Could Legal Sports Betting Become a Nationwide Reality?

There’s probably no gavel involved in this process. Got your attention though, didn’t it? (Ed Murray/NJ Advance Media)

There’s probably no gavel involved in this process. Got your attention though, didn’t it? (Ed Murray/NJ Advance Media)

When we recently posted our complete beginners’ guide to betting on sports, we mentioned in one of the first sections that legal sports betting is not available in all states, and that some potential sports bettors might have to overcome their ethical hang-ups regarding whether making bets online would constitute breaking or merely bending the rules. Of course, since we don’t consider sports betting to be nearly as nefarious as some of the more popular games of chance found in casinos across the nation, we would readily champion a movement to legalize betting on sports in all states across the good old US of A.

Not that all games of chance are technically nefarious, but come on…it’s ridiculous to ban someone from making a friendly wager on a game when they have a roughly 50/50 chance of winning, yet allow that same person to play games where the odds are clearly stacked against them. Either slot machines, roulette, and even bingo should go right out the door, or sports betting should become a legalized hobby for anyone who wants to enjoy it. And if that sounds bold, it’s only because we’ve always been relatively certain that we weren’t the only ones who felt this way.

In fact, now we’re surer than ever. There have always been talks about legalizing sports betting in certain states such as New Jersey, home of Atlantic City. But lately, the news regarding those talks seems to be taking on a stronger tone. Some news sources seem almost certain that legal sports betting is about to become a possibility not only in such states, but maybe even nationwide. On the flip side, recent events in Congress have had some dastardly implications for the possibilities of legal sports betting in all states, including the ones in which it already exists.

Below, we’ll look at the movement to legalize sports betting, as well as the move to ban all forms of online wagering. We’ll also examine the effect that each of these respective movements may stand to have on the states that seek to secure legal sports betting as a right for their citizens, as well as the states that now fear losing that right. In the process of relaying these recent events, we will do our best to maintain a sense of unbiased journalism. Even though you totally know how we feel about all of this already.

Proponents of Legal Sports Betting

NBA Commissioner Adam Silver wants to see betting legalized for the sake of regulations. Potential NBA profits also don't hurt. (Nikki Boertman/The Commercial Appeal/MCT)

NBA Commissioner Adam Silver wants to see betting legalized for the sake of regulations. Potential NBA profits also don’t hurt. (Nikki Boertman/The Commercial Appeal/MCT)

New Jersey is one of the major states currently vying for the right to legal sports betting, and a lawyer working for the horse track at Atlantic City’s Monmouth Park said at last week’s East Coast Gaming Congress that he felt 95% certain that the state would be able to legalize sports betting by fall of 2015. Of course, this was one man’s opinion, and many have disagreed with him. They have every right to, since New Jersey has been subject to broken promises of the exact same kind in the past.

There were over six hundred professionals present at the Gaming Congress, each potentially playing their own role in the movement to enact legal sports betting in the state of New Jersey. Not only did the conference include professionals working in the casino industry, but also government officials and legal experts (such as the one mentioned in the paragraph above). Frank Chesky III, one attorney who disagreed with the 95% certainty, noted that the sports leagues and the Department of Justice might have an edge over New Jersey when it comes to legalized sports betting. And he certainly has a point.

But alas, there may be power in numbers. New Jersey may not be able to legalize sports betting, but they have legalized internet gaming. And while they have not made a strong push in this direction, Pennsylvania and California have considered following suit. David Rebuck, the current director over at the Division for Gaming Enforcement in the Garden State, has commented on the possibility that the laws governing internet gaming and the laws governing legal sports betting may actually be linked. And while New Jersey (with the assistance of Delaware) is trying to fight in court for their ability to legalize betting on sports in their state, Rebuck believes that a nationwide legalization of internet gaming might be the gateway to a nationwide legalization of sports betting.

And the same states that are thinking of joining New Jersey in offering legal internet gaming are also leaning toward offering legal sports betting. In fact, California has been looking at this possibility pretty strongly since November of last year, the same month that NBA Commissioner Adam Silver said that he would absolutely support an increase in legal sports betting as long as it meant that the federal government were able to regulate it better than they can under the current conditions, which all but encourage the widespread illegal sports betting activities occurring daily across the nation.

Pennsylvania has not necessarily considered legal sports betting as closely as New Jersey or California, but that doesn’t mean that the state’s lawmakers are not still intrigued by the idea. The House Gaming Oversight Committee’s chairman, Pennsylvania representative John Payne, believes that both sports betting and internet gaming are important possible sources of taxable revenue for the state.

