In 3 Years Since PASPA Ruling, Legal Betting Transforms Sports

In 3 Years Since PASPA Ruling, Legal Betting Transforms Sports
© USA Today

When the U.S. Supreme Court undid what had been the governing law of the land regarding sports wagering, some of what was coming was predictable. But many events since the Professional and Amateur Sports Protection Act was overturned have been highly surprising, even stunning, and more far-reaching than many appreciated when the ruling was made on May 14, 2018.

The well-told history is that PASPA, a federal law, shut down sports wagering, saying only states that were already offering sports betting when the law became effective in 1992 could continue to do so. It was a restraining influence on even states that offered all other types of gambling, including casinos.

Other PASPA Stories

The net effect was to hand Nevada a de facto monopoly on broader sports gambling. Three other states were also allowed to continue with meager iterations of sports gambling that they had conducted before the law.

When the High Court broke PASPA’s iron grip on sports wagering, the floodgates opened for eager states. Here is what has happened since:

The States

By the end of 2018, eight states had legalized sports wagering. But despite what, on the surface, was a rapid proliferation of sports wagering (and the brisk pace has continued), the manner in which states have adopted sports betting, even in the early days, was a harbinger of what has been going the last three years.

In short, states have been inconsistent in developing sports wagering. After PASPA, Delaware was the first to market but even today it only offers retail sports wagering, no online betting. New Jersey, the state that led the charge against the big-time sports organizations that tried to halt sports gambling, was next in line with mostly a free-market approach tied to the state’s casinos and race tracks. That same year, Montana jumped in with a lottery-centric scheme. Pennsylvania eased into sports wagering with first retail in 2018 and online the next year. New Mexico has tribal sports wagering.

Sounds complicated and confusing? Well, it is. And that is the way it has continued.

RELATED: Online Gambling Laws & Federal Regulations in the U.S.

So, while typical news stories reel off the statistics that 21 states and the District of Columbia have launched sports betting since the fall of PASPA; that another six states have legalized sports betting but have not yet launched, and that as many as 13 more states have legal sports gambling bubbling in a legislative pot, the mere numbers don’t explain the bigger picture.

The country’s four largest states – California, Texas, Florida and New York – still have not launched online sports gambling. New York has retail sports wagering in a handful of upstate casinos.

This year, two of those prize states from the perspective of sports gambling operators, New York and Florida, are at serious stages of trying to legalize full sports gambling but their respective frameworks have observers wondering what sports betting will look like in those places.

Read More About: The Launch of NY Betting Sites in 2022

Despite the awkward rollout of sports gambling across the U.S., bettors have responded enthusiastically. For instance, in December 2020, New Jersey set an all-time record for sports wagering in a month, with handle falling just short of $1 billion. Driven by online wagering, which makes up more than 90% of all of New Jersey’s sports wagers, and the patronage of New York bettors, Jersey has overtaken Nevada as the sports betting capital of America.

But even Jersey is destined to be eclipsed by more populous states, possibly online casinos in Michigan and Illinois, and certainly New York and Florida whenever they get traction.

As much as anyone, former New Jersey state Sen. Ray Lesniak, a Democrat from Union County, gets credit for pressing the legal challenge to PASPA that led to the landmark ruling.

“I wrote a book, ‘Beating the Odds,’ about the legal battle to bring sports betting to the United States, and at the beginning I have a rainbow with a pot of gold," Lesniak said. "And while it has been a pot of gold for the state of New Jersey, as I expected, I am surprised that some states have not jumped all over it, particularly New York, which is good for us because there are more cars in the parking lot at the Meadowlands (a race track where there’s a sportsbook) from New York than from New Jersey. I am surprised that it hasn’t progressed across the whole country as rapidly as possible. But here in New Jersey, we’re reaping the benefits. It did bring back to life both our horse racing industry and our casino industry. They were both teetering before we legalized sports gambling.”

Given the normal governmental pace in various jurisdictions, in another year or so, about half of the U.S. will be able to put down a legal sports bet in their home state.

The Bookmakers

Before PASPA fell, the most famous sportsbooks were actual places. Huge rooms with theater-sized TVs and comfy seating in Las Vegas casinos, such as the Westgate, Caesars Palace and the Mirage. Or a bookmaker might be some hometown guy who took bets on credit over the phone. Or, in the cyber world, the sportsbook was (and still is for many) a website beamed out of Costa Rica or some similar place where the financial transactions were a bit awkward — and occasionally iffy — but the betting was/is slickly convenient.

Now, the largest bookmakers in America are companies that weren’t even making book before PASPA fell. They were offering contests called daily fantasy sports to bet on. And their DNA isn’t really old-fashioned odds-making and gambling; at their core, these are technology companies because they reside on the internet.

