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How the Supreme Court just paved the way for legal sports betting, explained in 4 minutes

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Now that the Supreme Court has given a thumbs-up, states can start legalizing sports betting. Many will.

March Madness Viewing Party At The Westgate Las Vegas Photo by Ethan Miller/Getty Images

On Monday, the Supreme Court issued a decision in Murphy v. NCAA that could lead to legal sports betting in states across the country. Here’s what’s going on.

The Supreme Court didn’t just legalize sports betting, but it paved the way for states to legalize it on their own.

In 1992, President George H.W. Bush signed the Professional and Amateur Sports Protection Act. PASPA gave states that already had licensed casino gaming one year to tell the federal government that they wanted to have legal sports betting within their borders. Only Nevada, Delaware, Montana, and Oregon said they did. PASPA effectively banned sports betting in the other 46 states, an almost nationwide rule that had held up to this day.

In 2011, New Jersey voters decided in a referendum they wanted sports wagering in their state. The idea was it would boost struggling casinos in Atlantic City and provide an economic pick-me-up around the state. But the NCAA and the country’s four major pro sports leagues sued in 2012 to block the New Jersey law, arguing that it violated PASPA.

Federal courts agreed, but New Jersey pushed its case to the Supreme Court. This was an extremely CliffsNotes explanation of New Jersey’s argument (more here), but the state argued that PASPA is unconstitutional because it “commandeers” states’ regulatory authority. Seven justices agreed in broad strokes.

So, this ruling doesn’t mean sports betting will automatically become legal in the states where it’s not already. States that want it will have to pass new laws.

Now, some number of states will legalize sports betting. Several already had plans in place in case of this ruling by the court.

“It’s gonna be like wildfire,” says Richard McGowan, an associate professor at Boston College’s Carroll School of Management, who has written six books on the gaming industry.

Five states already passed bills to set up some form of legalized sports gambling in case the Supreme Court gave them the go-ahead. A bunch more have had bills introduced in their legislatures that are still kicking around. ESPN has the 50-state tracker here.

There are three main rationales for states to legalize sports betting:

  • It’s a revenue stream.
  • It would cut into a huge black market.
  • It gives states a better chance to control consumption and address addiction.

States will tax sports betting money, though how much (and who pays between gamblers and businesses) will vary. States are particularly interested in sports betting as millennials add traditional lottery games to the long list of things they’ve ruined.

“The thing that millennials will really go for will be sports gambling,” McGowan says.

Legal sports betting would look different in states across the country.

The court left Congress room to legislate the issue nationally. But unless and until some kind of framework is put in place, states can go ahead on their own.

“I think most states originally are gonna say, ‘Alright, we’re just gonna allow it at the casinos.’ And then they’ll do it a little bit online, and then there’ll be all kinds of different ways of doing it, so we’ll see,” McGowan says.

States can now compete with each other for betting revenue, through tax rates and more. Media and gaming companies might offer apps. McGowan thinks some states will band together and run joint sportsbooks, kind of like they do with the Powerball.

Sports leagues have been opposed to legal betting for years, but they’ve been preparing for how to live with it.

Leagues have long painted their opposition to legal sports betting as a moral thing. But if they can make money from it, that moral stance might erode quickly.

Where it becomes legal, the leagues could push hard for a tax on sports betting that’s commonly called an “integrity fee.” The most common number floated is 1 percent of the handle, the total amount bet at a sportsbook. Bills introduced so far in Indiana and New York include versions of such a fee, which could make big money for the leagues.

“It’s just the sports leagues trying to protect themselves in some ways,” McGowan says. “The irony is they’re staying against it, but they can’t wait to get their hands on it, on the money. They’re saying, ‘We’re the ones who are providing you entertainment, so we should get something else or get some money out of the sports betting thing’ — as if NFL, over the years, hasn’t benefited from all kinds of illegal betting and everything else.”

The leagues say they’d need an integrity fee to offset the monitoring costs that would come with legal sports betting. (Some proponents have also made an intellectual property case.)

But it’s not clear why legal betting would force sports leagues to do more to protect against cheating, because they’ve presumably had safeguards to that effect in place all along. Black-market gambling already exists, and the leagues already have policies in place designed to ensure the integrity of their games.

“Hopefully, the enforcement’s gonna be the same as it is right now,” McGowan says. “What difference would it make [for] the enforcement? That’s a lot of nonsense.”

The American Gaming Association, casinos’ biggest lobbying group, is staunchly opposed to integrity fees. The AGA commissioned a report that says integrity fees would hobble both casinos and state efforts to collect tax revenue on legal sports betting.

All the Supreme Court has done is fire a starting gun.

Now, state governments and lobbyists will be off to the races.