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MOST OF THE ATTENTION paid to U.S. efforts toward regulating internet gambling has been directed toward legislative proposals to legalize online poker or casino games at the federal or state levels. But what is much more interesting are the sports betting initiatives. Discussion of these will be front and center at the U.S. regulation panelat Clarion Gaming's EIG Congress in Copenhagen, Denmark in October (www.eigexpo.com).
For years, I've tried to explain the U.S. position toward sports betting to those from around the globe. But, frankly, it defies explanation. Over the years, American policymakers have literally ceded sports betting to organized crime while the market continues to grow. Infact, the legal sports betting market in Nevada alone is estimated at $2.6 billion (generating $9 million for the state). The American Gaming Association estimates that Nevada sports books account for only one to three percent (1-3%) of all sports gambling conducted in the country. The vast majority of sports bets made in the United States are illegal.
Current estimates of the amounts of illegal betting, as cited recently by CNBC, are:
* National Football League (NFL) football: $80-100 billion
* Super Bowl: $6-10 billion
* College football: $60-70 billion
* College basketball: $50 billion
* NCAA basketball tournament (March Madness): $6-12 billion
* National Basketball Association (NBA): $35-40 billion
* Major League Baseball (MLB): $30-40 billion
Some background is in order for the uninitiated. Decades ago, the government's attempt to curb illegal sports gambling by organized crime resulted in the now-infamous Wire Act of 1961. Later, Congress passed the Professional and Amateur Sports Protection Act (PASPA) of 1992. The intent was to limit the number of states (four were listed) which could offer legal sports betting. As matters developed, only Nevada created a full-fledged sports betting system for punters.
Public policy in the United States has taken its direction primarily from the sports leagues. In particular, the National Football League (NFL) and the National College Athletic Association (NCAA) have continually expressed concerns about the effect of sports betting on the integrity of sports. However, over time, gambling, in different forms, has infiltrated professional sports. For example, the NFL itself,despite its longstanding anti-gambling stance, now counts among its revenue line items proceeds from its own fantasy sports leagues, as well as revenue from licensing NFL brands to state lotteries. This maynot be sports betting per se, but it's harder to convincingly take an uncompromising stance when you've already compromised.
The sport-betting equilibrium began to be upset in the early '90s,when telephone betting with offshore sports books in the Caribbean and Central America began to proliferate. It blossomed into a big industry in '95, when the first internet sports books began to emerge in those jurisdictions.
Necessity often drives policy changes. Given the staggering state budget deficits, the issue of legalizing sports betting in the U.S. is being reconsidered. The furthest along is the state of New Jersey, where Senator Ray Lesniak has introduced a sports betting bill which proposes a constitutional amendment that would legalize intrastate play. Senator Lesniak and his fellow state senators, along with severalgaming-related associations, have also initiated a lawsuit challenging the constitutionality of PASPA. The suit states that the ban unconstitutionally restricts states' rights under the U.S. Constitution's 10th Amendment. New Jersey Governor Christie has decided not to join the suit, citing more pressing state needs--but he's also not opposing it.
In the meantime, in early June, the New Jersey General Assembly unanimously approved legalizing the betting exchange model, popular in the rest of the world, which is an alternative to the fixed odds formof sports and race betting. For operators like Betfair and Betdaq, this was excellent news. Legalization still must be approved by the state Senate before it could become law, but the Assembly's unanimous approval shows that momentum may be on legalization's side.
While that two-pronged approach is going on in New Jersey, California State Senator Rod Wright came out in the Los Angeles Times in early August stating that he felt that California should also consider legalizing intrastate sports betting. Wright is the primary sponsor ofan online gaming bill for poker and casino games that hasn't yet made it out of committee. Introducing a sports betting bill in California may still be a year or two off, but the idea of the nation's most populous state joining the constitutional state's rights suit that NewJersey initiated is being discussed.
On the federal level, Representative Barney Frank of Massachusettsmade some headway in late July with his bill to legalize online gaming, when it was voted out of the House Financial Services Committee. However, the original language in the bill that prohibited sports betting apparently wasn't strong enough for the NFL. Thus, in the mark-up, two Senators asked to strengthen the bill to say, "No licensee under this subchapter shall accept Internet wagers on sporting events, with the exception of pari-mutuel racing as permitted by law." Case closed--at least for now. One can't be much clearer than that, so don'tlook for changes in federal policy. This is an issue where the states are taking the lead.
Should the efforts to legalize sports betting continue to pick up steam at the state level in the U.S., watch a variety of both domestic casino operators and offshore operators jump into the fray to give the campaign a boost. If they're successful in mobilizing the many millions of sports bettors in the United States, it could change the course of the gambling industry in the country. While conventional wisdom has long been that sports betting will never be legalized in the U.S., perhaps the times are changing. The ever-growing market for betting on all sports, combined with the dire need for state revenue, maywell conspire to see sports betting legalization a real consideration in the future.
Sue Schneider is editor-at-large of Gaming Law Review and Economics and is a principal of www.egamingbrokerage.com. Based in St. Louis,she consults on a variety of other independent projects in the industry. She is a former owner of River City Group, which produced i-Gaming events as well as industry trade publications such as iGamingNews.com and the Internet Gambling Report.