DraftKings Sportsbook and FanDuel Sportsbook, pioneers in daily fantasy, are two of the best-known sportsbooks. They have a physical presence as a retail sportsbook in casinos here and there, but their real presence is in cyberspace where they hawk betting opportunities with every pitch in a baseball game, every snap in a football game, and every trip down the court or the ice in basketball and hockey.

And while the transactional ease afforded by technology makes it all possible, the passing of PASPA and the proliferation of sports wagering has encouraged the popularity of what has become known as “in-play” or “in-game” wagering, meaning betting on an event as it is in progress or even on discreet events within an event.

Johnny Avello has been in the casino business in Las Vegas since 1979, in sports betting since ’86, and joined DraftKings as director of sportsbook operations in 2018, a few months after the company started in sports wagering.

“The biggest difference obviously has been the online part of it, especially if you can sign up new customers online without them coming to your brick-and-mortar location, that’s No. 1,” Avello said. “But No. 2 is that we have so many more things to bet on than ever before. … We’ve expanded greatly in the in-game wagering. Now, we’re taking, ‘What’s the next pitch going to be?’, or ‘Is the guy going to get on-base.’ We even did it for the NFL Draft. In-game wagering is the growth of the business right now.”

In addition to the largest bookmakers migrating from bricks and mortar to cyberspace, some also migrated to the public markets in spectacular fashion.

DraftKings didn’t exist 10 years ago. In 2012, it debuted as a DFS company. After transitioning to sports wagering, it became publicly traded on the NASDAQ in 2020 through a Wall Street maneuver known as a SPAC (special purchase acquisition company). A little over a year after its debut, DraftKings is trading at more than twice its original price with a market capitalization of nearly $22 billion (on May 4) — that was more than either Caesars Entertainment or MGM Resorts International, both traditional gaming companies.

FanDuel, part of Dublin-based Flutter, may be spun off as a stand-alone publicly-traded company in the U.S. market.

“There’s more to come,” Avello said of 21st-century bookmaking. “At DraftKings, we have 3,000 people working for us when you add the people from SBTech (which began a process of integrating with DraftKings when the company went public). A lot of young people, smart people, and they’re constantly coming up with new ideas. … We’ve (taken bets) on cornhole tournaments. We’re looking at pickleball bets. But there’s going to be new variants of all kinds of bets.”

The Sports Leagues

For decades, the major sports organizations resisted any association with gambling and the NFL even once banned a Las Vegas TV ad that was scheduled for the Super Bowl.

Since the fall of PASPA, individual sports franchises and entire leagues are falling all over themselves to embrace legal sports gambling. The 180-degree turnabout is so farcical that it would have defied belief just four or five years ago. The reason for the abrupt shift is simple: Money.

“They owe me a debt of gratitude,” Lesniak, the former Jersey politician, said of the pro sports leagues. “I’m waiting for my first ‘Thank You’ letter from one of the NFL owners because it’s increased the value of their franchises by billions of dollars.”

In March 2021, NFL Commissioner Roger Goodell, on the signing of new broadcast rights contracts with the major TV networks ($113 billion that extends TV deals from 2023 to 2033), gushed: “We’re going to find ways we can engage fans through legalized sports betting.”

Hold that up against another Goodell statement from 2012: “If gambling is permitted freely on sporting events, normal incidents of the game such as bad snaps, dropped passes, turnovers, penalties, and play calling inevitably will fuel speculation, distrust and accusations of point-shaving or game-fixing.”

On the heels of the TV haul, the NFL signed another huge deal for “data.” Data is the new word for statistics, but more to the point, data is used to settle wagers. There’s gold in them thar yards-after-catch, at least to those entities that control and distribute such data. Hence, another deal in April with Genius Sports that could mean about $1 billion over four years to the league in cash and possible equity.

Sports organizations have just begun to scratch the surface on what they can extract in fees from sportsbooks for access to data that comes from RFID chips or some other digital gizmo that can be implanted in footballs, shoulder pads, golf balls, baseballs, bats, hockey pucks, goal posts and anything else that can yield a wager-worthy metric.

Then, after media and data deals, the NFL announced partnerships with three of the largest bookmakers in the country; DraftKings, FanDuel and Caesars Entertainment. It involves the books using NFL trademarks and creating NFL-themed free games and sharing highlights and video footage (stuff the NFL had protected like a mama bear protecting her cubs).

Dozens of pro sports teams and even the odd college athletic sports program have signed on with sports gambling businesses in a variety of ways, including advertising, promotions and hosting sportsbooks in and adjacent to stadiums, ballparks and arenas.

John Pappas of Corridor Consultants, a firm that specializes in internet gambling issues, said, “probably the most-surprising turn has been the way pro sports leagues that once bitterly opposed gambling have now embraced it to the point where they are now seeking to be sports betting licensees. It’s been a sea change.”

