On May 14, 2018, the Supreme Court of the United States (SCOTUS) repealed the Professional and Amateur Sports Protection Act (PASPA), ending a 36 year old federal ban on sports betting. Prior to the repeal, United States citizens wishing to make a legal single-game sports bet had to make their way to Nevada, the only state fully exempted from the prohibition. Late last year, Pennsylvania lawmakers passed legislation to fully capitalize on the predicted easing of federal restrictions and bring legal sports betting to their citizenry.
A history of sports betting prohibition and repeal
In 1992, the US Congress passed PASPA, supposedly in an effort to eliminate the damage done to society through sports betting. Nevada’s full sportsbooks as well as some more limited betting lotteries in Oregon, Delaware, and Montana were exempted from the ban in a “grandfather” clause. Despite the best intentions of Congress, the actual result of PASPA was to create an enormous black market in sports betting valued in the tens of billions of dollars. Even worse, bettors and bookmakers now had to operate underground – without the protections available in a legal framework.
Many state politicians were unhappy under the ban as well. Not only did the dangers endemic to black markets harm gamblers and bookies, but the underground activities could not be taxed – depriving state treasuries of an obvious source of funds. It was viewed by many as a classic states rights issue. Clearly, New Jersey state senator Raymond Lesniak thought so when in 2009 he publicly announced his intention to challenge the federal ban. Two years later, that challenge manifested in the passage of a 2011 state referendum legalizing sports betting in the state of New Jersey.
The PASPA gives standing to several organizations (including the US Department of Justice) to challenge state laws they believe violate the federal one. Reacting to New Jersey’s brazen challenge, all the major American sports leagues joined the NCAA and filed suit in an action titled Christie vs. NCAA. Chris Christie was named in the suit because he signed the “offending” bill into law. The suit was re-titled Murphy vs. NCAA when Phil Murphy replaced Christie as governor of New Jersey.
New Jersey initially lost the case in district court and again on appeal in circuit court. Undeterred, Christie was vocal and public in his desire that the case be heard before SCOTUS. Christie got his wish and the resulting decision will have huge implications on sports betting across America.
Pennsylvania’s lawmakers were prescient and proactive
Well in advance of the anticipated positive SCOTUS ruling, Pennsylvania legislators began paving the way for legal and regulated gambling in their state. In October 2017, they passed a bill (H 271) legalizing online poker, daily fantasy sports, various online casino games, and sports betting. Governor Tom Wolf quickly signed the bill into law, placing sports wagering along with several other types of online gambling under the regulatory purview of the Pennsylvania Gaming Control Board (PGCB).
While all the details of Pennsylvania’s legal gambling landscape haven’t solidified yet, we do know some key landmarks. Twelve full gaming licenses will be offered to the twelve current “brick and mortar” casinos and “racinos” for $10 million. If they decline, the remaining licenses will be offered via auction to other casino operators. Partial licenses covering single types of gaming (online poker for example) will also be available for upwards of $4 million each. As if that wasn’t a high enough price for operators to pay, sports betting profits will be taxed at a rate of 36 percent. For comparison, Nevada sports books are taxed at 6.76 percent.
The fees are high. The taxes are also high. None of it will matter. Pennsylvanians are eager to make legal bets and casino operators will line up to provide the much desired service. In Pennsylvania, it’s a great time to be a sports betting enthusiast.