The Odds of Sports Gambling Legalization in a Pandemic

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2020 was supposed to be the year sports betting exploded. But a pandemic hit, the economy tanked, and major sporting events were canceled across the country.

As states start to loosen their pandemic restrictions and businesses begin to reopen, some states are weighing sports gambling legislation to bolster their economies and normalize an activity many participate in illegally.

Two years ago, the U.S. Supreme Court overturned The Professional and Amateur Sports Protection Act (PASPA). The act, which outlawed sports betting in virtually all states (with the exception of Oregon, Montana, Delaware, and licenced casinos and sports pools in Nevada), was signed into law by President George H.W. Bush in 1992. But the Supreme Court’s 2018 decision said that PASPA violated the 10th Ammendmant’s anti-commandeering clause that says the government can’t enforce states to adopt or enforce federal law. The ruling, thus, directed the question of legal sports gambling to the states.

Since 2018, the legalization of sports gambling has picked up momentum. Twenty-two states and the District of Columbia have legalized sports gambling in various forms. Some offer mobile sports betting, others offer in-person gambling at sportsbooks, casinos, or racetracks.

Just two years after the 2018 supreme court decision, most states have legalized, or taken steps toward legalization. Only three states, Utah, Wisconsin and Idaho, have not introduced a sports gambling bill.

Sports Gambling

Virginia is the most recent state to approve legalization. And in November, Maryland will ask voters whether or not they want sports gambling in their state.

In addition, state senators from California recently announced that they are lobbying to put a constitutional amendment in the November election to legalize sports betting. The state was on track to consider legislation in 2021 but, due to the pandemic, California lawmakers are looking for new ways to “prop up” their state budget right away..

“The legalization of sports wagering gives California an opportunity to provide much-needed revenue to our state during tough economic times,” Sen. Dodd, a co-author of the California bill, said to Courthouse News. “We can’t afford inaction.”

Authors of the legislation say the state could raise $500 million to $700 million dollars in revenue and may help fill the states estimated $54 billion deficit caused by the pandemic.

Obviously, sports gambling will not be an economic vaccine for cash-strapped states in the wake of a pandemic. But it can offer a much needed revenue boost to state and local economies in a post-COVID world.

Although sports gambling can be done in casinos, at racetracks and other physical sportsbook locations, it’s mobile betting that attracts state lawmakers. For one, online sports gambling generates far more revenue.

“States have a few incentives to authorize online sports betting,” Chris Grove, a gaming industry expert who oversees sports betting at Eilers & Krejcik Gaming, told Deadspin.

“Online sports betting generates significantly more activity [than sportsbooks] and therefore more tax revenue than retail betting alone.” In states like New Jersey, for example, “online sports betting accounts for some 80 percent of the total sports betting market.”

Another reason states are interested in mobile sports gambling? Licencing fees from online bookies such as DraftKings, FanDuel, and others. “Online sports betting can command much higher license fees than retail sports betting alone,” added Grove. “Pennsylvania was able to charge operators a $10 million upfront license fee for a sportsbook license covering online and retail sports betting.”

Currently, there are two state legislatures expected to pass a sports gambling bill by the end of this year: Massachusetts and Ohio. Both states are proposing laws for in-person and online sports wagering.

On May 29, Ohio state representatives overwhelmingly passed House Bill 194. The bill would allow Ohioans to bet on live sports on their phones and on location at a sportsbook. H.B. 194 is now onto the Ohio Senate. State Sen. John Eklund is one of two lead sponsors of a bi-partisain senate bill to legalize sports gambling in Ohio. He and Sen. Sean O’Brien are looking to pass Senate Bill 111 at some point this year.

Eklund told Deadspin he believes sports gambling could be “a piece” of the economic recovery in his state, but not the whole pie.

“I want to avoid giving the impression that the economy will rebound on the back of sports gaming,” he said. “It’s like any other business opportunity that is made available anywhere, right? Economic development is important to every state. And part of economic development means encouraging new business.”

Eklund has fought for sports gambling for over a year. Long before the virus, he argued for legalization. But the rest of the country could consider sports betting sooner rather than later.

If states with large populations like Florida, Texas, and California legalized, sports betting would be legal for the majority of the country. The three states alone would account for approximately 90 million people.

In November of 2018 the DraftKings Sportsbook at Resorts Casino Hotel in Atlantic City, New Jersey made opened its doors for the first time.
In November of 2018 the DraftKings Sportsbook at Resorts Casino Hotel in Atlantic City, New Jersey made opened its doors for the first time.
Photo: Getty

The largest state with legal sports betting is New York. But New Yorkers can only gamble at physical sportsbooks. One N.Y. lawmaker is trying to change that.

State Sen. Joseph Addabbo has been vocal about the need for online sports gambling. He even advocated for the state to use this time to “Plan, Pass, and Prepare” sports gambling legislation.

“The pandemic certainly has affected and increased our deficit in the budget and has wreaked havoc economically,” Addabbo told Deadspin. And with professional sports on pause, Addabbo thinks now “is an opportune time to certainly seriously consider mobile sports betting.”

