In May 2018, the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA)—the federal law banning sports betting in most states.
Anticipating that decision, New Jersey legalized sports betting almost immediately after the verdict, while other states utilized 2019 to draft and pass sports betting legislation, setting up the groundwork for its success. Accordingly, the stage is set for legal sports betting’s popularity to surge in 2020, as states, betting operators, sports leagues, and bettors usher in a nascent multibillion-dollar industry with unlimited potential.
The Sports Gambling Gold Rush at the State Level
As more states have ushered in legal sports betting operations, the stigmatization of sports betting has been reduced. Since the Supreme Court abolished the federal ban on sports betting in its May 2018 decision in Murphy v. NCAA, 14 states have legalized sports betting while another seven (including Washington, D.C.) have passed legislation but do not yet have the infrastructure necessary to make it operational. Those states represent nearly every region of the country, with the Eastern part of the U.S. leading the charge.
In 2020, the face of legalized sports betting in the U.S. will continue to evolve and expand. A number of remaining states are moving toward legalization, and at least 12 states have active legislation pending.
Issues that consistently are at the forefront of state legislative debates include whether and how to allow mobile sports betting, where to permit brick-and-mortar betting locations, whether to pay integrity fees to professional sports leagues (i.e., taxes on bets causing sports books to pay fees to leagues), and how to overcome the stigma of betting.
Leagues and Clubs Ink Betting Partnership Deals
With a growing number of states legalizing sports betting, professional sports leagues are less concerned about ostracizing fans and have helped push sports betting into mainstream consumerism. Until recently, American-based sports leagues would not consider calling a casino or a sports book an “official partner,” a relationship long-considered far out-of-bounds because of the risk to the integrity of their games. Today, nearly every league and many teams have announced casino or gaming sponsors.
Many are brand sponsorships where leagues use logos to promote the company but not a specific type of gambling, especially not sports gambling or sports books. But the times they are a-changin’, and U.S. professional sports leagues will soon actively promote sports gambling.
In 2020, the PGA Tour will roll-out on-site sports betting (likely app-based) at several of its tournaments, thrusting the Tour’s integrity program into the spotlight. Individual golfers can single-handedly disrupt the integrity of the sport, and as golf gambling becomes more widespread and players get closer to the action, the Tour must be extremely vigilant.
Additionally, in-stadium sports betting is set for takeoff in Washington, D.C., and will transform the game-day experience by allowing the most zealous or casual fans maximum engagement to the sport being played in front of them.
Wire Act Makes News, But DOJ Enforcement Stays Quiet
In early 2019, the Department of Justice released an opinion proclaiming that it would soon apply the Wire Act to non-sports gambling. But the DOJ opinion, which does not carry the force of law, reiterated the DOJ’s stance on prosecuting sports betting businesses: The Wire Act prohibits companies in the business of betting from using interstate wire transmissions to place sports bets or send information assisting in the placing of sports bets.
As states legalize sports betting and the market for online and app-based wagers grows, the DOJ could bring enforcement actions using the interstate nature of online sports betting as its hook.
The Wire Act has since taken on heightened importance because the future of sports betting in the U.S. rests with mobile or app-based betting whereby signals for every online bet likely cross state lines. Even customers in New Jersey using a New Jersey-based app to gamble on sports might have their data travel to New York or Pennsylvania, therefore implicating the Wire Act.
Nevertheless, the Supreme Court has since green-lighted states to pass and implement sports betting operations and, to date, the DOJ has not shown an appetite to attack legal online sports betting.
Vegas Is Sill King, But New Jersey Gives Chase
Since the Supreme Court’s landmark decision, consumers legally wagered more than $7.7 billion on sports bets in Nevada and more than $5.2 billion in New Jersey. Those impressive figures further signal Americans’ shift away from the negative stigma of sports betting, and there is no telling how big and fast sports betting in America may grow.
As more states enter the legal betting foray, expectations are that sports betting revenue in the U.S. could increase exponentially as accessibility to betting opportunities rapidly increases. But that bullish outlook rests on sports betting businesses creating innovative betting platforms and improving accessibility to legal betting options, thereby transitioning customers of illegal offshore sports books to permissible, state licensed alternatives and generating new customers, with no previous sports betting experience.
DraftKings Is Set to Make Its Public Debut
Before the turn of the New Year, DraftKings, a daily fantasy sports and sports betting operator, announced plans to go public. The IPO will reportedly value DraftKings at $3.3 billion.
The real news is not that DraftKings’ IPO perhaps turns the corner on a disappointing year of public company debuts. Rather, we will soon see DraftKings’ “ticker” scroll across the bottom of every finance television channel, further implanting sports betting’s place in modern American society.
States, sports leagues, and fans across the country have sparked the rapidly expanding sports betting industry. As the stigma around sports gambling wanes among fanatic and casual sports fans, all bets point to 2020 unleashing sports betting as a runaway freight train.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Lex Urban is a special counsel in Cadwalader’s White Collar Defense and Investigations Practice and is based in the firm’s Washington DC office. His practice focuses on representing companies and financial institutions, as well as their directors and officers in criminal and civil investigations.
Stephen Weiss is an associate in Cadwalader’s White Collar Defense and Investigations Practice and is based in the firm’s Washington, D.C., office. His practice concentrates on advising U.S. and international clients in connection with internal and government investigations and enforcement proceedings.