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Posted by on May 14, 2018 in Blog, Essays | 4 comments

Winners and Losers in the SCOTUS Decision to Allow Legalized Sports Gambling

 

 

Today, the United States Supreme Court struck down a federal law which prohibited most states from allowing legalized gambling on sporting events.

By a 6-3 vote, the high court’s ruling overturned the Professional and Amateur Sports Protection Act (PASPA), which was a 1992 law that banned state-authorized sports gambling (aside from Nevada).

What does this ruling mean?  Well, it’s really good news for sports gamblers.  It’s even better news for many states and companies with the infrastructure to begin offering sports betting.  And, it’s fabulous news for the State of New Jersey, and especially Atlantic City, which has experienced a steady decline in popularity as a recreational gambling destination over the last 20 years.

Here’s my list of the winners and losers in today’s historic decision which is expected to drastically alter the American sports gambling landscape.

 

WINNERS:

Recreational Sports Gamblers — Amateur bettors will soon have the option of making a legal wager within a licensed and regulated environment.  Recreational bettors who might previously have been skittish about placing a bet with an illegal bookie or depositing money into an offshore betting account, can now conveniently step up to the betting window at a local casino, place a wager, and expect to get paid quickly assuming the bet wins.  For the first time, sports bettors will be respected as legitimate consumers.  They will be entitled to the same protections as other citizens engaged in commercial transactions, rather than treated as outlaws.

Professional Sports Gamblers — There’s serious concern that some states might impose a so-called 1-percent “integrity fee” atop all sports wagers.  This is potentially quite problematic given the narrow margins of profit for even the most successful sports handicappers.  That said, as some states begin to legalize sports wagering, expect an increase in the overall betting handle.  In the long term (as more populous states come on board), expect a substantial increase in sports wagering, leading to what’s known as “public money.”  This means more casual wagering inside the overall betting pool, which typically translates into pointspreads that reflect mainstream biases.  Sharps tend to take advantage of inflated lines and inaccurate perceptions about teams and players.  In short, the more uninformed bettors there are in any market, the greater the advantages for the most skilled and disciplined bettors.

New Jersey/Atlantic City — As more states have legalized casino gambling, especially in the heavy-populated Northeast, Atlantic City’s market share of overall gaming revenues has declined substantially.  One-third of Atlantic City’s casinos have shut down.  Some casinos even declared bankruptcy.  Now, given the Supreme Court landmark decision which gives New Jersey a green light to offer sports betting, expect a flow of traffic back towards the Jersey Shore, especially this coming fall when NFL games kick-off.  For the first time in history, citizens within the Garden State (and from nearby states including Pennsylvania, New York, Maryland, Connecticut, and Virginia which are within driving distance) will be able to walk into casinos in New Jersey and legally bet on sporting events.  The same holds true for Delaware, which will also get a boost from legalized sports gambling, particularly from heavily-populated surrounding states.

States (Education and Other Programs) — Most state budgets are desperate for tax revenue.  This is why many states have legalized casino gambling over the past 25 years.  Taxing gambling profits supports many vital state agencies and important programs, especially relating to education.  Soon, states will reap additional revenues from taxes collected on profits from sports gambling.  Accordingly, they won’t be as pressed to raise taxes elsewhere to maintain essential services and protections.

The NBA — Credit NBA Commissioner Adam Silver for being the first head of a major sports league to see the future and face obvious realities connected to the public interest in major sporting events.  A few years ago, Silver announced his support for legalized sports gambling, including fully licensed and regulated wagering on NBA games.  Silver clearly understands what drives fan interest at many sporting events.  Rather than deny realities as all the other leagues have done for many decades, Silver and the NBA embraced the proposal of fans being able to bet on their games.  Look for an uptick in interest in daily/nightly sporting events (NBA, NHL, MLB) since more fans will watch sporting events because of a personal financial interest in the outcome.

States’-Rights Advocates — “States’-rights” has been a pillar of conservative political philosophy for more than a century.  However, as federal powers have gradually increased, states have seen their responsibilities reduced in some matters of governance.  The high court’s decision reaffirms the rights of states to dictate their own policies on matters such as gambling, taxation, and morality.  Instead of a blanket ban against sports betting (outside of Nevada), which had been the law of the land, each state now has the option to make their own laws, and establish their own regulatory and taxation framework.

Fantasy Sports Companies — Fantasy sports companies made a big splash a few years ago when they overreached and bombarded the networks with an annoying number of bad television commercials, initially leading to explosive growth, followed by a legal crackdown on their quasi-legal activities within some jurisdictions.  With sports gambling soon becoming legal, fantasy sports companies — namely DraftKings/FanDuel — are perfectly positioned to transition into legal full-service sportsbooks.  These companies also have existing deals with many professional sports teams.  It remains to be seen exactly how they will shift operations into key states where the competition to run sports gambling operations will be intense.  However, fantasy sports companies already have millions of customers in their databases and some measure of brand loyalty, which provides obvious strategic advantages.

Professional Sports Franchises — Let’s face it.  There’s not much mainstream interest in a game between two losing teams with lots of bad players.  But add the sizzle of gambling on the game, and suddenly, the matchup becomes exciting to watch for most viewers.  Since team sports began, franchises have relied solely on their local fan bases for financial sustenance — in terms of ticket sales, merchandising, and revenues from television rights.  Accordingly, many franchises have struggled.  Some teams have moved to other cities hoping for greener pastures.  Sports gambling is the great equalizer.  It gives bad teams the potential to be watched and enjoyed with just as much enthusiasm as premier games.  Television ratings will increase across the board on all sporting events connected to gambling.  This means more revenues going to the teams and higher franchise values.

