Sports gambling has had a contentious history in the U.S. and yet evolved into a legalized, sophisticated, revenue-generating industry. From gamblers using the internet to placing sporting bets on some platforms located in the Caribbean to the NFL staunchly opposing any kind sports gambling association in order to protect the integrity of the sport (at least until 2021), sports gambling in the U.S. has come a long way to being legal and very popular.
It helped that major sports leagues—the NFL, NHL, the NBA, the MLB, and somewhat the NCAA—have had a change of heart. Not just due to a particular New Jersey court case that shuttled the major federal law banning state sports gambling, but also due to the billions of dollars in revenues from sports gambling and associated deals.
Chapters
- US Sports Betting: A Brief History
- Two Laws Regulating Sports Betting
- How the Leagues Thought
- NJ Legalizes Sports Betting
- Leagues React
A Brief History About Onshore and Offshore Sports Betting in the US
In the late 1990s and early 2000s, sports betting was not legal in the U.S. except in Nevada, Oregon, Delaware, and Montana. For decades, U.S. sports gamblers had to turn to the black market to place their bets, which consisted of illegal offshore sports books and local bookies. Mafia associates or larger criminal enterprises ran many sports books.
However, some online sports betting sites were legitimate companies in their host nations, such as the well-known Pinnacle Sports, registered in Curacao, and Worldwide Telesports, registered on Antigua. Most of the online sports betting companies operated in the Caribbean and Central America where online gambling is legal. Host governments seemed very uninterested in regulating the online gambling industry.
Technological Advances
Technology had allowed for offshore sports betting platforms to reach the U.S. mainland. Originally, sports bets were placed by phone. But then, increasing internet access changed the game. The internet enabled sports books to be accessible by gamblers all across the U.S., which they claimed circumvented Federal Law as applied to gambling because they accepted bets outside the U.S.
As a result of online sports gambling sites finding ways around Federal prosecution, Congress decided to act.
The Two Main Federal Laws Regulating Sports Betting
In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA), also known as the Bradley Act. The law aimed to outlaw sports gambling across the U.S. that was operating through a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly on one or more competitive games or on the performance of professional athletes.
The major sports leagues largely supported the passage of this act. While not all states could legalize sports gambling, certain states could continue to allow betting.
Some States Grandfathered
Nevada was grandfathered in due to their casinos being established prior to the act as well as legalizing gambling in March 1931. Also, Nevada had legalized sports gambling in 1949. So, Nevada’s sports books were allowed to operate fully. As a result, Las Vegas became a tourist hot spot for gambling, which generated millions of dollars in state revenues per year.
The act also grandfathered Delaware, Oregon, and Montana. These states already had a pool betting system or a sports lottery in place prior to October 2, 1991.
Additionally, states who had casinos operating for the past 10 years had a one-year window starting on January 1, 1993, to pass laws to register sports pools, which would have included states such as New Jersey (who failed to pass legislation in time). Other permissible gambling activities included in the law were bicycle racing in New Mexico and golf in Wyoming, several sports-based lotteries, horse racing and jai alai.
Unintended Consequences
Meanwhile, the act intended to cure a “social blight” of sports gambling, but PASPA actually contributed to the rise of a shadow economy of sports gambling being operated by Mafia associates and website-hosted offshore platforms who skirted the law. Due to the Federal law, states and local entities could not tax sports betting to raise revenues for their economies.
2006 UIGEA
With the rise of online, website-based sports betting, Congress attempted to stamp out online sports gambling by passing the Unlawful Internet Gambling Act (UIGEA) in 2006. The law aimed to prohibit gambling businesses from knowingly accepting payments for bets or wagers in connection with a participant over the Internet where gambling is illegal under Federal and state law.
The Federal Government promulgated regulations that required participants in five payment systems—automated clearing house (ACH) systems, card systems, check collection systems, coney transmitting businesses; and wire transfer systems—to conduct due diligence on any restricted transactions through identification and blocking of the processing of money.
