Love college basketball and can’t wait for March Madness? Want to place a bet on your favorite team to win it all? That’s great, but your sports betting options in the U.S. are limited, because the only way to wager legally is to hop on a plane and throw down at a Nevada sportsbook (which, by the way, is a wonderful experience). There’s the options to wager with a local bookie or at sportsbooks offshore, but other laws (like UIGEA) complicate matters (such as funding an account), while some offshore sportsbooks operate unlicensed in their jurisdictions.
This U.S. sports betting landscape took hold in 1992 Congress passed PASPA, or the Professional and Amateur Sports Protection Act. The law is currently under fire and could be overturned as soon as March 5 as the Supreme Court of the United States considers Christie vs. NCAA, a lawsuit in which the state of New Jersey seeks to have PASPA overturned, thereby clearing the way for individual states to determine if they want to legalize sports betting.
So, Really, What the Heck is PASPA, the Federal Ban on Sports Betting, All About?
Put simply, PASPA bans sports betting across the U.S., except in Nevada. When the law was passed in 1992, it did grant New Jersey the opportunity to legalize sports betting one year after the law passed, but the state failed to do so.
Three other states, Delaware, Montana and Oregon, had certain quasi-sports betting games grandfathered in, meaning they could continue them. In Delaware, bettors can make three-plus team NFL parlays (only); in Montana, sports pools, fantasy sports leagues and sports tab betting are legal, and Oregon was permitted to allow parlay betting until it outlawed it in 2007 to appease the NCAA. Only Nevada had and still has the ability to license and regulate sports bets of all kinds: single-game wagers, teasers, futures and prop bets, among others.
PASPA is a short and succinct law. It is broken down into the four sections:
- Section 1: Defines terms used in the law;
- Section 2: Makes it unlawful for a state to to operate or license sports betting, or gambling on professional or collegiate sporting events.
- Section 3: Allows the U.S. attorney general or an athletic league to go to federal court to stop any state or entity suspected of violating the law.
The last section exempts other gambling such as lotteries and horse racing that was already taking place.
Why Did Congress Pass PASPA?
By all accounts, the law came into existence as a way to stem the tide of legalized sports betting. Paradoxically, it was sponsored by democratic Senator Bill Bradley of New Jersey – the very state that has vigorously battled the leagues in courts trying to overturn the law. (Bradley played college basketball at Princeton before playing 10 years professionally with the New York Knicks.) The sports leagues pushed for the law citing the “integrity of the game,” and then-NFL Commissioner Paul Tagliabue testified to its necessity.
The idea behind PASPA was to stamp out sports betting before more states passed laws making it legal and began creating or licensing sportsbooks. Historically, leagues have argued that sports betting bribery scandals called into question the integrity of sporting events. Remember the Black Sox Scandal, the 1951 college point-shaving scandal or the 1985 Tulane cash-and-cocaine college ball scandals?
But The Leagues Now Recognize That PASPA Has Failed
It has failed to meet its goals of stopping sports wagering or helping to maintain or bolster the integrity of and public faith in games.
Writes NBA commissioner Adam Silver in 2014 in a New York Times op-ed, after stating that “I believe we need a different approach” to sports betting:
Despite legal restrictions, sports betting is widespread. It is a thriving underground business that operates free from regulation or oversight. Because there are few legal options available, those who wish to bet resort to illicit bookmaking operations and shady offshore websites. There is no solid data on the volume of illegal sports betting activity in the United States, but some estimate that nearly $400 billion is illegally wagered on sports each year.
Times have changed since Paspa was enacted. Gambling has increasingly become a popular and accepted form of entertainment in the United States. Most states offer lotteries. Over half of them have legal casinos. Three have approved some form of Internet gambling, with others poised to follow.
In other words, scandals are more likely to occur in a completely unregulated, under-the-radar, unmonitored environment — as in the case of former NBA referee Tim Donaghy, who was busted by the FBI in 2007 for rigging games in connection with the mob.
The leagues also have a monetary interest in legal, regulated sports betting. Sports betting makes their games more popular and more profitable.
The Other Problem With PASPA And Why It May Fall
Separate from PASPA’s failure to accomplish its stated goals, the law is under fire in the Supreme Court for the way it operates: By “commandeering” states to keep and maintain prohibitions on sports betting, New Jersey argues with the support of 19 other states.
In other words, New Jersey argues, the law doesn’t actually regulate or prohibit sports betting (which Congress could do). Instead it tells sovereign states what they can do, cannot do, how to regulate their citizenries, and carry out federal policy at their own expense. The Supreme Court may deem this a violation of the 10th Amendment of the U.S. Constitution.
With the Supreme Court decision coming, numerous states are now moving to legalize sports betting in anticipation. Why? Because “Gambling has increasingly become a popular and accepted form of entertainment in the United States,” Silver writes.
And because states believe licensing and taxing the activity — which is currently happening anyways — would benefit the states, give patrons better consumer protections, and have other ancillary benefits for their economies.
Oral argument in the case took place in December. Stay tuned in here for the Supreme Court decision and our forecast for what may unfold whether New Jersey wins or loses.