ESPN - Sports betting legalization: Where do we stand right now?

Article | 09.14.2017

September 14, 2017 

By David Purdum 

Most estimates are in the hundreds of billions of dollars, but no one knows for sure how much money Americans bet on sports every year.

Whatever the amount, it's enough to fuel the massive offshore bookmaking industry that consists of hundreds of online sportsbooks. It's also large enough to get the attention of cash-strapped states and ratings-dependent sports leagues that now seem more accepting of betting.

The American Gaming Association estimates $150 billion is bet annually on sports by Americans. Professional gamblers say that's too high. Professional bookmakers say it's too low. The $150 billion mark must be a good line.

"I would bet over $150 billion before I would bet under," veteran offshore sportsbook operator Scott Kaminsky of TheGreek.com wrote in an email to ESPN.

In the coming months, the United States Supreme Court will hear a case that will not only shape the future of American sports betting, but also begin to divvy up a market that experts say could be worth as much as $5.8 billion in annual revenue.

The case is centered on the federal ban on legal sports betting, the Professional and Amateur Sports Protection Act of 1992 (PASPA), and matches New Jersey Gov. Chris Christie versus the NCAA, NFL, NBA, NHL and Major League Baseball.

Oral arguments are expected as soon as late November in the Supreme Court, with a decision anticipated by the end of June.

Sports leagues getting ready

Dozens of states, the professional sports leagues, international gaming companies and members of Congress are not waiting around for the Supreme Court to rule and are instead taking steps to get out in front of the decision and be prepared for a variety of outcomes.

Just this week, executives for Major League Baseball were in Las Vegas, to meet with sportsbook operators to learn how the industry works.

The NHL also is becoming more comfortable with regulated sports betting and recently elected not to request a prohibition on betting on its new Nevada franchise, the Vegas Golden Knights. The mobile sports betting apps offered by the majority of Nevada sportsbooks will be accessible inside T-Mobile Arena, where the Golden Knights will take the ice.

At the same time, the NHL remains a plaintiff against New Jersey and has repeatedly decried the irreparable harm that the league would suffer if legal sports betting were to expand.

"[N]ew Jersey's contemplated sports betting scheme threatens serious and irreparable harm to the NHL, harm that cannot be remedied or compensated for by any amount on monetary damages," NHL commissioner Gary Bettman wrote in a legal filing in the case on Aug. 9, 2012.

Multiple sources connected to the case said all of the professional sports leagues are educating themselves on the issues surrounding legal betting and preparing contingency plans should the Supreme Court strike down PASPA. (The NCAA is not actively working on the issue in Washington, D.C., according to a spokesperson).

The professional sports leagues have partnered with European sports data companies that provide odds and information to sportsbooks around the world. The NBA, which now openly supports expanding legal sports betting with a federal framework, has worked with Las Vegas-based consultants for decades, and even the NFL has had hired services to monitor for unusual betting patterns in the past.

The NFL also has put a franchise in Las Vegas, with the Oakland Raiders expected to arrive in Sin City by 2020, if not sooner.

"People are kidding themselves if they think that [the leagues] have any motivation other than money," gaming attorney Kate C. Lowenhar-Fisher said in a recent phone interview. "There's none."

Interest building in Congress

U.S. Rep. Doug Collins, a Republican from Georgia, is calling for a hearing on PASPA in the House Judiciary Committee. Nothing had been scheduled by September, but there's a push to make it happen sometime in the fall.

"The Supreme Court will issue a decision on Christie v. NCAA within months, but the responsibility to write legislation belongs to Congress alone," Collins told ESPN in a statement. "Historically, when we've failed to legislate, the Supreme Court has been all too happy to fill the void. So, legislators have a window to address the issues surrounding PASPA, and, since the House Judiciary Committee has jurisdiction over this particular law, I look forward to reviewing it with the Chairman and our colleagues there."

The American Gaming Association and its sports betting lobbying coalition continue to meet with stakeholders and are hoping the looming Supreme Court decision increases the urgency about the issue in Congress.

"PASPA is an outdated and failed law," American Gaming Association CEO and president Geoff Freeman said in a recent news conference.

There's also interest out of the House Energy and Commerce Committee, where U.S. Rep. Frank Pallone, a Democrat from New Jersey, has already released a draft of legislation aimed at repealing PASPA.

As federal interest increases, other states are looking to get involved. Twenty states signed on to an amicus brief filed to the Supreme Court in support of New Jersey, and a dozen states have introduced legislation aimed at legalizing sports betting, if the federal ban is lifted. Even Nevada, where the state's regulated sports books are on pace to take $5 billion in wagers this year, supports expanded legal sports betting in the U.S.

