The Implication of Legalized Sports Betting

By | February 23, 2019
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The legalization has raised a few questions and concerns over the integrity of sports outcomes. Most affected in this regard are college athletes who are vulnerable to corruption since they aren’t being paid. – The Implication of Legalized Sports Betting

Introduction

The 2017 Super Bowl between the New England Patriots and the Philadelphia Eagles witnessed an outstanding $4.76 billion in the form of bets placed by Americans. Only 3% of those bets were placed legally. However, this is expected to change by the time the next edition of the Super Bowl comes around.

On May 14, 2018, the US Supreme Court struck out the 25-year-old Professional and Amateur Sports Protection Act (PASPA), thus allowing states to decide whether to legalize sports betting or not. Up till that moment, Nevada was the only state with legal single-game wagering, while others like Delaware, Oregon, and Montana ran limited sports lotteries.

Following the decision of the US Supreme Court, many stakeholders such as betting enthusiasts, sports leagues, and casinos have begun to make moves to cash in on the multi-billion-dollar industry.

This article aims to go over the foundations of sports betting, implementation schedule, as well as the distribution of revenue. Also, the implications of the legalization such as increased interest in sports activities, fresh opportunities, and ethical concerns will be discussed.

What is Sports Betting?

Hardly any professional sport does not have betting activity, with the form of betting differing from one sport to another. Betting goes beyond just predicting the winners and losers of a game; it could also entail predicting the eventual score of the match.

In general, the most popular sports to bet on are professional football and basketball. Sports betting is considered legal in most parts of the world, with its largest market base in the UK.

Even in regions where sports betting has been banned, the industry has still managed to thrive. Indeed, illegal wagers worldwide amount to about $1.8 trillion, especially in unregulated markets and on illegal betting sites.

Legal Sports Betting Could be A $200 Billion Industry

Illegal sports wagers in the United States are reported to generate around $208 billion in 2018. To put this in perspective, Nevada, which is the only state that allows sports betting, recorded around $4.8 billion in 2017, while Britain, having a population of 65 million people, recorded a $20 billion yield in wagers in the 2017 fiscal year.

The Implementation Of the Legalization May Not Be Immediate

About seven states including Nevada, Mississippi, West Virginia, and Maryland have legalized sports betting. Sixteen states like California, Minnesota, Missouri, New York, and Illinois have introduced a bill to that effect, but it has not been passed yet. However, sports betting remains illegal in Utah.

States have an excellent reason to legalize sports betting as the projected economic output representing the money spent by betting patrons in the US is estimated to reach about $41 billion.

The American Gaming Association has predicted that if legalized, sports betting will provide approximately 86,819 direct jobs with a labor income of $4 billion, as well as 129,852 indirect jobs and a labor income worth around $7 billion. These jobs would result in fiscal impacts, including state, local, and federal tax impacts, reaching about $8.4 billion and an added contribution of $22.4 billion to the GDP of the US – which is more than the total GDP of Iceland.

Although, before states can cash in on these benefits, they will have to sort out licensing, taxing, and other potential demands from sports leagues. In particular, states have to formulate a policy on who would be taxed and how much the rates would be.

Another factor to be considered is how the revenue will be shared among stakeholders such as sports leagues, teams, and bookmakers.

Regarding individual state regulations, sports organizations such as the NBA and NFL have requested the Congress to pass federal legislation to ensure that all states have the same standard management as opposed to fragmented laws.

Who Could Benefit From Legal Sports Betting?

Aside from the obvious beneficiaries like casinos, racetracks, and online betting sites, many sports organizations and sports leagues may seek to benefit from the sports betting industry.

Major sports leagues like the National Basketball Association (NBA) and the Major League Baseball (MLB), have made a demand for 1% fee on bets placed on their games. The claim is that this “integrity fee” would be used to monitor and investigate ethical concerns regarding sports betting.

On the other hand, stakeholders such as sports operators and casinos have opposed the fees, stating that the increased interest and engagement generated from the games is already of immense benefit to the leagues.

The American Gaming Association, using Nevada state as an example, notes that a sports book in that state generates only 3% to 5% in profits and that a 1% “integrity fee” on all the money wagered legally would amount to an average of 25% of the total revenue.

What Are The Benefits of Legal Sports Betting?

According to a recent Nielsen research, sports bettors accounted for about 25% of the NFL’s TV audience in 2015 but only watched 47% of the minutes viewed. The study further stated that upon legalization of sports betting, the number of NFL season audience who bet on sports would jump from 40 million to 57 million. Therefore, one can infer that legalizing sports betting will increase sports viewing.

The sports television industry would also benefit from the ruling as the industry has been facing pressure from social media platforms and streaming services. The change can cause an increase in sports consumption, engagement, and ultimately advertising spend as people would want to follow the outcomes of the bets they have placed.

Ethical Concerns Of Legalized Sports Betting

The legalization has raised a few questions and concerns over the integrity of sports outcomes. Most affected in this regard are college athletes who are vulnerable to corruption since they aren’t being paid.

However, National Collegiate Athletic Association (NCAA) has suspended its policy of not organizing championships in states where sports betting is legal. This move is a U-turn on its previous uncompromising stance against sports betting in which athletes were warned against betting or risk losing their eligibility for a year.

For more details on how legalized sports betting will have an impact on the US economy and other vital predictions, check out the infographic below.

The Brave New World of Legalized Sports Betting


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