During its current term, the Supreme Court of the United States (“SCOTUS”) will hear a case brought by the State of New Jersey challenging the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) in an attempt to legalize sports gambling in the state. Sports betting, and in particular single-game sports betting, has a long and fraught history in the United States, but since the passage of PASPA only four states are legally permitted to offer sports gambling.1 However, according to American Gaming Association President and CEO Geoff Freeman, legalization is “closer than any point in the last 25 years.”2 While there are certainly plenty of groups which oppose legalization, among them, most of the major sports leagues and the NCAA (the named defendant in this case), there are many people both inside and outside of the gaming industry who view this as a welcome development. And indeed, there are several reasons to believe that gambling should, and will, be substantially different by the next football season.
In the early 1990s, the heads of the major sports leagues, spearheaded by then-NFL Commissioner Paul Tagliabue, worked together to lobby Congress to protect their leagues from what they viewed as a growing threat: an expanding gambling industry and the possibility that such gambling would lead to serious corruption of the integrity of the leagues.3 The leagues successfully pushed for the legislation that, in 1992, became PASPA, which prevents states and tribal governments from repealing or amending gambling laws currently on the books.4 By doing this, Congress grandfathered in any states that at the time had legal gambling, but effectively froze them in place, such that no new states could enter the market. Further, even if one of the four states with legal gambling wanted to change their laws or no longer offer sports gambling, they could not do so. Since the passage of PASPA, there have been numerous challenges to the law, but none has proven successful, nor have any of them come particularly close.
All of that may change this year for several reasons. First, from the states’ perspective, there are two main issues: tax revenues and federalism. At a time when many state governments are facing multi-billion dollar budget crises, denying such a ready source of sorely needed revenue seems foolish. Nobody knows how much money is being bet offshore, and how much tax revenue would be generated by legalizing gambling, but estimates range as high as nearly $6 billion in annual revenue.5
This would certainly not be the first time that states have turned toward some form of gambling to bolster their coffers: “The history of gambling in the United States is not an inexorable march from outlawed vice to accepted leisure activity, but rather a recurring pattern: legalization, scandal, then prohibition. Legal bans last decades, until elected officials are desperate for cash, then the cycle repeats.”6 This would follow the same pattern as the lottery, which was outlawed for a long time before it was finally deemed acceptable when states desperately needed the revenue.7 While there will always be a moral component to gambling – and to the prohibition thereof – such large potential tax revenues will likely prove too tempting to ignore. And although states will assume a significant burden in terms of the cost of fairly regulating the gambling industry, in the long run the revenues generated from legal, but taxed, sports gambling will far outstrip whatever monetary costs might be incurred in regulating it.
Next, as far as federalism is concerned, there is a good argument to be made that gambling has historically been left to the purview of the states, and that Congress should revert back to the old arrangement. There are certainly good policy reasons, such as innovation and bureaucratic efficiency, for Congress to do just that. From a legal/constitutional perspective, however, it is less clear that such an argument would win in the Court. Sports gambling would almost definitely fall under Congress’ Commerce Clause power to regulate interstate commerce as it sees fit.
Additionally, from a policy perspective, there seems to be a shifting landscape in relation to sports league opposition to legalized gambling. Although in a perfect world, from the perspective of the leagues, gambling could be effectively outlawed, it has become increasingly clear to them – most conspicuously stated by Adam Silver, who is the current NBA Commissioner and most vocal champion among the commissioners of the major leagues of legalized and tightly regulated gambling – that the current system is not working, both in terms of the amounts illegally gambled offshore and in terms of the demonstrated corruption affecting the integrity of the games (i.e. the Tim Donaghy scandal).8 Moreover, the leagues themselves are (controversially) investing in an industry that, if not gambling, is adjacent to gambling: daily fantasy sports.9 The leagues have taken a lot of criticism for their public stances against single game betting, while also being willing to profit off of a game that is, in essence, gambling. In order to correct this cognitive dissonance, it is possible that the leagues have decided to drop their opposition to gambling once and for all. A final harbinger of change, at least according to some observers of the sports industry, have been the decisions in the last two years of the NHL and NFL to put teams in the gambling hub of the United States: Las Vegas. For years, the major leagues avoided Vegas largely in order to avoid any appearance of impropriety. But with the NHL’s decision to expand to Las Vegas this season, the historical taboo of locating a team in such close proximity to gambling seems to be wearing off.
So what may happen? There are two ideas as to possible outcomes. One is that Congress may actually repeal the law.10 As for the Court, there does not seem to be consensus on how it will rule, although many believe that PASPA will be found to be unconstitutional.
Will Hobson, Sports Gambling in U.S.: Too Prevalent to Remain Illegal?, Wash. Post (Feb. 27, 2015), https://www.washingtonpost.com/sports/sports-gambling-in-us-too-prevalent-to-remain-illegal/2015/02/27/f1088e4c-b7d3-11e4-9423-f3d0a1ec335c_story.html?utm_term=.65c933103295. ↩
Megan R. Wilson, Gaming Group to Supreme Court: End Ban on Sports Betting, The Hill (Sept. 5, 2017), http://thehill.com/business-a-lobbying/business-a-lobbying/349280-gaming-group-to-supreme-court-end-ban-on-sports. ↩
Hobson, supra note 1. ↩
David Purdum, Sports Betting Legalization: Where Do We Stand Right Now?, ESPN (Sept. 14, 2017), http://www.espn.com/chalk/story/_/id/20704273/gambling-where-does-sports-betting-legalization-us-stand-right-now. ↩
Hobson, supra note 1. ↩
Adam Silver, Opinion, Legalize and Regulate Sports Betting, N.Y. Times (Nov. 13, 2014), https://www.nytimes.com/2014/11/14/opinion/nba-commissioner-adam-silver-legalize-sports-betting.html?mcubz=0. ↩
Marc Edelman, The NFL Has Mastered Art of Profiting from Daily Fantasy Sports: Just Pit DraftKings Against FanDuel, Forbes (Sept. 10, 2015, 8:25 AM), https://www.forbes.com/sites/marcedelman/2015/09/10/the-nfl-has-mastered-art-of-profiting-from-daily-fantasy-sports-just-pit-draftkings-against-fanduel/#36a91de714ee. ↩
Thomas Barrabi, Sports Gambling Ban Repeal Could Happen in Trump’s First Term, Group Says, Fox Business (Apr. 26, 2017), http://www.foxbusiness.com/features/2017/04/26/sports-gambling-ban-repeal-could-happen-in-trumps-first-term-group-says.html. ↩