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A new dawn for sports betting in the US

| By Stephen Carter | Reading Time: 3 minutes
David Schollenberger of Healys analyses the implications, likely beneficiaries and time line arising from last week's landmark SCOTUS decision

Until last week, sports betting in the US was prohibited by the Professional and Amateur Sports Act (PASPA), except in the state of Nevada.

On 14 May 2018, the Supreme Court of the United States (SCOTUS) struck down PASPA as unconstitutional. This is the biggest news for the online gambling industry since UIGEA.

But what does this mean? Secondly, who stands to benefit? Finally, what is the likely timeline when it comes to the roll-out?

History in the US courts
The case originated out of a law passed by the New Jersey legislature in 2012 legalising sports betting in Atlantic City and at horseracing tracks.

The National Collegiate Athletic Association (NCAA) and three major professional sports leagues brought an action in federal court seeking to enjoin the law on the grounds it violated PASPA.

New Jersey argued that PASPA violated the “anti-commandeering” principle in the US Constitution. The tenth amendment to the Constitution confirms that all legislative power not conferred on Congress by the Constitution is reserved for the States.

In other words, Congress cannot order state legislatures to enact or not enact legislation unless that power has been reserved to the federal government. Gambling legislation is not.

The District Court and Court of appeals at the time held for the NCAA and the Supreme Court declined to hear the case.

In 2014 the State of New Jersey enacted a new law, which rather than authorising sports betting, repealed existing legislation provisions that prohibited wagering on sporting events by persons 21 and over, at a horseracing act or casino, and only as to wagers not involving a New Jersey university team or a university sporting event taking place in the state.

The plaintiffs in the previous suit filed in federal court again and the District and Appeals court again held in their favour.

The Supreme Court agreed to hear the case this time and held that PASPA’s provision prohibiting state authorisation of gambling schemes violates the anti-commandeering principle.

The remainder of the law was held not to be severable and the entire law was struck down as unconstitutional.

What does this mean?

States are now free to decide themselves if they wish to enact legislation legalising sports betting. Last week’s decision does not legalise sports betting at a federal level.

A number of states have already prepared legislation to legalise sports betting and some where the legislation immediately went into effect following the SCOTUS decision.

The Wire Act, 18 USC 1084 outlaws interstate transmission of information that assists in the placing of a bet on a sporting event. It applies, however only if the underlying gambling is illegal under state law.

Therefore, betting activities between individuals in different states would be legal if it were legal in each of the states involved.

This will allow licensed operators in states where sports betting is legal to take bets or pools bets across state lines.

Implications and who will benefit

With the US’ large population, gambling market and high propensity to gamble, this decision is a windfall for the gambling industry. Because the legislation will be done on a state-by-state basis, it is difficult to generalise who will benefit the most.

It makes sense that UK sports betting operators, with a long history of sports betting know- how and international operations, will look to aggressively expand their presence in US state jurisdictions, following successful licence applications. William Hill already has a strong presence in Nevada.

Some state laws will permit sports betting only at casinos or race tracks, such as in New Jersey. This will give an immediate advantage to the large casino companies such as MGM and Caesars Entertainment.

In states where the licences may only be granted to casinos or race tracks, there will be a number of betting operators that will seek to partner/joint venture with casino operators.

Daily fantasy sports operators such as Draft Kings and Fan Duel will be in an excellent position to move into sports betting operations with their massive customer databases and brand presence carved out by huge marketing investments.

Online will be more difficult. American society is still largely conservative and religious and state legislatures may still be squeamish about allowing online sports betting into citizens’ homes, with fears of underage gambling and interference with family life.

Time line

The expansion across the US states will take time. It is reasonable to predict that ten states may have legalised sports betting within the next four years. Possibly 25 to 30 may enact within ten years. It is unlikely that any uniform scheme would be developed on a federal level.

This is a massive and welcome step for the US in allowing states and their citizens to make their own decisions on sports betting. It brings it into line with practices of other major jurisdictions in Europe and APAC.

This will have the benefit of reducing illegal sports betting and its control by organised crime. Regulating it will also make it fairer, safer and better able to identify and provide services for problem  sports betting gamblers.

Additional state tax revenue will also be a welcome benefit for state coffers, as they have found from the legalisation of casinos.

David Schollenberger is partner and head of gaming, Healys LLP solicitors

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