"I am confident that Nevada will continue to set the gold standard of regulation when it comes to gaming and sports betting," Nevada Gov. Brian Sandoval told ESPN in a statement. "A ruling in favor of New Jersey would help in the fight to reduce illegal gaming and will not hurt the Silver State's position as a global destination for gambling and entertainment. ... Many companies based in Nevada would have a new opportunity to expand across America while maintaining international headquarters right here in the Silver State."

Dividing up the market

While the exact amount is unknown, Americans are betting enough on sports to keep hundreds of offshore sports books in business.

Costa Rica-based website Sportsbookreview.com monitors 108 online sportsbooks that serve the United States. These are the more commercial bookmakers, often located offshore in the Caribbean, that require money up front to bet, post-up shops like Bovada.lv, 5Dimes.eu and Bookmaker.eu.

In addition, there are believed many more bookmakers who run their operations on credit, using offshore-based websites to facilitate the bets, while handling payment transactions person-to-person. The number of pay-per-head bookmakers is believed to dwarf the number of commercial, post-up sites. "There are seriously thousands of pay-per-head credit shops," a source in the offshore industry told ESPN. "You sit down at a poker table in the islands and everyone is a bookmaker."

The upcoming Supreme Course case will go a long way in determining how the process of creating a regulated sports betting market in the U.S. takes place -- even though legal authorities say sports betting will have little to do with the court's ultimate decision.

"The case is about the anti-commandeering principals, it's about state-sovereignty and federal sovereignty, it's not about betting," Lowenhar-Fisher said. "From a legal perspective, it's about federal overreach."

That's exactly why Collins, the congressman from Georgia, says there needs to be a hearing on PASPA.

"I think it's important that the Judiciary Committee get involved because I'm a constitutionalist and PASPA raises constitutional issue -- including federal overreach -- that we would be severely unwise to ignore," Collins said in his statement to ESPN. "Like many Americans, northeast Georgians don't appreciate the federal government coloring outside the legal lines."

For the first time in a case that has lasted more than five years, New Jersey is considered the consensus favorite, according to legal experts. Sources close to the case, however, say there has not been even a sniff of any settlement discussions between the two parties.

Kevin Braig, an attorney with Ohio firm Shumaker, Loop & Kendrick, who has been following the case, believes the most efficient avenue to legal sports betting could come via an agreement between the leagues and any states interested in offering legal sports betting, a covenant not to sue.

"There is no hypocrisy in this case. Each side is pursuing an outcome that is in its economic interest," Braig said. "Do you think (New Jersey race track) Monmouth would find it acceptable for the New York Yankees to take bets on horse races at Monmouth Park without first getting permission to do so from the New Jersey Horsemen's Association?"

If New Jersey prevails, the sports leagues will be expected to make an immediate push for federal legislation to create a consistent regulatory framework and potentially create a way to benefit financially from legal sports betting. The best scenario for the leagues would seem to be a significant and direct financial benefit without the appearance of such a benefit. In addition the leagues and states, tribal gaming interests, state lotteries and problem gambling associations will also want a seat at the table to discuss how revenue from a legal sports betting market will be divided. There is currently a 0.25 percent federal excise tax on wagers; Nevada's state tax on sports betting is around 6-7 percent.

Respected gaming industry trade publication Gambling Compliance released a report this week that examines the gross gaming revenue (amount the sportsbooks win) that could be generated if legal sports betting were to expand in the U.S.

Roughly a dozen states have introduced legislation this year that deals with sports betting. Gambling Compliance assumes 21 to 37 states will offer legal sports betting within five to seven years after PASPA is lifted. That number of states would produce annual gross gaming revenue from sports betting ranging from $2.0 to $5.8 billion, according to the report.

Currently, Nevada is the only state allowed to offer single-game sports betting, the most popular form. In 2016, Nevada sportsbooks took $4.5 billion in bets and won $219.1 million.

If the market were to expand to 50 states and include online wagering, the Gambling Compliance estimate balloons to $13.8 billion.

For now, all eyes are on the Supreme Court.

"The Supreme Court has a hearty appetite to reverse lower court decisions," said Jeff Ifrah, a prominent Washington, D.C. based attorney and founding member of Ifrah Law PLLC. "The Court will be especially hungry to do so when it hears oral arguments in Christie v. NCAA later this fall. The case offers a full menu of hot button legal issues including states' rights and state sovereignty. The win will go to Christie and the State of New Jersey."

Original article 

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