Interestingly, the UIGEA did not include betting on fantasy sports provided that they met three key criteria:
- Awards and prized awarded to participants are made known and the value is not determined by the number of participants.
- All willing outcomes are based on the participant’s knowledge and skill and not by chance.
- No willing outcome is based on the score, point-spread of any real single sports team or solely on the single performance of a real-life athlete in a real-world sporting event.
How the Professional Leagues Thought About Sports Gambling
During the mid-2000s, the major U.S. sports leagues had unfavorable opinions about online sports betting. The main sports leagues had generally supported the passage of the PASPA, which had banned sports betting in most states. However, the leagues started realizing that sports betting had continued and was widespread. Sports betting was generating millions of dollars for other—and often dubious—entities.
NFL Against
The NFL remained fully against sports gambling until the late 2010s. They were so against sports gambling that they cancelled scheduled appearances by then Dallas Cowboys star Tony Romo because he was supposed to appear at a fantasy football convention in Las Vegas.
In 2015, Commissioner Roger Goodell went as far to say that gambling was the a significant threat to the integrity of the sport and he did not anticipate the NFL changing their position any time soon.
NBA For
While initially the NBA was opposed to legalized sports betting, by 2014 the NBA had significantly changed their tune. Much akin to legalizing marijuana, Commissioner Adam Silver advocated for the legalization of sports gambling.
MLB Open Minded
Historically, the MLB had been opposed to sports betting after a series of scandals in 1919 and 1989 resulting in players throwing games. Previously, retired Commissioner Bud Selig had opposed the legalization of sports gambling. He was appalled by New Jersey Governor Chris Christie’s attempt to legalize it. But in 2015, the new Commissioner Rob Manfred vocally supported giving “fresh consideration” to the issue.
NHL Arrives in Las Vegas
While the NHL had not issued a public stance on legalized sports gambling in the 2000s, they did place a professional hockey team in Las Vegas in 2017. They also allowed teams to have sponsorships with gambling companies.
MLS Sees Possibilities
In 2017, Major League Soccer Commissioner Don Garber became the third sports league head to speak in favor of sports betting to help the league gain more popularity as well as bring the industry out of the dark ages.
NCAA Diametrically Opposed
By the late 2010s, the tide amongst the U.S. professional sports leagues was turning in favor of legalizing sports gambling, especially after the Supreme Court decision in Murphy v. National Collegiate Athletic Association.
Despite not being a professional sports league, the NCAA was the most vocal against legalizing sports gambling. They implemented a wide ban on sports betting and providing information for betting on employees working for the entity, the sports department at the academic institution, and player-athletes. Even with the legalization of sports betting in 2018, the NCAA still forbids the activity. The NCAA believes that sports betting demeans the competition and threatens the integrity of the sporting contests.
2011 New Jersey Approves Legalized Sports Betting
While New Jersey was eligible to be grandfathered in under PASPA, they failed to take advantage of the loophole so they could legalize sports betting. By 2011, the public mood had shifted in favor of legalizing sports betting.
In the November 2011 election, the ballot contained Public Question No. 1, the Sports Betting Amendment, that would amend the state constitution to allow the NJ Legislature to legalize sports betting. Over half of NJ voters had voted to approve sports betting in the state.
With this mandate, the Sports Wagering Act (S3113) was introduced in the NJ Legislature in early 2012, mere weeks after voters approved the constitutional amendment, and passed on January 9, 2012. It would decriminalize sports betting in the state. Governor Chris Christie signed the act into law on January 17, 2012. The major U.S. sports leagues and the NCAA were against the law.
Leagues Sue Governor Chris Christie
On August 7, 2012, the NCAA, NBA, NFL, NHL, and MLB sued Governor Christie in NCAA, et al. v. Christie (Christie I). The Plaintiffs contended that the NJ law violated PASPA and sought to enjoin the law from going into effect. In response, Governor Christie argued that PASPA violated the U.S. Constitution. In 2013, the U.S. District Court of New Jersey ruled in favor of the NCAA et al., and the U.S. Third Circuit Court of Appeals affirmed. The U.S. Supreme Court declined to hear the case.
