On Monday, the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), the 1992 federal law that banned sports betting basically everywhere in America other than Nevada. In a 6-3 decision in the case of Murphy vs NCAA et al, the court deemed PASPA unconstitutional.
“The legalization of sports gambling is a controversial subject,” the court’s conclusion reads. “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… Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”
State-by-state betting landscape
This does not mean sports betting is now legal at a national, federal level. It means New Jersey can legalize and regulate sports betting, and collect taxes on bets. And New Jersey will move forward right away: bookmaker William Hill, for one, already announced, “We’re going to get ready to open for business at Monmouth Park as soon as responsibly possible.”
Additional states will follow New Jersey’s lead, on a state-by-state basis.
The state-by-state legal landscape will look a lot like marijuana policy has looked: rapidly changing, controversial, not always clear and consistent. As American Gaming Association president Geoff Freeman says in a press release, “Now all attention turns to the states. Already 18 states have introduced legislation to legalize sports betting, with more states expected to follow.” (Some of the states with bills already in place to support legalized sports betting, and reap the tax revenue, are Connecticut, Mississippi, New York, Pennsylvania, and West Virginia.)
So, what does this all mean for an average sports fan who might want to place money on a game and has held off because it wasn’t legal in their state? What does it mean for the major US pro sports leagues, or for the popular daily fantasy sports companies that spent two years battling legal cases that accused them of being betting operators?
Here’s a quick guide of what’s likely to happen next.
Impact on pro sports leagues
The NBA has led the charge of leagues openly advocating for legalized sports betting, ever since NBA Commissioner Adam Silver argued for it in a New York Times op-ed in 2014. MLB Commissioner Rob Manfred followed suit, if not as vocally. But there’s some nuance here: Even though the NBA and other leagues wanted legalized sports betting in America, the NBA, NCAA, NFL, MLB, and NHL all opposed New Jersey’s case, and even sued to stop New Jersey from winning. They wanted it legalized at the federal level, not on a state-by-state basis. This is why the case was called Christie vs NCAA et al (renamed in 2018 for new governor Phil Murphy).
The sports betting landscape is going to be messy for a while, as some states rush to follow New Jersey and others don’t. That means it won’t be so simple and clean for the leagues to monitor betting on their games. As NBA assistant general counsel Dan Spillane said on a sports law panel in November, “Our view has been that if it’s illegal [at the federal level], that’s not the right way to start off legal sports betting in the United States — under a cloud, doing it in violation of federal law. At the same time, we agree with New Jersey on the ultimate policy outcome: that having legal, regulated sports betting in the United States is the best place to end up. The disagreement is just on how to get there.”
The NBA and MLB have said that if sports betting happens, they will demand an “integrity fee” of 1% on all wagers placed on their games. Some have seen the integrity fees as draconian, and argue that the fees will drive bettors to continue using bookies on the black market rather than pay extra to bet legally. Others see it as benign and inevitable: if betting is above board, the leagues want their cut. The players’ unions will also want a cut of the betting.
NBA not winning the PR battle on integrity fees pic.twitter.com/DpfYGAFkHr
— Dustin Gouker (@DustinGouker) January 25, 2018
Meanwhile, the NFL has been relatively silent on all of these issues.
Impact on fantasy sports operators
DraftKings and FanDuel, the leading “daily fantasy sports” (DFS) companies that exploded in popularity in 2015 but then spent over a year battling lawsuits from attorneys general that accused them of being betting operators, were quick to celebrate the decision.
On a press call, both DraftKings and FanDuel say they will aim to offer sports betting products in time for the next NFL season. He also reflected, “I think people would generally prefer to do things in a legal market, and have only been doing it on the black market because they’ve been forced to.”
Robins also shared some metrics: DraftKings has nearly 10 million users, took in $1.8 billion in entry fees last year, and believes it has more than 60% market share of the DFS market. (DraftKings and FanDuel announced in 2016 that they would merge into one company, but in 2017 called off their merger after it became clear regulators would not approve.)
hen can you expect to place a wager through DraftKings? The timing will depend on when individual states move to pass the necessary legislation and set up the regulatory framework that will allow online sports betting. We’re hopeful states will move quickly, but lawmakers need to hear directly from fans like you.”
Critics may say all of this sounds like a reversal of the claim DraftKings and FanDuel long clung to: that their fantasy contests do not constitute gambling.
But FanDuel investor Paul Martino, a partner at Bullpen Capital, argues, “It was never disingenuous that the companies never said ‘We are offering gambling,’ because we were operating under different regulations. So we had to talk about it as a game of skill… Now the regulations have changed.”
To be sure, both DFS companies have been preparing for this potential SCOTUS ruling for more than a year—and staffing up. DraftKings in particular, sources tell Yahoo Finance, had doubled down on this outcome so greatly that the company would have been in big trouble if New Jersey had not won.
“The day the case got announced,” Martino says, “I got on the phone with Nigel [Eccles, founder of FanDuel and its former CEO] and we had a brainstorming session on, ‘What companies do we buy if this happens?’ I mean, who has the largest set of depositors ready to go? FanDuel and DraftKings.”
Still, everything to come is uncertain because it’s a state-by-state landscape. As Martino puts it, sports betting policy will look like “50-state whack-a-mole” for the time being.