The Media

Sports media’s relationship with gambling in the era before PASPA’s fall had been a flirtation. Now, it’s a fully committed marriage.

Whether it was Jimmy “The Greek” Snyder’s weekly inclusion in the CBS pregame show, “The NFL Today,” where the handicapper would pick winners without regard to a point spread, or NBC’s Al Michaels making double entendres about a game hitting the Over, references to the betting element of the games were relatively vanilla.

Since PASPA’s undoing, like everything else about sports, betting has made a profound change in the tone of sports coverage and promises to do so even more as broadcasters, gambling operators and sports leagues link arms.

ESPN has invested in a daily show on sports wagering called, well, “Daily Wager.” It broadcasts from Las Vegas. Before the fall of PASPA, a start-up daily sports gambling show operating on far less resources than ESPN called Vegas Stats & Information Network (VSiN) started broadcasting from the South Point Casino, far south of The Strip resorts, with shows anchored by announcing veteran Brent Musburger. VSiN started in 2017, more than a year before it was apparent that sports wagering would become the new normal in the sports world.

This year, on a wave of gambling media acquisitions, DraftKings bought VSiN. Terms were not announced, but the deal was reported to be about $100 million. This month, Better Collective A/S, which offers betting news, agreed to buy another sports wagering content company, Action Network Inc., for $240 million.

A newly constituted Bally’s company has piled on layers of gambling and media assets that is an example of the new sports media company. In April, Bally's Corp., which owns casinos and online gambling interests, joined with the Sinclair Broadcast Group, which has 19 regional sports networks. That merged operation is now known as Bally Sports.

An even more intimate coupling of media and gambling is likely coming to the gambling operators’ own websites. Plans have been afoot to live stream sports events on the gambling platforms to more closely align the user experience that combines watching a live event and wagering on that very event. Soon, sports coverage and sports wagering will work together so seamlessly, it’s likely that fans won’t be able to tell where one ends and the other begins.

The Fans

That the fan experience has changed is obvious from a single number — wagering handle, which is the gross amount of money bet. For 2020, the U.S. sports wagering handle was $21.5 billion. In 2017, the year before PASPA was overturned and Nevada was the only state where broad legal sports wagering existed, the handle in that state was $4.51 billion. Obviously, allowing more states to offer sports gambling has led to greater participation by Americans at large, most of whom are presumably fans, whether rabid or casual.

Not to be dismissed in discussing the numbers regarding legal sports wagering is the significant amount of betting that continues with offshore bookmakers with whom regular sports bettors have grown comfortable. Those bettors likely will stay with those books, at least for the near term. The offshore betting action actually dwarfs wagering with regulated U.S. operators.

As time goes on and self-interest in the outcomes of the contests or the performances of individual athletes becomes more a part of the sports spectating experience, there is likely to be a drift from the 20th-century fan paradigm. Certainly, older sports fans, who grew up in the traditional rooting ethos, may continue to cheer for the colors and emblems they grew up with, and that have been part of community identity.

However, there’s an attraction to sports gambling in its new iteration that will likely influence how younger fans view the games. Gambling creates a new home team, meaning the gambler. Self-interest is a powerful draw. Should that occur, it’s difficult to predict what it will mean for the fan experience, which has been largely communal in spirit but is rapidly trending toward a different goal: Individual profit.

Other influences come into play. Modern sports wagering is largely played out in a digital environment, a world that’s native to younger fans. In addition, 21st-century sport wagering is becoming more and more a science of data absorption and analysis, and younger fans have developed an appetite for analytics.

“The bettor is more informed now. He has the internet. He can read news accounts from around the country and there’s more sports betting shows on TV where they can hear so-called experts,” DraftKings’ Avello said.

Where It Leads

The dismantling of PASPA, like so many legal turns, has had ramifications that could not be foreseen. More will continue to emerge, largely because of technology and the enormous amount of money at stake.

The proliferation of sports betting, especially online, has placed it front and center on the American sports landscape, meaning that gambling is now entwined with one of the country’s most important cultural pillars. In the UK as well as continental Europe, sports gambling has been common for decades. Recently, there has been pushback driven by what some perceive as too much gambling.

That might or might not happen in the United States. For the next few years, America’s sports wagering industry will inevitably grow — a few states each year. Perhaps, in time, sports gambling will find a national equilibrium with which people are comfortable, but even that will mean adapting to a sports world with new measures for how the games and player performances are appreciated and valued.

It would seem that for many folks, being a sports fan will never be as simple again as “root, root, root for the home team.”

"The trickle-down effect of the PASPA decision has certainly included many unforeseen, unexpected consequences,” said Pappas, the iGaming consultant. “Whether that turns out for the good or not for the good remains to be seen.”