Despite being defeated, the N.J. Legislature tried again to legalize sports betting again with the passage of the Sports Wagering Law on October 16, 2014, which would partially repeal laws that criminalized sports betting. The law was signed by Governor Christie the next day. The law permitted state-licensed casinos and racetracks to provide sports betting and the state would not be involved in the licensing or regulation of sports betting itself.
Once again, the major sports leagues and the NCAA were against the law. Although by this time, Commissioner Adam Silver had taken charge at the NBA and had spoken out about participating in legalized sports betting—yet the NBA still participated in the lawsuit.
NCAA, et al. v. Christie, Round 2
Then on October 20, 2014, the NCAA again filed suit to challenge the NJ law in NCAA, et al. v. Christie (Christie II) and for the courts to grant a preliminary injunction to prevent the law from going into effect. The Plaintiffs argued that the law was a clear violation of federal law (PASPA). The Respondents countered that the law is a repeal of the state ban for sports betting, which would allow state-licensed entities to offer sports gambling.
On November 21, 2014, the District Court ruled in favor of the Plaintiffs, determining that the Sports Wagering Law violated PASPA and the federal law did not violate state sovereignty rights. Governor Christie appealed to the U.S. Third Circuit Court of Appeals. On August 9, 2016, the Court of Appeals upheld the lower court’s judgment.
Leagues Sue Governor Chris Christie
“We are reexamining our stance on gambling. It’s a conversation that’s ongoing with the owners. . . Sports betting happens,” Manfred said. “Whether it’s legalized here or not, it’s happening out there. So I think the question for sports is really, ‘Are we better off in a world where we have a nice, strong, uniform, federal regulation of gambling that protects the integrity of sports, provides sports with the tools to ensure that there is integrity in the competition … Or are we better off closing our eyes to that and letting it go on as illegal gambling?'”
– Rob Manfred, MLB Commissioner, February 8, 2017 – prior to PASPA Ruling
SCOTUS Weighs In
Then, on October 7, 2016, the state appealed to the U.S. Supreme Court, who granted cert on June 27, 2017 on the legal issue of whether a federal statute that prohibits modification or repeal of a state law prohibitions of private behavior impermissibly commandeer the regulatory power of states under the Constitution (see Murphy v. NCAA). On May 14, 2018, the Supreme Court ruled 6-3 to reverse the Third Circuit Court of Appeal’s decision. The Court held that PASPA’s provision on banning state-authorization of sports betting violated the anti-commandeering doctrine under the Tenth Amendment of the U.S. Constitution.
PASPA Overturned
In other words, PASPA was declared unconstitutional because it interfered with states’ rights to repeal state anti-gambling laws. As a result, NJ and other states could begin to offer legal sports betting to their residents, which 7 states did within 6 months of the ruling.
As of November 2021, 29 states plus Washington, D.C. have legalized sports gambling with 3 more states legalizing it but is not operational and 1 state with legislation introduced in 2021.
League Reactions After Murphy v. NCAA
Initially, the major sports leagues and the NCAA were none too pleased with the Supreme Court’s ruling in Murphy v. NCAA and the repeal of PASPA. Yet, after some time, the leagues started coming around to support legalized sports gambling. As sports betting started generating millions and then billions of dollars in revenues annually since 2018, the sports leagues wanted a piece of those monies.
NBA Vindicated
As stated previously, in 2014, NBA Commissioner Adam Silver became an outspoken proponent of legalized sports gambling.
“Today’s decision by the Supreme Court opens the door for states to pass laws legalizing sports betting. We remain in favor of a federal framework that would provide a uniform approach to sports gambling in states that choose to permit it, but we will remain active in ongoing discussions with state legislatures. Regardless of the particulars of any future sports betting law, the integrity of our game remains our highest priority.”
