Sports Wagering’s Year Since PASPA Repeal Is Complicated

May 14th, 2019

Sports Wagering’s Year Since PASPA Repeal Is Complicated

The U.S. Supreme Court’s decision to repeal the Professional and Amateur Sports Protection Act on May 14, 2018, has changed the American sports betting landscape.

As we hit the one-year anniversary, Gambling.com looks at the impact of PASPA’s repeal, where sports betting stands in America and what the future holds.

BOSTON – A year ago this morning, sports betting was legal and in practice only in the state of Nevada. The Professional and Amateur Sports Protection Act of 1992 was the law of the land.

But on that day, the Supreme Court, by a 6-3 vote in adjudicating Murphy v. National Collegiate Athletic Association., No. 16-476, effectively lifted a federal ban on legal sports betting. Each state was allowed to self-determine whether it wished to explore a potential new source of entertainment for its residents, and revenue for their coffers.

Basic governance is difficult with universally agreed-upon issues. Gambling is not one of them. And sports betting legislation brought all manner of complications, requiring a mitigation of social values, perceptions and regulations to gauge and channel the money that projections and studies had touted in enticing politicians and sports leagues.

Legal sports betting would need to be destigmatized and differentiated from the black-market version that still exists, even more so in places without legitimate options. Vulnerable athletes, particularly collegians, would need assurances of protection. Problem gambling would have to be addressed.

And the leagues that provide the grist from which wagers were made possible had made it clear in the months before May 14, 2018 that they were going to seek remuneration for their art. “Integrity fee” became a contentious buzz phrase through the industry.

The process has been so complicated that just seven new states have legalized and undertaken legal sports betting in the year since the politicians and advocates in New Jersey, who began the process with a lawsuit, were interrupted from board meetings or rounds to find their future bet had finally hit.

It was a day that changed everything, or at least started to do so.

It was also a day when DraftKings CEO Jason Robins joked, “I think I set the unofficial record for the most text messages I ever received.”

The decision left no ambiguity, which was crucial, Robins said Tuesday at the ICE Sports North America conference. Interestingly, NFL chief strategy and growth officer Chris Halpin agreed with Robins.

“We had put so many resources into preparing for this and we felt very well prepared, but we weren’t sure what the outcome would be,” Robins said.

“It was like making a bet and we were watching the game and we had no idea when it was going to end. It could be any day, any time. It was really weird. We just kind of were trudging along and doing what we needed to do to be ready.

“We got to a point where we just wanted an answer so we could move on or hit the gas and move forward.”

How Landscape Changed Since PASPA Repeal

On May 13, 2018, sports betting was legal and underway in Nevada and the right do so was grandfathered in for Delaware, Oregon and Mississippi in various limited ways.

On May 14, 2018, every state in the union was granted the right to legalize sports betting.

On May 14, 2019, Delaware, Mississippi, New Jersey, New Mexico, Pennsylvania, Rhode Island and West Virginia have since implemented the pastime and operators within their borders are accepting sports bets.

In keeping the with imperfect methods of the complicated union, bills have been passed amid the tug of social values, tax rates, concessions to local lotteries or horsemen or casinos, most with some form of the crucial mobile online component, some without.

Arkansas, the District of Columbia, Indiana, Iowa, Montana, Oregon, New York and Tennessee have all passed legislation and remain in varying states of regulatory approval or implementation. More progress seems likely in 2020.

A report released on Monday by Gambling Compliance estimates a $5.7 billion market in annual revenue with 34 states having legalized sports betting by 2024.

Legal sports betting appeared in the deeply conservative places such as Mississippi – albeit in a region with a proclivity for gambling of various sorts – Montana, Tennessee and West Virginia. But not in the nation’s three most populous states, California, Texas and Florida. In Florida, an oddly worded state amendment supposedly struck down an expansion of gambling, but negotiations on opening the contract with the powerful Seminole Tribe appear to be more important.

The Gambling Compliance study projects the United States will become the second-largest regulated gaming market in the world – behind only China – even without California, Texas and Florida, which combine for 27 percent of the United States’ population.

Budget deficits, tourism ambitions or attempts to keep in-state dollars from emigrating over bridges into neighboring states are among the myriad motivations.

Sports betting bills were introduced this year in 38 states.

“Five years from now,” Monmouth Park operator Dennis Drazin, one of the pioneers of New Jersey sports betting movement told Gambling.com, “you're probably looking at the majority of states in this country having some form of sports betting.”

Massachusetts Demonstrates Sports Betting Gains, Stumbles

That the prestigious ICE North America gaming conference convened in South Boston today underscored what is possible for the industry and how much is left to accomplish.

DraftKings moved into spacious new quarters in Boston’s Back Bay this spring, just a few miles from Fenway Park and across the Charles and Mystic rivers from the city’s lone casino, the upcoming Encore. While the company has emerged as one of the most successful in New Jersey – combining with competitor FanDuel to control upwards of 80 percent of the market – DraftKings resides in a sports betting desert.

Massachusetts Gov. Charlie Baker is an advocate, but his 2019 bill would have allowed betting only at the state’s three casinos, just one of which is currently operational. This after the inclusion of mobile betting has become an understood must for the success of a market.