And if states believe that legal sports betting can make them an easy dime, then you can bet dollars to donuts that even more states than the ones mentioned above might start hopping on board. Heck, there are people in Illinois who are already pushing to add a state to the list of those currently seeking legal sports betting, and Mississippi’s state legislature asked the executive director of the Mississippi Gaming Association to study the possibilities of legal sports betting in their state just last year.

Effects of Legalization on the States

Atlantic City needs legal sports betting to get out of financial trouble, possibly due to what we assume is a massive electricity bill. (Shutterstock)

Atlantic City needs legal sports betting to get out of financial trouble, possibly due to what we assume is a massive electricity bill. (Shutterstock)

As you may have guessed, the issue of taxable revenues is going to factor into the possible effects of legalized gaming on New Jersey, Pennsylvania, and California if legal sports betting becomes a reality in those states. However, there are some who disagree with the idea that the state will actually benefit from these potential changes.

The article linked above is an opinion piece which states that Governor Chris Christie is costing the state of New Jersey millions of dollars by continuing the legal battle to end the ban on sports betting in most states. And this isn’t wrong, but it should be stated that this cost is incurred in the short term. So, what about the long term? Well, the owner of the Meadowlands Casino in New Jersey believes that they could earn at least $500 million in taxable revenues by opening a casino, with at least $200 million of this aimed at benefiting Atlantic City (which has recently shut down a third of its major casinos). Why can’t they open a casino? Because even if legal sports betting rights were granted to New Jersey, the state constitution still bans gaming of any kind outside of Atlantic City.

In other words, New Jersey technically isn’t ready to accommodate the changes they’re requesting. But if they were to make the necessary alterations, they could benefit Atlantic City as well as other cities in New Jersey that could use the extra tax revenues. And this is important, because gaming in Pennsylvania has given the old AC a run for its money.

Pennsylvania cleared over $3 billion in gaming revenues last year alone, and that was after a reduction in the number of slot machines in the state. But while Pennsylvania may appear to be taking some of the thunder away from New Jersey’s gaming scene, they experienced less profits last year than they had either of the two years prior. They were on a major upswing from 2006 onward, but only three gaming venues have regularly increased their overall table profits in the past three or four years. In fact, most of their money is from the slots, which makes that reduction in slot machines seem a bit more significant. If Pennsylvania’s gaming scene is indeed beginning to falter, then legal sports betting might help them experience another surge in profits.

That leaves California. It was reported last year by Forbes that California would likely legalize sports betting if New Jersey manages to get their way in court. Not only would California likely experience the same benefits as those outlined above for Pennsylvania and New Jersey, but Forbes also mentioned a proposal that bettors should be charged with a fee that would go to the sports leagues.

If this were to happen, it would mean that the implementation of legal sports betting on a national scale could not only benefit the states that embrace the law, but also the sports leagues who would profit from their participation.

Barriers to Legal Sports Betting

Yes, it’s a smart phone. And if you live in Nevada, it’s more important to the fate of legal sports betting than you might think. (Craig Greenhill/Herald Sun)

Yes, it’s a smart phone. And if you live in Nevada, it’s more important to the fate of legal sports betting than you might think. (Craig Greenhill/Herald Sun)

As of now, the only four states that support legal sports betting are Nevada, Delaware, Oregon and Montana. And while there is generally massive support for legal sports betting through the internet, it appears as if it could take at least two or even as many as ten years to see this reality due to the efforts Congress has put toward enforcing the Wire Act.

This is unfortunate because, as we mentioned in the section above, the sports leagues could benefit almost as much as the states. In fact, with outfits such as Draft Kings collaborating with the leagues, some believe that legal sports betting could raise the salary cap and allow teams within the sports leagues to make more competitive bids for top players.

The NBA is especially keen on pursuing such opportunities (they’re currently using European examples such as the Barclays Premier League as a model for cooperation between sports leagues and gaming companies), and even MLB Commissioner Rob Manfred is starting to look at the possibilities that legal sports betting could offer the sports leagues.

But while the NBA and MLB are starting to look at the possibilities, the Restoration of America’s Wire Act is throwing a monkey wrench into the process of legalization. The point of the bill is just to ban gaming on the internet, but another result of the bill’s passing would be a semi-ban on legal sports betting in Nevada. The state makes close to $4 billion annually on its sportsbooks, but a lot of that comes from mobile sports betting apps that would be banned if the reinstatement of the Wire Act were to come to pass.