– Adam Silver, NBA Commissioner, May 14, 2018
MLB Starts a Conversation
In 2015, MLB Commissioner Bud Selig told ESPN that the league would give “fresh consideration” to legalized sports betting, yet the MLB still joined the lawsuit. In 2017, the new MLB boss, Commissioner Rob Manfred signaled a shift in tone, signaling that a “conversation” was being had at the MLB about how sports gambling regulation in the U.S. should be changed and how they can be involved.
NHL Adopts Popular Opinion
NHL Commissioner Gary Bettman was coming around in 2017. He understood that the regulatory landscape and popular opinion was changing in favor of legalized sports betting.
NCAA Budges
Even the NCAA’s tone changed in 2017, when NCAA President Mark Emmet talked about Las Vegas possibly hosting the NCAA tournament in the future.
“Our highest priorities in any conversation about sports wagering are maintaining the integrity of competition and student-athlete well-being,” said Mark Emmert, NCAA president. “Sports wagering can adversely impact student-athletes and undermine the games they play. We are committed to ensuring that laws and regulations promote a safe and fair environment for the nearly half a million students who play college athletics.” Emmert added, “While we recognize the critical role of state governments, strong federal standards are necessary to safeguard the integrity of college sports and the athletes who play these games at all levels.”
– Mark Emmert, NCAA President, May 17, 2018
Leagues Change Their Tune
After the Murphy v. NCAA decision, the leagues realized that the legalization of sports betting was going to happen in the states, and they wanted a piece of the revenues. The NBA, MLB, and PGA Tour began lobbying states for direct payments as part of a royalty fee scheme (aka integrity fees) as well as pursing deals with gambling companies.
The NFL wanted to focus on game integrity and consumer protection. The NHL worked on landing direct deals with gambling companies. Generally speaking, the sports leagues want legalized sport gambling in addition to promoting the integrity of the sport and players. Moreover, they want to encourage responsible gambling habits.
Today, nearly all sports league’s positions in the U.S. have evolved to be supportive of sports gambling, with the NFL the last to get on board. The MLB, NHL, NBA, and even the NFL have made deals with sportsbooks and data companies.
NFL Makes Deals with Sportsbooks
In April 2021, the NFL decided to finally join the sports betting industry. It proclaimed its first sportsbook partnerships with Caesars Entertainment, DraftKings and FanDuel. Then in August 2021, the NFL announced a partnership with an additional four approved sportsbook operators: FOX Bet, BetMGM, PointsBet, and WynnBET. All sportsbooks partnerships must adhere to the NFL’s policies on protecting the integrity of the game and its fans. Additionally, they must adhere to the NFL’s score integrity policies, and collaborate with the NFL on advocacy efforts to support responsible gambling efforts.
Not to be outdone, even professional athletes want to tap into the sports gambling revenues, with the NFL-NFLPA successfully including revenues from sports gambling and even onsite slot machines in their collective bargaining agreements. U.S. pro sports leagues have come a long way to embrace legalized sports gambling. After being staunchly opposed, they have wholeheartedly embraced the extra cash revenues it brings.
Conclusion
In closing, the NFL, NHL, NBA, and MLB (and somewhat the NCAA) came around to the idea that legalizing sports betting was beneficial overall for their leagues. While they may still have reservations about the ethics of gambling and the sport’s integrity, these sports leagues are definitely enjoying the extra millions of dollars generated for their respective entities.
“The Supreme Court’s decision today paves the way to an entirely different landscape – one in which we have not previously operated. We will review our current practices and policies and decide whether adjustments are needed, and if so, what those adjustments will look like. It’s important to emphasize that the Supreme Court’s decision has no immediate impact on existing League rules relating to sports wagering, and particularly, wagering involving NHL games. So, while changes may be considered in the future, today’s decision does not directly impact the operation of the League or any of our Clubs in the short term.”
– NHL Official Statement, May 14, 2018