March 2, 2017
By Dustin Gouker
A report released today by a Washington D.C.-based libertarian think tank argues that the US government should end the federal ban on sports betting.
The report is from the Competitive Enterprise Institute. It comes with March Madness — the annual men’s college basketball tournament — just around the corner. Americans will wager billions of dollars via office pools and illegally at offshore sportsbooks. Some betting will also occur in the only US state where single-game wagering is legal: Nevada.
You can view the full report here.
The new report on sports betting, at a glance
The CEI makes the case that Congress should act to change the Professional and Amateur Sports Protection Act — PASPA — empower states to determine their own gambling rules and laws.
Sports betting is legal only in a few states. There is Nevada sports betting, and limited forms of sports wagering take place in three other states. (That doesn’t count daily fantasy sports, which takes place in roughly 80 percent of states.)
Despite that prohibition on sports betting, the CEI estimates that Americans bet about $9 billion on March Madness in 2016. The American Gaming Association has put estimates of total annual sports betting handle in the US north of $100 billion, most of it illegal.
The report explains that PASPA doesn’t deter people from betting on sporting events, nor does it safeguard the integrity of games. Quite the opposition, the report states “the ban deprives states of billions in potential tax revenue and forces consumers into the black market where they have no protection from crime.”
While the design of PASPA was to help protect integrity of sports betting, it actually has the opposite effect, the CEI report posits.
The libertarian and states’ rights argument
The CEI advances the argument that state should decide what they do about all forms of gambling, sports betting included:
Worse, gambling prohibitions that bar states from legalizing, and adults from voluntarily engaging in, certain wagering activities undermine state sovereignty—and thereby the Constitution’s allocation of powers between the states and the federal government—and exacerbate any social ills that might arise from gambling by driving the activity underground.
The states’ rights argument might fly in Congress. But the CEI also makes a more broad-based libertarian argument. That likely won’t hold up in the current Republican-controlled Congress:
Rather than seek to enforce a futile and counterproductive ban based on some subjective moral qualms that are far from universal, it is long past time that government policy recognize that gambling—whether it be buying a lottery ticket, betting on the big game, or playing poker online—is a legitimate means of recreation.
Sports betting issues more easily addressed in a regulated market
One of the arguments advanced by some — most notably the NFL — is that the presence of legal sports betting would lead to increasing concerns about the integrity. CEI dismisses this argument, saying legalization and regulation would actually help integrity.
That’s an idea in line with the NBA and Commissioner Adam Silver. From the report
By criminalizing sports betting, PASPA actually increases the risks of match-fixing and corruption. Unlike the betting market in Europe and much of the world where sports betting is legal, bookies are incentivized to share with authorities odd betting patterns that might signal corruption.
This is not the case in the U.S., where this information remains remain inaccessible to and unexamined by sports authorities.
CEI also says that regulated markets address problem gambling more easily than black markets. In the latter, operators have no incentive to help people who are wagering too much:
The tools to address problem gambling and spot suspicious betting activity exist as countries with legal gambling have demonstrate. But, without a legal market where operators are incentivized to work with authorities and protect vulnerable consumers, there is little opportunity to employ them.
It’s the money, stupid
Another reason to legalize sports betting, the CEI argues? The US is missing out on revenue:
If this economic activity were brought into the daylight, it would mean millions of dollars for cash-strapped states. In New Jersey, for example, illegal sports makers prosecuted in the late 1990s had an annual volume of around $200 million.
Global gaming research firm GamblingCompliance projects that a fully developed legal American market—where bets are placed at casinos, online, and at retail bookmaking shops—would produce $12.4 billion in annual revenue, five times bigger than the U.K.’s sports betting market and 11 times bigger than Italy’s.
What’s next for sports betting in the US
There appears to be more momentum than ever to rethink the federal ban on sports betting:
- Major League Baseball Commissioner Rob Manfred is coming closer to Silver’s position.
- The major pro leagues are increasingly okay with putting franchises in Las Vegas.
- State legislatures across the country have moved quickly to legalize DFS. Some states are even eyeing sports betting itself, should the federal climate change.
- Congressional legislation exists, but it’s unclear if that will go anywhere this year.
- New Jersey has a chance to win its sports betting case in the Supreme Court.
Regardless, the CEI report is more weight on the scale, bolstering the arguments of proponents of legal US sports betting.