambling laws, many states have swayed between authorizing and prohibiting acts of wagering in a multitude of forms. The earliest form of sports betting in the U.S. dates back to 1665 within the horse racing industry, and by 1868 horse racing had become a gambling enterprise in the United States. In the face of bookmaking being outlawed in the early 1900s, pari-mutuel betting (bettors gambling amongst themselves rather than a third-party acting as ‘the house’) came to the fore, and once again restrictions on gambling were dodged. Outside of horse racing, however, the relationship between gambling and organized sports grew testing, due in part to a string of match-fixing scandals such as the famous ‘Black Sox Scandal’, in which the White Sox purposely lost the 1919 World Series – soon after, sports gambling found itself as not only being deemed illicit, but illegal also. Following the Major League Baseball’s lead, in order to maintain the “integrity of the game” in their respective sports, every major professional sporting association appointed Commissioners, whose responsibility it was to enforce regulations to ensure fair-play within their sport. Despite these extensive efforts, the arrival of the Great Depression resulted in a paradigm shift once more within U.S. society, and law makers began to consider less the moral implications of gambling, instead focusing on the practicality of raising revenue and boosting economic prosperity. As a result of this change in attitudes, currently all states but Hawaii allow for at least one form of gambling within state lines – predominantly in the form of the lottery. While federal law has typically delegated issues regarding gambling to state-level, sports-gambling remained exempt from this rule, and in 1992, as discussed earlier in this paper, Congress enacted the ‘Professional and Amateur Sports Protection Act’ – essentially barring states that did not already allow sports wagering from doing so in the future. This decision came after the 1980s, where at least thirteen state legislatures were considering proposals to legalize sports gambling once more. The fear of these proposals destroying the integrity of sporting events, and with it fan engagement (meaning profits), spurred the nation’s major sporting leagues to implore Congress to put an end to the legalization of sports gambling once and for all. Federal involvement in what had historically been considered a state matter was deemed necessary, as Senate Judiciary Committee staff declared the following in a report:

“Sports gambling is a national problem. The harms it inflicts are felt beyond the borders of those states that sanction it. The moral erosion it produces cannot be limited geographically… Without federal legislation, sports gambling is likely to spread on a piecemeal basis and ultimately develop an irreversible momentum.”

However, following the implementation of PASPA, it was soon clear that federal legislation had no effect on the spread of illegal wagering, but merely spurred underground activity. This, the state of New Jersey argued, was PASPA’s plan the whole time – and PASPA did not deny that ‘stopping the spread’ was not their intended goal. Rather, PASPA’s goal was to eliminate legal wagering – in other words, keep the gambling activity underground and unseen in order to protect the image of the major sporting leagues. For the last decade, PASPA has come under increased scrutiny, culminating in May of this year when the Supreme Court deemed PASPA “a legislative overreach by the federal government,” with many justices siding with the state of New Jersey in claims that Congress had “commandeered” state regulatory power by prohibiting states from legislating the issue. As a result, PASPA was essentially overturned, and whilst this does not completely legalize sports betting in the United States, all fifty states now have the power to legalize the act of sports betting within state lines if they choose. In the months following, so far eight states have legalized sports betting, with a further twenty-three on track to pass new laws allowing the activity in the near future. Will history repeat itself? With the eradication of PASPA, will the reputation of major sporting leagues and the integrity of sports as a whole be tarnished within society? Through a closer analysis of sport spectatorship, as well as evaluating the changing attitudes of society as a whole, a modification of the original question has to be made: is the integrity of sports spectatorship dependent on whether or not spectators can wager? If prohibiting sports betting only makes corruption harder to spot within sports, does the legalization of the industry not make sense?

Licit or Illicit: Changing attitudes within the U.S.

In recent years, there has been a renewed interest in the debate surrounding sports gambling in the U.S., with talk of immense economic benefits causing attitudes toward gambling to radically shift in a positive direction. Twenty-five years since its enactment, even those who were involved in original PASPA discussions have found the nation’s perspectives have altered.

