Legal Hammer

Sports Betting in the US: The Long Road to Legality

Sports betting is a pastime that has been around for as long as sports have. From the glory days of the Coliseum through the Premier League via centuries of Olympics, people have been placing money on the outcome of sports throughout recorded history. In the United States, however, with only one very notable exception, it took until 2018 for the Supreme Court to strike down the criminalization of sports betting on a federal level, and more and more states have made sports betting and gambling fully legal (but regulated) across the country.

How did we get here, though?

It is, as you may imagine, something of a long story, but it goes something like this:

referee holding ball

The Founding of the Union to the 1930s

Prior to 1910, gambling of all sorts enjoyed a sort of nebulous legal existence in the United States. It was technically legal, but not really regulated. By the end of 1910, though, gambling was outlawed across the United States, which was further ratified by the passing of the prohibition act at the end of that decade. This, obviously, included sports betting. Famously, in fact, eight Chicago White Sox players were banned from professional baseball on the charge of collaborating with sports bookmakers to throw their games – a ban that remained intact despite seven of them being acquitted by a grand jury of those charges.

It wasn’t until 1931 that the first tentative steps towards the legalization of sports betting occurred. Nevada re-legalizes casinos and most major forms of gambling and though it was the only state to go that far, some 21 other states joined Nevada in legalizing horse racing and charity bingo games.


The 50s and 60s

Not a lot changed between the ‘30s and ‘60s bar two or three important developments. First, in 1951, in a bid to avoid the gambling that was legal in Nevada from spreading to the rest of the country, a 10% tax was implemented on all casino winnings from Las Vegas – which led to a precipitous drop in visitors coming to the state to gamble. A decade later, President Kennedy signed into law the Federal Wire Act, which prohibits the use of telecommunications across state lines for the purposes of betting – this, in effect, made sports betting a state, rather than federal matter. Finally, after the past couple of decades saw most of the country adopt the legalization of horse racing and charity bingo, New Hampshire took another step forward by opening the first state lotteries since 1910. 

Baseball stadium

The ‘70s to 1992

Gambling saw an increase in acceptability throughout these years, as the taxes on sports winnings in Nevada dropped from 10% to 2% to 0.25%, while the beginnings of inter-state and then national lotteries happening across the northern states of the US, specifically Vermont, Maine and New Hampshire. In 1978, the first casinos opened their doors in 1978 in New Jersey for the first time since prohibition with Atlantic City becoming a second hub for gambling, casino games and sports betting. 

In 1987, meanwhile, a further blow against legislation against sports betting occurred when the US Supreme Court issued a ruling that Native American casinos may self-regulate all gambling not explicitly outlawed in their state. And in 1990 the state of New York allowed for phone-in bets to be taken from places where sports betting was legal.

All forward momentum, however, ended in 1992 when president George WS Bush signed the Professional and Amateur Sports Protection Act (PASPA), which, in effect outlawed sports betting everywhere in the country except for Nevada. The rest of the ‘90s were generally a boon for casinos, though, as by the end of the decade 25 states and 3 US territories had legalized casinos – either allowing true casinos, Indian casinos or riverboat casinos to operate in their state.


The 21st Century

A further blow against legal sports betting in 2006 when Bush’s Republican successor and son, George W Bush signed into law the Unlawful Internet Gambling Enforcement Act, which prohibited the taking of all sports bets by vendors online. In 2009, however, arguably the most important development in the legalization of sports betting since 1931 occurred when the state of New Jersey petitioned the supreme court to strike down PASPA on the grounds that it violated the 10th Amendment, which protects against federal anti-commandeering laws.

The Supreme Court ultimately only agreed to New Jersey’s petition and began a trial in June of 2017 to hear both sides of this argument. Swayed especially by the fact that illegal sports betting was happening throughout the country in such excessive amounts that the next year’s Superbowl would see some five-billion dollars worth of bets taken on the results of that game with almost all of them being illegal, untaxed and unregulated. 

On 14 May 2018, the Supreme Court struck down PASPA, ruling it unconstitutional and allowing for the legality of sports betting to be decided on a state rather than federal level. In the 5 years since, more and more states have fully legalized sports betting, both online and in-person, with less than a dozen states expected to continue banning sports betting in the long term. 

For the rest of the country, the sports betting business is booming and, because of the regulation that comes with legality, it now also brings in a whole new, multi-billion dollar revenue source for participating states in the form of (lucrative) taxes on legal sports bets.

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