Convention-goers to last month’s Betting on Sports America 2019 conference in New Jersey could sample the product between seminars, even from the hotel gym, because of the state’s mobile offering. But the only hint of sports betting Sunday at a rainy Fenway Park was the MGM Resorts International logo on the Green Monster. The Red Sox entered into a casino sponsorship deal with MGM Springfield this year.

The only mentions on the local news was the Encore being denied permission to eventually serve alcohol until 4 a.m. With the Bruins opening the Eastern Conference final in the Stanley Cup playoffs at TD Garden, dogged bettors could have trekked 56 miles to Twin River Casino in Rhode Island. Or they could fall back upon the gray markets or the local bookie or illegal offshore websites.

Meanwhile, the lone sports betting state in New England has emerged as a cautionary tale of groping for sports betting revenue without proper diligence. Rhode Island, which has approved but not yet implemented mobile wagering, has so far underperformed because it misapplied statistics from an American Gaming Association study to its taxation model.

Just as the Dallas Mavericks did not instantly double in value with the repeal of PASPA, as owner Mark Cuban predicted a year ago, states have learned many factors impact sports betting revenue, from taxation rates to licensing fees and where and how bets can be placed. It’s complicated.

PASPA, 1 A.D.

As far as Founding Fathers of the legal sports betting movement in the United States, Ray Lesniak is a bit of a Benjamin Franklin.

With the swagger of a winner, in a casual outfit and cap with “Sen. Ray” embroidered on the crown, Lesniak is a liberal Democrat and former New Jersey state senator who found common ground with a conservative Republican – then-Governor Chris Christie – on a 10th Amendment issue to tip the first domino.

Among Lesniak’s fellow sports betting original patriots, Drazin learned of the Supreme Court decision after repeatedly refreshing an app on his phone when he had word a verdict was imminent.

Though Lesniak writes in the forward of “Beating the Odds: The Epic Battle That Brought Legal Sports Betting Across America” that he would have posted initial odds of victory “in the neighborhood of 2000 to 1,” he had grown ever confident when the Supreme Court had agreed to hear the case, which had then been fronted by new Gov. Phil Murphy. The “over-commandeering” argument would prevail, he thought.

That didn’t lessen the exultation when the decision was minted.

"I was in the locker room of Suburban Golf Club ready to go out to play golf. I got a call. Don't remember who it was from. ‘We won,’” Lesniak recounted to Gambling.com. “I knew exactly what they were talking about. We were expecting it. “

Lesniak said his first call once he had confirmed the verdict was to Rudy Garcia, a former Union City mayor, state assemblyman and partner in his law firm at the time who was ensnared in a $35 million sting – but later cleared by a grand jury – after he’d taken friends’ bets with him to visit his Monmouth County bookie in 2008.

“He was a regular guy, so he just went down to Atlantic City to bet for him and his friends,” Lesniak said. “They thought he was part of an organized crime run course, spending operation. It annoyed me that he could have gotten on a plane and flew to Las Vegas and did it. Legally, charges were dropped because he was not a part of the operation. But meanwhile his mugshot was in the paper. He was embarrassed.

“So that was the first call I made. I said, ‘Rudy, you're vindicated. We won.’ And I spent the rest of the day making phone calls, celebrating with the people who came along with me, and I never did get to play golf."

How Legal Betting Transforms American Sports Fans

For now, legislative action is a slow process. But the speed at which sports betting has become a mainstream part of sports consumption is rapid.

Sports leagues continue at their own pace to embrace it, even as they continue to monetize it.

Just months after Toronto-based theScore voiced intentions to acquire the licenses needed to launch a betting app, becoming the first media content-provider to do so, Fox Sports announced a deal with Stars Group to create Fox Bet, which it says will offer free-to-play national predictive games and sports betting where legal.

While gaming industry experts have told Gambling.com that a full media rush into the sports betting provider business is unlikely, Fox, regarded as a forward-thinking sports property entry, is compelling if not influential.

Either way, sports betting content has proliferated on major networks, with ESPN and NBC Universal adding multi-platform offerings in 2019.

The Disney Corporation, which partnered with the Seminole Tribe to bankroll a successful anti-gambling amendment in Florida last fall, will supposedly not be among them, even with its majority ownership of ESPN. Disney CEO Robert Iger said. “I think you'll see more of it integrated in the programming, but we just don't intend to go into the gambling business." Google concurs even as it formulates its gambling advertising standards for the United States.

Sports betting references, even for those who are not necessarily looking for them, are seemingly everywhere.

Professional sports bettor James Holzhauer has become a national sensation after winning in excess of $1.7 million applying gaming techniques with great leverage on the “Jeopardy!” television show. Wisconsinite James Adducci became a pop curiosity after he turned his alleged first sports bet – for $85,000 – into a $1.2 million payout on Tiger Woods winning The Masters at 14-1.

Illegal Betting Market Still Major Issue

But the offshore market continues to thrive, arguably moreso because of confusion about where the practice is actually legal.

“We know that you're not going to convert everybody to a legal market because bookies can offer credit and things that we can't do. So, some of the market will continue to work with bookies,” Drazin told Gambling.com. “I think some people don't want their action tracked, so not all of it's going to move over.

“But a significant amount of the revenue, maybe 50 to 60 percent, should ultimately end up in legal hands. And the better we can make efforts through our regulatory bodies in this country to crack down on the offshore sites and bookies, the better the numbers we'll look at.

“I think that overall we're in a growth period.”