This particular effect of the bill is likely not intentional, and the reasoning for it is practically baffling. The core issue that mobile sports betting apps in Nevada would face is that phone transmissions do not travel in a direct path. They travel through multiple routers before getting to their intended destination. So even if a phone in Nevada is used to place a bet through a transmission that ultimately is received in the same state, that transmission will actually have traveled through states such as Utah, California, and Arizona. This means that a perfectly legal wager would have crossed state lines, thus becoming illegal.

If you aren’t quite following that, don’t feel ashamed. It’s rather complicated, and the whole thing frankly sounds a bit pedantic. But, bear in mind that one of the reasons Adam Silver supports legal sports betting is because he feels that sports betting needs to be federally regulated. And with corruption in the gaming industry turning into a global problem (even in places where sports betting is already legal), Congress might just be trying to keep the issue from spreading by putting the hammer down on gaming in general. Hopefully, however, the issues created for Nevada by the Wire Act are not a harbinger of possible nationwide bans on sports betting itself.

Effects of a Possible Ban on the States

Pictured: The current state of the sports betting industry in Oregon. (John Burcham)

Pictured: The current state of the sports betting industry in Oregon. (John Burcham)

The issue that Nevada now faces due to the Wire Act is that, as mentioned in one of the links above, about 40% of sports betting in the state travels through the mobile apps that stand to get banned. That said, Nevada has just passed a bill through the state senate that, if officiated, would allow businesses to place wagers on sports. Since corporate entities could arguably afford larger bets than individuals, this could mean massive profits for the sportsbooks. The question is whether or not more businesses would be willing to take advantage of the new bill if they were able to place their bets from the comfort of the office. The bill has the potential to raise profits for Nevada sportsbooks, but they won’t profit by as much if the Wire Act is not struck down.

Of course, for some states, even an outright ban on sports betting would make little difference. Delaware’s legal sports betting industry is the youngest of the four in the United States at the moment, as they only began allowing parlays on NFL games through the Delaware Sports Lottery back in 2009. But why did they do it? Because the year before, they expected their gaming industry to experience an increase in revenues of more than $13 million, and they barely cleared over a third of that. Now, even their major racetracks are struggling. In other words, Delaware only embraced legal sports betting as something of a Hail Mary, which ultimately fell incomplete.

Montana has the authorization to enact legal sports betting, but much like Delaware, their efforts at expansion haven’t been too great. As of this year, they join Louisiana, Washington, Iowa and Arizona as one of five states that has tried and failed to legalize fantasy sports sites (although Kansas has been successful). In fact, even traditional sports betting is not technically legal in the state of Montana, even though it is authorized. The only way in which Montana residents are allowed to bet on sports is with each other. There is no house, which means no major taxable revenues for the state. Since two people can easily make a friendly wager without the worry of government interference, there wouldn’t be much fallout for Montana if legal sports betting were entirely wiped out today.

Oregon is the last of the four states that has managed to get around federal law by grandfathering in the practice of legal sports betting. Prior to the ban on sports by the Professional and Amateur Sports Protection Act of 1992, Oregon had added something called Sports Action to the state lottery. It was pretty similar to the NFL parlays allowed by Delaware, although it was killed by the state legislature in 2007. Since then, they’ve done very little to bring back legal sports betting to their state. Not only would they not be affected by a ban, but even restoring the Federal Wire Act of 1961 would not affect them since online sports betting is basically illegal in their state anyway.

If you’re taking anything away from this, it should be that of the four states which are allowed the right to legal sports betting due to a grandfather clause in the act that banned it nationwide, only Nevada has actually fully embraced their rights. What is interesting, however, is that technically any state could have had the right. When the ban was passed, the rest of the US outside of the above four states had a year in which they could have set up their own systems of legal sports betting, but elected not to. In other words, we could have had nationwide legal sports betting already if the states really cared about it.

In short, the ban was not too harsh when you consider that it could have easily been circumvented by any states that cared enough to do so. And it is unlikely that sports betting will ever be banned entirely, if for no other reason than the impact it has on Nevada’s job market alone. This is also why the Wire Act might (hopefully) either see revisions or be killed entirely. Americans care about jobs. Why else would the issue of free health care in the US constantly turn into a debate about nothing but its implications for the job market?

So we definitely don’t have to worry about an actual ban on sports betting any time soon. Legalization, however, may still be something of an uphill battle. It might be a while, but with the tax implications it could have for the states, the sports leagues, and possibly even the federal government…there’s a good chance you’ll be able to partake in legal sports betting, online or offline, at some point in the next decade.