Removal of PASPA could open the door for $150 billion betting market
May 24, 2018
May 14 was a historic day in American sports history. However, if you’re like me and can’t even remember a friend’s birthday, let alone what happened on that day in sports, you can rest assured knowing you’re not alone.
No, there was no epic game-winning shot. No, a heavily outmatched underdog did not come back to win a championship. And no, Lebron James fans, the Golden State Warriors did not lose in the playoffs (I’m sorry).
What happened last Monday is more important than that: the U.S. Supreme Court ruled to strike down the Professional and Amateur Sports Protection Act of 1992 (PASPA), which effectively banned commercial sports betting in almost every state.
Now, if you think this topic is boring and are tempted to stop reading right here, I don’t blame you. Rarely do sports and politics mesh together—and that is usually for the best. Yet, instead of setting aside this article and drifting back to Instagram, let me explain why this ruling is so significant.
By ruling that PASPA was unconstitutional, the Supreme Court has effectively opened the door to legalizing the estimated $150 billion in illegal bets on professional and amateur sports that Americans make every year, according to The New York Times.
How can this happen? What does this mean? And how could this affect you, as well as sports in America in general? This topic, as well as the future for legal sports gambling, remains fairly confusing with many questions that must be answered.
Why was PASPA ruled unconstitutional?
PASPA was a federal law that defined the legal status of sports betting in the United States and effectively made it illegal for any state government to legalize, regulate and/or tax sports betting (with few exceptions). However, the law was deemed unconstitutional because of its conflict with the Tenth Amendment of the Constitution, which states that any powers not delegated to the federal government or prohibited to the states in the Constitution are reserved to the states.
Essentially, since regulation of sports betting was not a power explicitly given to the federal government, states have the right to make their own decisions on the matter.
So, does that mean everyone—including Santa Clara students—can legally make bets on sports now?
Well, not necessarily. In order to place a bet in-person, you are still only legally allowed to do so in Nevada. However, in this case, what happens in Vegas won’t necessarily stay in Vegas. Expect this to change in the next few years, as 20 states have already introduced some form of sports betting legislation.
Of these states, New Jersey, Delaware, Connecticut, Mississippi, Pennsylvania and West Virginia are the furthest along. In fact, in-person over-the-counter transactions are already accepted in Atlantic City and at horse tracks in New Jersey. Of course, there are still age requirements to place bets, which can differ depending on the state.
Oh okay, so all we have to do is sit back and wait for California to pass its laws legalizing sports betting, right?
Technically yes, but it’s more complicated than that—because why wouldn’t it be? Californians will not be able to place in-person bets until California passes a state law that permits it.
The only problem is that it will likely take several years with lots of arguing and tons of money spent to decide whether or not California will allow legal sports betting and who will own the rights to the revenues it will create.
Okay, so you’re telling me sports betting is no longer illegal nationwide, but it is also not yet legal in every state and it could possibly take years until California catches up to New Jersey in this area?
Well then what’s the point of this act getting struck down?
The importance of this new Supreme Court ruling is in how it will affect the sports leagues the betting is based on. At the professional level, sports are a business—and businesses want to be compensated for their products.
Last year alone, Nevada sports books won a record $249 million according to the ESPN website. That $150 billion in illegal bets that Americans make every year—which can now become legal—will not be easily dismissed either. If sports leagues can push hard enough to get themselves a piece of the revenue, this could become yet another massive moneymaker for them.
So far, different leagues have had various reactions to the change. The NBA and MLB have been the most active and outspoken in support of legislation to legalize sports betting–as long as it includes certain stipulations beneficial to their leagues.
In fact, both leagues have launched state by-state lobbying efforts. Basically, they are arguing for a dependable set of regulations which would “provide sports governing bodies with the ability to restrict or prohibit betting on league events, data rights and a percentage of the amount bet on league events paid by operators,” according to ESPN.
Should these leagues be successful and should most of the country follow the lead of New Jersey, sports betting as most everyone knows it today will change. League owners will profit tremendously and the downsides that come along with this decision will need to be addressed.
We won’t know exactly how all the factors will play out until the issue develops further, but one thing I can tell you is that big sports leagues rarely miss a chance to monetize an opportunity.
Think they won’t get it done? I bet you 100 bucks it’ll happen.
Contact Kyle Lydon at firstname.lastname@example.org or call (408) 554-4852.