Sports Networks/News Sites/Media — Sports betting is largely predicated on access to reliable and up-to-date information.  A broader sports gambling landscape means an increasing flow of traffic to networks, programs, news sites, and periodicals which provide subject matter primarily of interest to gamblers.  Many sports fans won’t be content any longer with simple sports coverage or mundane personality-driven talk shows.  Instead, they’ll be seeking out more hard data and breaking news which could impact the outcome of a game.  Look for sports broadcasts to openly refer to spreads and totals for the first time, since a substantial percentage of viewers and listeners are focused on that element of coverage.  Since a rising tide lifts all boats, more viewers watching games on television and clicking various websites translates into an increase in traffic and advertising revenues.

 

LOSERS:

Offshore Sportsbooks — Sportsbooks located outside the United States, particularly those based in Central America and the Caribbean, have filled the void of the vast sports gambling appetite.  Since most Americans can’t wager legally on sporting events, millions were forced to bet through illegal bookies and/or offshore.  Now, as an increasing number of states are destined to offer their own legal sports betting markets, the demand for offshore sportsbooks will slowly decrease.  Most offshore sportsbooks won’t able to compete with the convenience of local casinos and quick, reliable payouts much closer to home.  Expect several smaller sportsbooks which rely heavily on the American market to go out of business, unless they offer reduced vig and other perks which appeal to most sports gamblers.  By contrast, increased competition translates into more options and better value for most gamblers/consumers.

Anti-Gambling Crusaders (Religious Fundamentalists) — The religious right and behavioral moralists have been proven dead wrong on just about every gambling issue since casinos began sprouting up all over the country.  Their dire warnings of increased crime and other ills supposedly associated with greater access to gambling were unfounded.  Thoroughly discredited on the gambling issue (and just about every moral issue), anti-gambling crusaders have been debunked and defanged to the point of political and cultural irrelevance.  As tens of millions of Americans wake up every Sunday morning, they won’t be attending church.  They’ll be far more interested in wagering on the day’s football games.  Stike another blow to the 19th Century puritans who have run out of arguments against legalized gambling and are being tossed onto the ash heap of history.  Bury them.  They’re done.

The NFL — The NFL remains the undisputed king when it comes to American sports gambling.  Anticipated legalization in many states will come despite their vigorous objections, kicking and screaming against legalized gambling for decades.  Over and over again, the NFL has repeatedly handled its public relations crisis horribly — whether it’s been player misbehavior/reinstatement, the CTE scandal, the National Anthem controversy, ripping off taxpayers to build new stadiums, and so forth.  Here’s yet another black eye and kick in the ass to a league that remains absurdly popular despite gross mismanagement and outright hypocrisy.

The NCAA — The NCAA is the most corrupt organization in sports.  It reaps obscene profits solely at the expense of student-athletes.  It pays its fatcat commissioners, athletic directors, and shady bowl presidents absurd salaries while all the risks are taken by an uncompensated and often exploited labor force.  It’s criminal what’s happening.  Fortunately, the NCAA was dealt an embarrassing defeat and now must face the reality that millions of Americans will soon be betting on their games, whether they like it, or not.  Hooray!

 

Winners and Losers?

Other Casino Games — Who wants to play keno or roulette when pretty soon you can walk into a casino and bet $20 on a ballgame, instead?  Studies find that most gamblers, especially millennials, like to feel as though they have some measure of control over the outcome of a bet.  Unlike most casino games where the action/results are random, sports betting will become an increasing attraction since the gambler’s decision matters.  New sportsbooks could divert traffic flow from the casino floor.  However, a strong case can be made that since sports betting will attract new customers to casinos, some gamblers will gravitate to games like keno, roulette, craps, blackjack, and the slots.  Hence, legalized sports gambling appears to be an uncertain win-lose proposition for other casino games.

Illegal Bookmakers — At first glance, bookies might seem to be the biggest losers when sports gambling becomes legal.  The reasons are obvious.  Bettors won’t have to rely on the illegal gambling market if a viable legal option is accessible.  Moreover, expect the heat to be turned up on illegal bookies since local law enforcement will be tasked with reducing the competition for gambling dollars.  In the long run, however, bookies might actually enjoy a boost.  Since most bookies extend credit to their customers, this presents a huge advantage.  If the sports gambling market increases (and it will), gradually many new bettors will become enticed by betting on credit rather than fronting money.  Hence, bookies might gain more customers.  Bookies might also be able to take advantage of significant pointspread differences in various betting markets.

Online Gambling/Online Poker — Good News:  Given that PASPA was declared unconstitutional, it’s now going to be next to impossible for the federal government to impose similar prohibitions against casino games and poker played online.  This should finally once and for all kill various bills proposed in Congress which might have outlawed online poker (and gambling games).  Bad News:  Don’t expect online poker or gambling games to get any boost in traffic, however.  In fact, interest and traffic could decline since gambling dollars will increasingly find their way into casino sportsbooks instead of in online poker accounts.  There’s only so many gambling dollars in the market available and if New Jersey and other states open up their betting windows, some percentage of the money used to buy sports tickets will come from other gambling ventures — probably, online poker and casino games.

_____

 

4 Comments

  1. Nice, thorough commentary!

  2. Enjoyed the article…got acurious question in relation to baseball players who gamble (Rose)…do you see this prohibition changing (I don’t anytime soon…players should still never be allowed to gamble on their games for integrity of the game….but, would this change eventually help lower the lifetime ban on Rose…?

  3. Interesting read and believe that your lost of winners and losers is pretty accurate. Although, I believe the NFL quietly is in support of it as they will see an uptick in their lagging ratings.
    By the way, the NCAA is not the most corrupt organization in sports. FIFA has held that title for about 40 years!

  4. your music sucks bro

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