You don’t have to go far — literally — to notice how much New York State is losing by not legalizing mobile sports gambling. Just across the George Washington Bridge in New Jersey, the first state to legalize mobile sports betting, over 60 million dollars in taxes alone have been collected, since legalizing.

New York, a state where you can only gamble on sports at sportsbooks, has not even collected $1M in taxes on sports betting.

Addabbo is not naive. He knows New Yorkers are traveling across state lines to gamble in Jersey. And he estimates that New Yorkers have spent nearly $800 million gambling on sports in the Garden State last year.

Another reason Addabbo wants New Yorkers to place online bets in their home state is to bring illicit sports gambing, and gambling addicts, out of the shadows.

“Right now we don’t know who these people are, they’re going to Jersey, they’re going to do it illegally, off the grid. Once you provide these individuals in our state, with a safe, regulated, legal way of doing mobile spending, then you can help them.”

Arnie Wexler used to be one of those “individuals.” The co author of “All Bets Are Off” a book which details his compulsive gambling addiction, Wexler today speaks out against the dangers of legal gambling, including legal sports gambling.

“You put legal gambling into any state [and] you’re going to see people looking for help,” he told Deadspin.

Wexler’s last sports bet was in 1968, but he continues to attend a twelve-step program to fight addiction. In these meetings Wexler says he has seen more folks come in to talk about sports gambling problems since the 2018 legalization.

And he does not think state lawmakers share his perspective when it comes to sports gambling.

“The only reason why [politicians] want to legalize sports betting in any state…is so the state can grab more money from people. That’s what it’s about.”

New York Governor Andrew Cuomo has hesitated on moving forward with a sports gambling bill, in part because he views it as a “complicated issue.” On May 22, Cuomo was asked about the state’s $13 billion deficit, and whether or not he considered passing recreational marijuana and mobile sports betting to alleviate the economic burden.

“I support legalization of [both]” he said. “I worked very hard to pass it. I believe we will, but we didn’t get it done this last session because it’s a complicated issue and it has to be done in a comprehensive way.”

But there is a clear economic advantage to states who have already legalized sports gambling, or marijuana for that matter. Colorado, one of the first two states to legalize recreational marijuana, has profited off a billion-dollar pot industry. And New Jersey, the first state to legalize after PAPSA, has become one of the nation’s hubs for sports gambling.

“States that have been on the fence with sports betting and marijuana will likely move forward,” Joe Ostrowski, a sports gambling radio host at 670 The Score in Chicago, told Deadspin. “A recession may slow down the proliferation of sports gambling, but it will be more readily available.”

The momentum of sports gambling legislation comes at a unique time in American life, to say the least. But sports gambling stocks are on the rise. And sports gambling companies are poised to benefit from legalization and live sports returning.

In May, Penn National Gaming CEO, Jay Snowden, told CNBC how he thinks the current economic climate will help push the legalization of sports gambling.

“We think that this legalization process that is happening at the state level stands to accelerate, and we really think we’ll benefit from that because we operate in more states than any gaming company in the world,” Snowden said.

Another sports betting company, Draftkings, saw record betting interest for the NFL draft, a day before the company debuted on the Nasdaq. That was in April, when the idea of live sports still seemed far off.

Since the economic downturn, it’s stocks like Penn National Gaming, DraftKings, and Flutter Entertainment, which owns FanDuel and Fox Bet, that are making a better comeback than the S&P 500. Even one sports betting company says they will not feel any long-term effects from the pandemic. DraftKings, which went public in April, is valued at roughly $13 billion, according to a CNN Business report.

“There’s a myriad of reasons that sports betting stocks are booming,” says Ostrowski. “The biggest reason is because one-third of the country already has legalized sports betting with many more to come, since so many states are strapped for cash.”

FanDuel, once just a daily fantasy site, has been a driving force for the legalization of sports gambling, no surprise why.
FanDuel, once just a daily fantasy site, has been a driving force for the legalization of sports gambling, no surprise why.
Photo: AP

In a statement provided to Deadspin, FanDuel commented on the states looking to legalize sports betting in light of COVID.

“Sports betting has proven to be a key revenue drive for the states and, although many state legislatures face uncertainty about when and how they will reconvene in 2020, there is no doubt that the economic pressure of the COVID-19 crisis has legislators looking for new revenue sources. When legislatures return in earnest, we firmly believe the number of states ready to consider accelerating mobile sports betting and online gaming legislation to drive tax revenue will expand substantially.”

As more states begin to legalize, the floodgates are opening for more sports gambling content on TV, radio, and even editorial platforms with The Athletic and Bleacher Report considering betting deals.

And as the pandemic ensues, bet on states to legalize and capitalize on sports gambling.

But if states roll the dice, their constituents will need sports to bet on first.

While researching this story, Deadspin reached out to Gamblers Anonymous to inquire about the negative impact legal sports gambling could have, particularly on those suffering from gambling addictions. A spokesperson for the organization said Gamblers Anonymous will not take a position on legal sports gambling. According to the spokesperson, the organization’s focus is to find help for those who have a gambling problem.

If you have a problem, you can get help.