Wanna bet? Next steps for legal sports betting after SCOTUS decision

In this Monday, May 14, 2018 photo, people make bets in the sports book at the South Point hotel and casino in Las Vegas. Now that the U.S. Supreme Court has cleared the way for states to legalize sports betting, the race is on to see who will referee the multi-billion-dollar business expected to emerge from the decision. (AP Photo/John Locher)

The U.S. Supreme Court's decision to strike down a 1992 law banning most statewide sports gambling was literally a game-changer.

Dozens of states are now moving ahead with legislation allowing sports fans to legally bet on professional and amateur sports, with the possibility of some states accepting bets by the start of the football season.

On Monday, the justices deemed the 1992 ban on state-run sports betting, the Professional and Amateur Sports Protection Act (PASPA) unconstitutional, effectively ending the prohibition with a 6-3 vote.

For states, bookies, bettors and sports leagues, the decision opens the door to a multi-billion dollar market. According to the American Gaming Association, a lobbying group for casino and gambling interests, Americans spend up to $150 billion per year on illegal sports bets.

One estimate by Oxford Economics projected legalizing sports betting nationwide could contribute more than $22 billion to U.S. gross domestic product, boost state and federal tax revenue by $8.4 billion and could add almost a quarter-million jobs.

But before placing any bets, states legislatures still have to lay the groundwork, weigh the concerns of consumers and sporting leagues while potentially facing new federal government regulations.

Currently, 19 states have introduced legislation related to sports betting and a number of states are poised to legalize sports betting within a matter of months, according to a bill tracker from Legal Sports Report.

New Jersey lawmakers are prepared to enact the state's sports betting law, which passed with public support in 2012 and has been fought in the courts for years until it was upheld by the Supreme Court this week. Shortly after the decision, the New Jersey legislature introduced new legislation to regulate and tax sports bets.

Other states including New York, Pennsylvania, West Virginia and Mississippi have also passed legislation that can now go into effect following the SCOTUS decision. Oregon, Delaware and Rhode Island may soon authorize sports betting through their lotteries.

According to a 2017 report from Eilers & Krejcik Gaming, 32 states could offer legal sports betting within the next five years.

According to Michelle Minton, a senior fellow at the libertarian Competitive Enterprise Institute, states will likely move fast to legalize sports betting after the SCOTUS ruling.

"I think by the start of the NFL season you're going to see a couple of states that have already legalized sports betting and the revenues are going to start coming in," she said. "Now that this decision has been handed down, a lot of them have new motivation to really push bills through."

Of course, the SCOTUS ruling doesn't mean anyone in any state can head to their nearest bookie and place a bet. Many states will have to go through the process of changing their constitutions to legalize gambling. Other states will continue to prohibit it.

Sen. Orrin Hatch, R-Utah, a sponsor of the original 1992 PASPA, is working on legislation to protect states that want to continue their gambling prohibition. He announced plans to introduce a bill in the coming weeks.

According to Hatch's spokesman Matt Whitlock, the legislation would provide a "light touch" regulatory framework to ensure state regulations aren't "a race to the bottom."

While the effort has been disparaged as an anti-gambling bill, Whitlock said its primary focus will be to "protect the integrity of sports" and protect against corruption. That would address one of the central concerns raised by all the top U.S. professional sports leagues and amateur leagues, like the National College Athletic Association (NCAA).

The executive director of the Major League Baseball (MLB) Players Association, Tony Clark issued a statement warning of the "far-reaching implications" of the court decision.

"From complex intellectual property questions to the most basic issues of player safety, the realities of widespread sports betting must be addressed urgently and thoughtfully to avoid putting our sport's integrity at risk as states proceed with legalization," he said.

In a Monday statement, the National Football League (NFL) called on Congress to "enact a core regulatory framework for legalized sports betting," saying, "Congress has long recognized the potential harms posed by sports betting to the integrity of sporting contests and the public confidence in these events."

The National Hockey League (NHL), National Basketball Association (NBA) also supported a federal framework.

Sen. Hatch is currently working with those stakeholders and others in drafting his bill.

Ultimately, many experts expect a boon from legalized sports betting not just for states and the gambling industry but for professional sports.

Mark Cuban, a billionaire investor and owner of the Dallas Mavericks, said the court ruling will drive up the value of team franchises. "I think everybody who owns a top four professional sports team just basically saw the value of their team double, at least," Cuban told CNBC Monday.

It may have been an exaggeration, Minton noted, but legalizing sports betting "is going to drive interest" back to professional sports, boosting viewership and overall engagement.

As more states move into the relatively new space of sports betting, Nevada can provide a useful example, said David Schwartz, the director of the Center for Gaming Research at the University of Nevada, Las Vegas.

"Nevada has a couple decades of experience running sports betting and I think that's going to be very instructive both from the operational point of view an also from the regulatory, compliance point of view," he noted.

In a nutshell, Nevada allows private companies, or sportsbooks, to offer bets. Those companies are regulated by the state and the state, in turn, takes a percentage of their gross gaming win as taxes. "That's the Nevada model," Schwartz explained.

Last year, Nevada's win from legal sports betting was $249 million, according to the state's Gaming Control Board. While not an insignificant amount of money, it only represented about 2 percent of the state's total gaming revenue.

For states that hope to follow in Nevada's footsteps, there are three key steps, Schwartz explained.

First, they have to pass the law to legalize sports betting. Second, they have to figure out the nuts and bolts of regulation. That means figuring out cash flows, how winnings are reported and how much has to be reported, and other compliance issues. Third, is determining who gets a license to offer sports betting.

While some critics of legalized gambling argue it will increase corruption and foul play in sports, Schwartz disagreed.

"I think the scandals and corruption are more likely to come from an underground market than one that is regulated by the state," he said, noting Nevada's legal sportsbooks have been scandal-free for at least 60 years. Moreover, the companies in charge of taking sports bets in Nevada are public and risk a lot of the legal exposure if they engage in corruption, he added.

Some experts have also raised concerns that legal sports betting will increase problem gambling. Questions still remain about whether more lenient gambling laws enable gambling addiction.

Among the state's that have introduced legislation, there is a general sense of relief that those questions will be left to them, rather than the federal government.

In handing down the majority opinion, Justice Samuel Alito issued a strong endorsement of the Tenth Amendment and the sovereign powers the states.

"Even where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts," Alito wrote, it may not commandeer the states' powers "by directly compelling them to enact or enforce a federal regulatory program."

Some constitutionalists have noted the decision could have widespread implications for other issues where states are battling against federal government encroachment, including marijuana legalization and immigration policy.

"I think the biggest winner is really liberty in the states, and state voters having more control over what happens in their lives," Minton said.





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