On May 14th, the United States Supreme Court sent shockwaves through the gambling and sports betting industries by striking down the previous anti-sports betting law and opening the door to any new state that wants to legalize sports betting. With this monumental ruling, there will be a lot of moving pieces and questions to follow. Let’s unpack what happened in the SCOTUS ruling and examine what the future now holds for sports betting in America.
What is PASPA?
In 1991, the Senate Judiciary Subcommittee on Patents, Copyrights and Trademarks began holding public hearings on the impact of sports betting in the United States. If you recall, the 1980’s was riddled with massive sports betting scandals that made the public question the legitimacy of each professional sport.
By the end of the hearings, it was determined that sports betting was a “national problem” and one that needed to be remedied. So, in 1992, President George W. Bush signed into law the Professional and Amateur Sports Protection Act, which defined sports betting and prohibited new states from legalizing and/or regulating sports betting. This law went into effect on January 1, 1993.
Also known as the Brady Act, for its main proponent Senator Bill Bradley, PASPA allowed Nevada, Oregon, Montana and Delaware to continue their statewide regulations on sports betting, which were already in place prior to this act.
- Nevada had legalized sports betting, and all of its forms, in 1949.
- Oregon began running a state lottery in 1985 and eventually added Sports Action in 1989. This type of sports betting allowed parlay wagers on NFL, NBA and various collegiate games. Oregon had seen its fair share of legal battles over sports betting with the anti-sports betting camp winning out in the end. Sports Action was eventually outlawed by 2007.
- Montana’s exemption centered on the concept of sports betting pools in the form of picking squares. Just like what many people like to do for the Super Bowl. The state didn’t participate in any other form of sports betting, but received exemption due to this state law. In 2008, Montana created a fantasy sports gaming within their state lottery for NASCAR and NFL. It was met with a backlash from the NCAA and proponents of PASPA. However, it was never brought to court for violating PASPA and continued operating without any legal obstacles.
- Delaware originally created an NFL parlay card through their lottery in 1976. It only lasted one year before discontinuing. The state didn’t try to create any other sports betting games and basically just allowed the law to sit on the books without using it. That changed in 2009 when they wanted to create sports betting opportunities like Nevada. Unfortunately, the Third Circuit Court of Appeals shot that down and said they could only do what was on the books prior to the PASPA enactment.
PASPA and Daily Fantasy Sports
Over the last half dozen years, daily fantasy sports has become a major gaming industry. Companies like FanDuel and DraftKings have become billion dollar entities due to the popularity of DFS. There have been many opponents of DFS who have tried to get it banned under PASPA. However, DFS is still considered a game of skill and PASPA does not have regulation over these types of fantasy games. However, SCOTUS’ ruling does open a new opportunity for DFS companies, which we’ll look at further in the sections below.
New Jersey Leads the Charge
May 14th’s Supreme Court ruling would not have happened if it were not for the state of New Jersey spearheading the charge. Ironically, New Jersey had a chance to be originally exempted by PASPA in 1993, but they failed to pass a sports betting law in time to take advantage of the PASPA clause.
At the time, only New Jersey qualified for the clause that would’ve exempted any state that had commercial gambling for at least 10 years prior to PASPA going into effect. However, the one stipulation was that a qualifying state had to pass a sports betting law during the 1st year of PASPA going into effect. New Jersey dropped the ball as they didn’t meet this stipulation.
From 2006 through 2016, New Jersey was involved in a handful of legal battles against PASPA. They were determined to get this overthrown in their state. In fact, by 2012, voters and lawmakers were united in making sports betting legal within the state, which sparked legal fights in 2013 and 2016. Although New Jersey continued to come out on the losing side of things, they never stopped fighting and eventually appealed all the way up to the Supreme Court.
The Supreme Court’s Monumental Ruling
SCOTUS had a real battle on their hands. They had New Jersey and their support from over a dozen states fighting against the major professional sports leagues (NFL, NBA, MLB, and NHL) and the U.S. government. The case was first heard late in 2017, but a ruling was not handed down until May 14, 2018. Even in the ruling, there was dissention between the judges. LAW.com, and many other sites, reported that the ruling was 6 to 3.
The 3 judges who opposed in part or full, could be summed up with the comments made by Justice Ruth Bader Ginsgurg:
“The court wields an ax to cut down §3702 instead of using a scalpel to trim the statute. It does so apparently in the mistaken assumption that private sports-gambling schemes would become lawful in the wake of its decision.”
Ultimately, the 6 judges who voted to strike down PASPA felt that Congress was in violation of the Constitution. Justice Samuel Alito Jr. spoke for the majority as he made the following comments about the ruling:
It unequivocally dictates what a state legislature may or may not do … State legislatures are put under the direct control of Congress. It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine.”
Ironically, Alito was a former U.S. Attorney in the state of New Jersey and his additional comments show just how much he opposed PASPA:
“The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”
What Does this Mean for Sports Betting in the USA?
SCOTUS’ ruling effectively repeals PASPA and now allows each state to regulate sports betting within their borders. Prior to this ruling, the American Gaming Association reported that sports betting was a $150 billion dollar a year industry. Most of that money came illegally as bettors placed their wagers with offshore sports betting sites. You can see why New Jersey and many other states desperately wanted to overturn PASPA. They all want a piece of that billion dollar pie.
With PASPA out of the way, I fully expect sports betting to grow in revenue each year. At first, brick and mortar sites will get the initial rush of betting action. But, you can bet that states will offer mobile sports betting platforms as soon as possible.
It’s expected that as many as 32 states will have legalized sports betting within the next 5 years. However, I doubt it will take even that long. The USA Today reports that 17 states have already passed or are about to pass bills legalizing sports betting. Each state was waiting for the SCOTUS ruling before moving forward.
New Jersey could have sports betting in their popular gambling locations within the next 90 days, provided that they get things set up by then. West Virginia could also have sports betting within the next 90 days. West Virginia’s State Lottery General Counsel Danielle Boyd made the following comments about legalizing sports betting, according to LegalSportsReport.com:
“When we had preliminary discussions with the casinos about the timeline for implementation, it was our understanding that they believed that they would be able to up and running within 90 days of a decision from the Supreme Court. That is of course contingent on our working diligently to put any necessary regulations, rules and minimum internal control standards in place that would be necessary for them to begin working on the infrastructure to place wagers on site and via mobile applications.”
Legalized Sports Betting’s Impact on DFS
Legalizing sports betting won’t just have a positive impact on states and casinos, but it will also have a major impact on Daily Fantasy Sports. DraftKings CEO Jason Robins announced that his company will definitely capitalize on any repeal of PASPA. According to HartfordBusiness.com, Robins made the following comments:
“We’re pretty excited about it. It’s a huge market that has the opportunity to create lots of new players, lots of new revenue and really open up things in a way that they never have been before in the United States.”
Now that it will be legal to bet on sports in most states, DFS companies won’t have to limit or hide behind the concept that DFS is a game of skill and not gambling. DraftKings, and its contemporaries, can go all out in promoting DFS and sports betting. It will definitely open up a new world of sports betting opportunities and revenue. owev
Goodbye PASPA, Hello to a Brave New World
PASPA’s demise will open up a new world of sports betting opportunities throughout America. It’s an exciting time within the gambling industry. However, the extent of this ruling won’t truly be felt for years to come. With each state preparing for this gambling venture, you can expect to see sports betting rise like never before. However, I do believe that there will be a federal law on sports betting in the future. There’s too much money at stake for the government not to get involved in regulating sports betting. But for now, we sports bettors can celebrate that our constitutional right to bet on sports has been restored.