May 29, 2018
A couple of weeks ago the US Supreme Court ruled that a 1992 law called the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional. The regulations under PASPA had effectively outlawed sports betting nationwide, with the exception of four states (Nevada, Oregon, Delaware, and Montana). The Supreme Court’s 6-3 decision gave back to each state the power to decide whether to allow sports gambling.
In the Court’s majority opinion Justice Alito wrote “Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.” He went on to note the “non-legal” pros and cons “Supporters argue that legalization will produce revenue for the states and critically weaken illegal sports betting operations, which are often run by organized crime. Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.”
While it is still too early to see the impact of the ruling, the Center for Gaming Research at the University of Nevada (where else?) has forecast that 14 states will have sports betting up and running within two years. An additional 18 others are predicted to have regulated sports books active within five years.
Prior to the Supreme Court’s decision, the American Gaming Association commissioned a study by Oxford Economics , to analyze the potential economic impacts of legalized sports betting in the US. The study, published in May 2017 provided some figures on just how much our economy could benefit from this legalization. The scope of illegal sports betting activity in the US is inherently difficult to measure. It occurs in a variety of formats, including, betting with bookies, online betting with offshore operators, and through casual forms, like office fantasy football pools. Unlike regulated gaming, which is tracked in detail at the state level, statistics for illegal gaming are not gathered.
Despite the difficulties, Oxford Economics produced an estimate for three adoption scenarios. The “best case” assumed all 50 states legalized sports betting, and that gambling was conveniently available through a variety of media including casinos, retail outlets, and online. The estimated impact of this scenario suggest the generation around $20 billion to the US GDP, and the addition of as much as $8 billion in additional annual tax revenue. Moreover, around 200,000 American jobs could be added, of which about 80,000 would be directly employed in the sports betting industry. Many of these jobs will come from casinos, which require intensive labor including security guards, technical support staff, and gaming staff, among other jobs. Some of these casino taxes (depending on winning proceeds) are as high as 25% to the IRS!
States will likely be cautious in adopting new gambling laws, so it may be awhile before we see the new ruling making a difference. However, there seems to be real potential for this heavily taxed hobby to have a significant effect on our economy.