Polls suggest a trend of legal gambling gaining strength, as while 69% of respondents opposed legalization in 1974, by 1993 that number had dwindled to only 56%. In recent years, the long-held stigma of ‘illicitness’ in sports gambling appears to have subsided, when a 2017 University of Massachusetts Lowell nationwide poll found a majority of voters (55%) were in favor of legalization, with a mere 33% opposed. Thus, it is no surprise that with the rise in approval ratings for legalization, so too has the number of American’s engaging in sports gambling risen, with Oxford Economics releasing a study in 2016 claiming that greater than one in three Americans gamble on professional sports every year. It appears that the major sporting league’s early fears of legalization were deeply misplaced, as it has become apparent the leagues in fact stand the most to gain. According to a Greenberg Quinlan Rosner Research survey, 45% of avid sports fans reported having bet on sports in the past year, which reportedly correlates directly with levels of engagement, according to Nielsen Sports, a subsidiary of the television ratings provider. In their 2016 report, Nielsen Sports claimed that gamblers watched an average of 19 more games and more minutes than non-bettors, with 60-73% of avid fans believing the activity should be legalized. This profound turnaround of views on the matter has permeated throughout the sporting leagues, and having recognized the rewards available, the commissioners that once sought to ban sports betting, are now huge advocates: “sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.” (Adam Silver, NBA Commissioner) Furthermore, Silver and the NBA made history in August 2018 when the NBA became the first major professional sports league in the United States to announce a partnership with a gambling company, MGM Resorts International – making them the official gambling partner of the NBA. It can be argued however, that fears may still linger amongst sporting leagues due to leagues such as the NFL, MLB, and NHL, having lucrative ties with Daily Fantasy Sports (DFS) through sponsorships and other advertising deals. With a fully legalized betting market in the works, there is no doubting the potential threat to the levels of participation in the DFS industry. Yet, despite these minimal fears, it is evident that due to a shift in societal values, statistics point toward the legalization of sports gambling – and a majority of sports fans are in support. So, is this radical change in support misguided? If supporters are basing their advocacy on the potential economic benefits, what exactly do regular U.S. sports spectators stand to gain?

Economic Impact on Society:

While once only 38% of Americans could accurately state whether sports gambling was illegal in the U.S., increased awareness of the prevalence of the black market in recent years has driven citizens to support effective regulation of markets like sports gambling. For those that engage in illegal sports betting, knowingly or not, the dangers they are susceptible to at the hands of criminal organizations are unavoidable under an illegal market, according to the law enforcement community: “Consumers would rather [gamble] in a regulated market that provides consumer protections, integrity of the game… certainty and transparency. It’s easier to maintain public safety in that type of environment.” (Ed Davis, former Boston Police Commissioner) . However, the safety of gamblers is merely a small impact in the grand scheme of things, as legalization stands to increase state revenue, and ultimately create jobs and stimulate wages. An estimated 32 out of 50 states are set to legalize sports betting by 2023 according to analysis carried out by gaming industry research firm Eilers & Krejcik. If this statistic proves to be true, it is estimated these states would collectively generate up to $16 billion in new tax revenue every year. Of course, these estimates are dependent on the tax rate on the activity, the number of licenses available, and the overall popularity of products used by consumers. An Oxford Economics study estimates that if a majority of states legalized sports betting, implemented a moderate tax rate of 10%, and offered a convenient alternative to those involved with underground gambling, they would generate almost $20 billion in new tax revenue from sports betting directly, and more than $40 billion in economic output if including revenue generated from related industries.

The economic benefits at both state and federal levels appear to be overwhelmingly positive, with the American workforce also receiving a boost with the potential rise of a new industry. A legal sports gambling system would reportedly create 125,000 to 152,000 jobs paying between $6 billion and $7.5 billion in total wages annually, providing an average salary of roughly $48,000 for a typical worker within this sports betting industry.