Betting on Sports

The Supreme Court’s ruling in Murphy v. NCAA yesterday is the first of several blockbuster opinions expected in the next few weeks. In its decision, the Court struck down a federal statute that effectively limited sports betting to a single state, Nevada. Writing for the majority, Justice Samuel Alito declared:

“Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports. The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.” 

The case is rich with legal issues, as Prof. Jeff Schmitt explains in his fascinating Faculty Lounge post below. The Court’s ruling will undoubtedly give rise to many law review articles. Although it is too early to know all of the case’s ramifications, I think we can predict with reasonable confidence a few likely consequences.

First and foremost, sports gambling is about to expand in the United States to an unprecedented extent. Analysts expect that 20 states will legalize sports betting in the weeks and months ahead, and at least 32 states will do so within the next 5 years. In light of the enormous tax revenue that sports gambling will presumably generate, the final number of states legalizing it will probably come close to 44, the same number as currently have lotteries. 

The nationwide expansion of sports betting follows in the footsteps of Europe, where betting on sports has been legal for years. For example, the English Premier League, the most profitable soccer league in the world, allows betting parlors to not only advertise in stadiums but also on team uniforms. Last year 9 Premier League clubs advertised gambling companies on their jerseys. Stoke City Football Club even plays in a stadium called Bet365 Stadium. If English professional soccer is any guide, betting will become a pervasive part of the sports viewing experience across the United States.

Second, it is now a foregone conclusion that Las Vegas will soon be home to every major professional sport, a prospect unimaginable just a few years ago. For decades professional sports leagues avoided Las Vegas like the plague. They feared that locating teams in close proximity to betting parlors would invite corruption into their sports, along the lines of the Boston College point-shaving scandal in the late 1970s which rocked the world of college basketball.

But those fears have clearly dissipated, especially now that sports gambling is going nationwide. In 2016 the National Hockey League awarded to Las Vegas an expansion club, the Vegas Golden Knights, a team that has arguably become the most successful expansion franchise in sports history. Shortly thereafter the National Football League approved the relocation of the Oakland Raiders to Las Vegas, beginning in 2019. At this point it is only a matter of time before the National Basketball Association and Major League Baseball expand to Las Vegas as well.

History would suggest that the nationwide expansion of sports betting will not make much of a dent in Nevada’s resort industry, at least not in the long-run. Many predicted doom for Las Vegas when Native American-operated casinos and state-run lotteries took off in the 1990s. But last year Nevada casinos generated a record $1.6 billion in revenues, and non-gaming spending has become a huge profit center for the state’s resorts. Nevada in general, and Las Vegas in particular, will find ways to prosper even without their monopoly on sports betting.

Third, sports revenues will soar ever higher. Already, the NFL has annual revenues of $14 billion and Major League Baseball exceeds $10 billion in annual revenue.

But the sky is really the limit now. Mark Cuban, the billionaire owner of the Dallas Mavericks, predicted that yesterday’s Supreme Court ruling will double the value of every franchise in professional football, basketball, hockey, and baseball.  The reason is because legalized sports betting dramatically expands the number of games of interest to fans well beyond their own favorite teams. For example, a Thursday night match-up between the Lions and the Browns would ordinarily have little interest to fans outside Detroit and Cleveland. But now that millions of people will be allowed to bet on the outcome, fan interest in low profile games will surge, which in turn will drive up television ratings and advertising revenues. In other words, the rich will get richer.

Fourth, the pressure will grow to pay college athletes or at least permit them to sign endorsement deals (like Olympic athletes). Yesterday’s ruling will lead to more money for college sports just like professional sports. For example, although New Jersey’s new sports betting law (which was the test case that gave rise to the Murphy v NCAA ruling) prohibits wagering on New Jersey-related college games, it permits gambling on out-of-state games involving out-of-state college teams. Other states will likely follow suit with similar regulations of their own. 

The amount of money in college athletics is already mind-blowing. For example, according to a 2017 study by Prof. Ryan Brewer, the market value of some major college football programs come close to that of NFL teams. The Brewer study found that the Ohio State football program is worth $1.5 billion, followed close behind by Texas at $1.24 billion and Oklahoma at $1 billion. Many other major football programs exceed $500 million in market value. 

As college sports profit further from the financial boom generated by sports betting, the debate over paying college athletes or permitting endorsement deals will increasingly focus on the issue of race. As pointed out yesterday in an important Washington Post op-ed by Prof. Tatishe Nteta, Prof. Kevin Wallsten and Prof. Lauren McCarthy, most African Americans support paying college athletes, whereas most whites oppose the idea. The professors’ research finds that the reason for the racial divergence is “[b]ecause a disproportionately large percentage of college basketball and football players are African American. As with welfare, health care and criminal justice reform, that means that, for most Americans, debates over NCAA compensation are implicitly debates about race.” 

Last month a blue-ribbon commission chaired by former Secretary of State Condoleeza Rice proposed sweeping reforms to college basketball without substantively addressing the issue of athlete financial compensation. But it is hard to see how future commissions will be able to ignore the issue, especially as college football and basketball revenues climb ever higher. The stark nature of the racial disparities within the world of college athletic finances will only grow worse over time. Accordingly, one can easily imagine Colin Kaepernick-inspired protests reaching college football stadiums and basketball courts in the near future.

Fifth, the nationwide epidemic of problem gambling will likely grow worse. According to the National Center for Responsible Gaming, at least 3 million Americans currently have some form of gambling disorder and another 5 million are on the path to developing such an addiction. Common sense would suggest that expanding sports betting nationwide will increase the number of problem gamblers.

Finally, the precedential effect of the Supreme Court’s ruling on the anti-commandeering doctrine will be felt for years to come, as Jeff Schmitt points out in his superb post below, which I highly recommend.

In short, while every Supreme Court case is important, Murphy v. NCAA seems destined to have a particularly far-reaching impact on the country.

Comments

[Deep State Special Legal Counsel]

Great. Just Great. It all started with the older Boomers who elected Ronald Deficit Arms for Hostages Reagan and their tax cuts during the heights of their earning power. He started to "drown government in the bathtub" and it continued with read my lips "no new taxes." Now my generation is left with a degrading environment, collapsing bridges in Florida and a bigot in the White House. The only way to pay for all that crap is this...pot, alcohol and now this more gambling. Yes, America is Great Again.

[aniekan]

I think the Congress should pass bill towards eliminating gambling activities in the country. The youth's focus should be channeled to something meaningful like learning a skill, inventing things etc.

[Deep State Special Legal Counsel]

^^^Agreed. A gambling addiction is pernicious. Go to any casino on any day in Iowa, Illinois or Indiana and in the parking lot one will find at least one 90s era Ford and GM cars loaded with belongings and papers such that the rear bumpers are nearly scraping the pavement. Hoarders. These casinos are really sad places.

[Essien]

Job opportunities should be made available in order to keep the mind busy. When youths engage their energy into something meaningful and profitable, there will be abstinence from gambling activities

[Michael]

good for business but bad for the youths. This is not good for the future of our youths. Their mental energy has to be targeted to something meaningful and creative.

[Deep State Special Legal Counsel]

^^^^"This is not good for the future of our youths." My generation has done really well. My grandparents gave us the New Deal and Social Security, my parents the EPA, consumer safety and a Great Society. I am giving my kids Pruitt, Zinke, Devos, torture, vape shops and Video Gaming Parlors at every strip mall and gas station. Also, Border Patrol Agents who detain women for speaking Spanish at a Mini-Mart in Montana.