Sports Betting Case Could Be Online Gambling’s Turning Point

Posted By Steve Ruddock on October 11, 2017

[toc]In the coming months, the Supreme Court of the United States will decide the future of sports betting in the US.

On Dec. 4, SCOTUS will listen to oral arguments in the case of Christie vs. NCAA et al. The case marks a culmination New Jersey’s five-year-long quest to bring legal sports betting to its casinos and racetracks. It could also result in ending the federal sports betting prohibition that limits legal sports betting to Nevada, and to a lesser degree, Oregon, Delaware, and Montana.

After the court hears arguments in December, supporters of legal sports betting will have to be patient. A decision isn’t expected until sometime during the first six months of 2018.

Potential outcomes

SCOTUS could do one of three things:

  1. Uphold the Third Circuit’s ruling
  2. Repeal PASPA in full, creating a “wild west” scenario
  3. Repeal PASPA but offer guidance to implementation

The Supreme Court’s decision to hear the case has many legal sports betting advocates feeling optimistic that PASPA’s 25 year reign will soon come to an end. Moreover, the smart money is on the court choosing option number three, a partial repeal of PASPA.

However, for the Supreme Court this case is less about sports betting and PASPA specifically. For SCOTUS, this is an issue of state sovereignty. The case revolves around drawing the line between what the federal government can and can’t prohibit states to legalize or prohibit.

If the federal government’s ban on sports betting comes to an end, legalized sports betting would be perhaps the most impactful gaming expansion in the United States since the Indian Gaming Regulatory Act (IGRA). That law passed in 1988, paving the way for tribal casinos.

Sports betting a hot topic at G2E

Unsurprisingly, the New Jersey sports betting case was a hot topic of conversation on panels, and during the many tête-à-tête discussions that took place in the hallways and anterooms at Global Gaming Expo 2017.

One of the questions raised on several occasions was whether or not online gaming could piggyback on sports betting legislation. Alternatively, would sports betting bills supersede online gaming and push the issue to the backburner.

The answer to that question likely depends on the state in question, and if it plans on legalizing terrestrial sports betting, online sports betting, or both.

Here’s why states should go online right away

States that choose to legalize brick & mortar sports betting exclusively will be making a bad decision. They won’t realize the full potential of the market.

In Nevada, mobile sports betting accounts for about 50 percent of all sports wagering. A state that decides to forego online sports betting is costing itself money.

Additionally, any state that only legalizes sports betting in terrestrial casinos will strengthen the offshore, black market online sports books.

That could be disastrous. The Supreme Court case and the passage of legislation will raise awareness of sports betting’s new legal status. That leave the door open for black market operators to sow confusion by conflating themselves with legal and licensed sports betting operators.

Bottom line: states that don’t go online will be leaving a lot of money on the table.

Further, it will leave an online void tblack market operators will happily fill.

Couple that with the increased awareness, and it’s easy to see how states that don’t authorize online sports betting will drive sports bettors to black market sites. Black market sites that will use the buzz surrounding legalization to confuse would-be customers.

For all of these reasons, states should pass legislation that authorizes terrestrial and online sports betting.

Of course, plenty of states will ignore this advice and limit sports betting to land-based operators.

Existing online gaming candidates could combine the two issues

The reasons for legalizing sports betting largely mirror the reasons for legalizing online gambling.

  • A legal, regulated market provides consumer protections and begins the process of dismantling the existing offshore, black market operators.
  • Revenue generated would help bolster the state’s casinos, racetracks, and/or lotteries with a new revenue stream and new product offering, in addition to providing revenue to the state via taxes.

Because of this, states that are already considering online gaming legislation will be more likely to take a comprehensive approach to sports betting, both terrestrially and online.

Not only is an omnibus approach good from policy standpoint (why legalize similarly regulated products piecemeal?), it could help increase support for the legislation, and if sports betting is added to an existing online gaming movement it will greatly reduce the learning curve for lawmakers.

The alternative option is more likely

Unfortunately, recent history says most states will take the piecemeal approach, considering online gaming legislation and daily fantasy sports (DFS) legislation comingle in only a few states.

  • In Illinois a bill seeking to legalize online gaming and DFS was passed by the xxxxx this summer.
  • Pennsylvania is close to passing an omnibus gaming reform package that includes DFS and online gaming, as well as preemptive sports betting legalization.
  • A Special Commission in Massachusetts simultaneously studied online gaming and DFS.

But only Illinois married the two issues together for political purposes.

Because of this, it seems unlikely sports betting will act as a catalyst for states to pass online gaming legislation. And unfortunately, online gaming is likely to take a back seat to sports betting, which is the hot gaming topic.

Sports betting might have a built in advantage over DFS-related iGaming in that sports betting and online gaming would likely have the same stakeholders. DFS and iGaming are separate industries.

Still, it seems more likely, states will begin legalizing brick & mortar sports betting. Then, further down the road, look into legalizing online sports betting and online gaming, either separately or in tandem.

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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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