Football Field

On May 14, 2018, the U.S. Supreme Court ruled to allow individual states to legalize sports gambling, a win for the country’s gaming industry and potentially a major revenue generator for the states. At issue in the litigation is the 1992 Professional and Amateur Sports Protection Act (PASPA), a law designed to ban sports betting in 46 states. In 2014, the state of New Jersey passed legislation to get around the federal law and decriminalize sports betting at casinos and racetracks to help revive Atlantic City’s economic detriments. A coalition of athletic associations led by the NCAA sued the state for violating PASPA. In turn, the state argued PASPA was an unconstitutional attempt by Congress to directly control the states. In 2016, the U.S. 3rd Circuit Court of Appeals in Philadelphia struck down the 2014 state law. However, the U.S. Supreme Court eventually agreed to take the case, ultimately siding with New Jersey and quashing the 1992 law with a vote of 6 – 3.

PASPA had barred state-authorized sports gambling with exceptions for Nevada, Montana, Oregon and Delaware. These states had already approved some form of sports wagering before it took effect. Notably, PASPA did not cover wagering between friends or animal races, such as horse racing, which many states already allowed. Nevada was left as the only state where a person could wager on the results of a single game, which created a monopoly on the industry. Gaming industry experts estimate that roughly $150 billion a year is spent on sports betting but only about 3% is legal, mostly in Las Vegas. Though it is apparent there are billions of dollars in the industry, what remains uncertain is which states will now choose to take advantage of the new ruling.

In the lead-up to the Supreme Court’s decision, five states in addition to New Jersey —Connecticut, Mississippi, New York, Pennsylvania, West Virginia — had already passed legislation to allow legalized sports betting in some capacity. However, some of those laws have lain dormant until the Supreme Court decision. Similar legislation has also been introduced in 14 other states since the beginning of 2017, according to the Center for Public Integrity. Now that the Supreme Court has given the green light for all states to move forward, we have already seen many states take action with the hope of filling their coffers with state revenue.

States that would likely offer sports betting

The Center for Gaming Research at the University of Nevada projects that 14 states will likely offer sports betting in the next two years, and 19 states will in the next five years [Figure 1]. In a report released in September 2017, GamblingCompliance projects that sports wagering is likely to spread between 21 and 37 states within a five-year period. “That would create a nationwide sports-betting market worth $2.0 billion to $5.8 billion in annual revenue, depending on whether those states choose to authorize wagering via mobile devices as well as casinos and other retail channels,” GamblingCompliance reported. The trade publication also reports that newly authorized sports betting markets in Pennsylvania, Massachusetts, New Jersey and Illinois would all surpass the current size of the market that exists in Nevada. In addition, New York could find itself as America’s largest sports wagering market under an aggressive legislative scenario.

In 2013, New York legalized sports betting at four new commercial casinos if the federal ban was ever lifted. When the Supreme Court gave the green light for states to act, New York state lawmakers were unable to push legislation forward to expand the current law before the legislative session ended on June 20. The New York Gaming Commission still has to issue regulations before those four casinos can begin sports gambling. However, the commission says it is poised to submit regulations regardless of what happens in the state house.

Pennsylvania and Oregon have also taken efforts to move forward on legislation. Pennsylvania had enacted a law in 2017 that legalized sports gaming if the federal ban on single-game wagering was ever struck down. Once the state law went into effect in May, the Pennsylvania Gaming Control Board notified casino license holders that they may petition for approval of sports wagering. The price tag for approval is steep; the initial fee to offer sports gambling is $10 million. The effective tax rate is 36 percent on sports betting revenue, which would be the highest rate in the world. While casinos are able to apply for licenses, it is still unsure when the actual rollout will take place. Officials in the state say they are “committed to getting things right,” so while a 2018 start date (in time for football season) is not out of the question, it is more likely to come about at the beginning of 2019. Oregon has been in the unique position of having had the freedom to allow sports betting even under PASPA, which it did for two decades until a state law passed in 2007 banning the practice. Despite the chart in Figure 1, the Oregon Lottery Commission already made plans to roll out virtual sports betting in 2019, and is reportedly working toward real sports betting by 2020.

In addition to these states, on June 3, Governor John Carney of Delaware placed the first legal sports wager in the state after the Delaware Lottery moved forward with their launch. In Mississippi, recent reporting shows sports betting may go live on July 21, but chances are it may be a few months before they officially launch. In West Virginia, the state enacted a sports betting law in March 2018 which could now go into effect by this fall. On June 22, Governor Gina Raimondo of Rhode Island signed sports betting into law and wagering could be active within three months.

As many states across the country continue to introduce new legislation, expand on current laws or strike down new measures, there is one thing most lawmakers have agreed on: the Supreme Court’s ruling gives the power back to the states. “It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals,” Justice Samuel Alito wrote in his opinion for the Court. Whether it is virtual sports betting on mobile phones or real time betting in gaming facilities, allowing the states to pass legislation that permits this law honors the principles of federalism laid out in the Constitution.