The Supreme Court of the United States (SCOTUS) paved the way for legalized sports betting Monday, peeling back the Professional and Amateur Sports Protection Act (PASPA) and essentially giving states the power to regulate sportsbooks within their borders. That’s a big win for gamblers across America — even if we’re not quite sure how each state will handle this newfound responsibility.
The SCOTUS ruling effectively says the U.S. government controls gambling law, but in the absence of federal legislation, states are free to make their own rules. We’ve already seen several champing at the bit to secure the revenue stream that comes with taxing wagering income. New Jersey, the state that launched the legal challenge that led to Monday’s decision, will be the first to join Nevada, Oregon, Delaware, and Montana with validated sportsbooks. Several other dominoes will follow.
A look at which states are likely to legalize sports betting following today’s Supreme Court ruling. https://t.co/OdiRcxX7Y6 pic.twitter.com/9ls41KErkJ
— AP Interactive (@AP_Interactive) May 14, 2018
While we have an idea of who will be next, how these local betting laws will work is more uncertain. Every state will have its own say on how sports wagering is handled, if at all, locally. That means state legislators hold all the cards as they navigate a sensitive avenue toward a previously-untapped revenue stream. Local lobbies will shape the route those lawmakers take and how they deal with invested parties like major sports leagues, college athletics, and law enforcement. Here’s how a handful of early models are shaping up — and how they could affect legalization efforts in other states.
The New Jersey model
No new state will be able to enact sports betting more rapidly than New Jersey, the state whose legal challenge was the impetus for Monday’s Supreme Court ruling. The Garden State has both the law and the infrastructure to handle wagers thanks to the legalized gambling of Atlantic City and the many racetracks within state borders. That means New Jersey will be a potential model as a new crop of states races to allow its residents the chance to bet on the NIT.
New Jersey’s approach isn’t groundbreaking. It mostly follows the standards set by Las Vegas’s casinos in Nevada — a track that makes sense given Atlantic City’s Vegas-lite aesthetic. There are no payments to the major sport leagues that would be the genesis of most of the betting action, which has helped spur resistance from the MLB, NBA, NFL, and NHL. Those organizations still aren’t entirely pro-gambling, but they have lent support to legislation that would grant a 1% “integrity fee”, which they claim would ensure betting doesn’t swing the outcome of games or affect play in any way.
The state would also at least partially avoid a conflict with the NCAA by disallowing betting on local college sports teams and any collegiate sporting event taking place within state limits. It would not extend such deference to professional teams, which include the New Jersey Devils, the New York Jets, and the New York Giants. Nevada currently allows bets to be placed on its college teams, but at the expense of the NCAA effectively ignoring its pleas to hold championship events in the state.
The state’s top priority will be bailing out Atlantic City, whose fortunes have plummeted to the point of considering bankruptcy in recent years. New Jersey’s laws give patrons a reason to frequent those casinos, though horse racing venues will offer similar options. The Garden State will have a head start on its peers and should be able to count on some extra tourism revenue from out-of-state spenders — that is, until Pennsylvania, New York, and Massachusetts enact their own gambling laws.
While those casinos will be a driving force, they may soon find themselves made obsolete by the rise of online gambling — a method currently only legal in Nevada. In the United Kingdom, 95% of the country’s legalized sports betting is handled online. While that revenue would still help boost the state’s budget, it may not be the panacea lawmakers were hoping for when they envisioned scores of bettors reviving Atlantic City’s flagging boardwalk.
The West Virginia model
West Virginia is an interesting case, as the state’s relatively small size means it has no local major pro sports teams and only two Division I NCAA programs. As a result, it’s not interested in paying major leagues with little stake in the Mountain State revenue from local betting. Legislation allowing for sports betting to be legalized in the state after the repeal of PASPA passed back in March with no language regarding an integrity fee. That lack of a cut even led MLB commissioner Rob Manfred to ask Governor Jim Justice to veto the bill.
Justice instead signed the bill into law, though future legislation could write an integrity fee into existence — the kind of lawmaking MLB lobbyists are likely hard at work pushing. However, just because professional sports are being left out of West Virginia’s sportsbook revenue doesn’t mean the state is keeping all that money for itself. Instead, it will funnel gambling revenue back to its top universities.
Source: Tentative agreement in West Virginia would give WVU and Marshall a cut of sports betting. Would be first two NCAA programs with such an arrangement.
— David Payne Purdum (@DavidPurdum) May 10, 2018
That’s an interesting development that pulls another major opponent to sports betting into play. The NCAA has been one of the staunchest opponents to the repeal of PASPA, and while moral reasons will likely keep that opposition intact, the idea of its members earning additional revenue would make the idea of betting much more palatable. On Monday, the organization appeared resigned to the Supreme Court’s ruling in an official statement — and even slightly receptive to it.
But while the state would not pay for a big four integrity fee, it would be up to casinos to make arrangements with America’s top sports leagues on their own accord.
Cavacini: "You have two private entities/profit makers that are in contractual arrangements with each other. And that’s how it should be handled. The state shouldn’t even be involved with it. I don’t know where the governor is coming from."
— Brad McElhinny (@BradMcElhinny) May 10, 2018
That’s not written into state law, but it could be a compromise that follows as pressure comes from major sports leagues. As far as wagering locations, West Virginia already offers gambling in state-sanctioned casinos and racetracks. Those casinos will have clearance to offer bets not only in-house, but also through their own online apps.
So what are the biggest moving parts in future sports wagering legislation?
Each state’s gambling laws will look different thanks to the makeup of its constituents and their local sports teams. States rich with pro sports franchises will face heavy pressure to include an integrity fee. Others with only Division I NCAA athletics to turn to may have to find an avenue that appeases that governing body as much as possible. In both cases, a cut of the money seems like the easiest road to resolution.
The other moving part is whether or not states will allow local pro and college sports to be subject to wagers. In theory, the 1% integrity fee paid to leagues would enforce the oversight to ensure New Jersey residents can bet on Rutgers to cover a 35-point spread against Ohio State without any funny business behind the scenes. However, that’s a moving target that will almost certainly incur its own investigations down the road. As a result, the laws we see in 2018 may look very different in 2023 and beyond, depending on the public response.
There’s also the potential for federal oversight. Monday’s Supreme Court ruling was clear that the U.S. government can take up sports betting laws, but if it chooses not to — and it has repeatedly over the last century — those laws can be handled by states. If the NFL’s reaction to PASPA’s rollback is any indication, powerful sports leagues will soon be lobbying U.S. lawmakers to step in.
Here the full NFL statement on today’s sports gambling development from the Supreme Court, via @NFLprguy pic.twitter.com/anWHybY0Sa
— Ian Rapoport (@RapSheet) May 14, 2018
Legalized sports betting is a viable method to add revenue and regulate the gambling that’s proliferated pro and amateur athletics since, well, they began. It’s no panacea for ailing casinos, however, as evidence has shown online betting and shifting real time wagers are the future of the business. That shifting culture could further define how each state sets up its sportbook business and whether or not preferred vendors or exclusive contracts become a commonality from state to state. While these laws aren’t quite in their infancy, they’re not yet tweens — and there’s a long way to go and a lot of work to be done before each state is satisfied with its final product.