Wagering on sporting events has been (with limited exceptions) prohibited at the federal level for the last 36 years in the United States. On May 14, 2018 the US Supreme Court (SCOTUS) changed all that in a landmark ruling. During the partial ban, Nevada had a de facto national monopoly on the lucrative practice of operating a legal sports book. Now that the ban is lifted, all 50 states can pass legislation allowing sports betting in their jurisdiction and Pennsylvania has given itself a head start on the process.
Why was sports betting outlawed and how was the ban lifted?
In 1992 the US Congress enacted the Professional and Amateur Sports Protection Act (PASPA) in a quixotic attempt to eliminate the “evils” associated with sports betting. PASPA prohibited all states from sanctioning any sports gambling schemes, but carved out exemptions for states that had allowed such schemes at any time between 1976 and 1990. This grandfathered in the Nevada sportsbooks, as well as the more limited sports lotteries or betting pools in Oregon, Delaware, and Montana. The predictable result of the legislation, however, was the creation of an enormous black market in sports betting valued in the tens of billions of dollars and the elimination of any legal protections for bettors and bookmakers now operating underground.
By 2009, some state legislatures were bridling under the perceived violation of their states rights embodied in the nationwide ban. In May 2009, Delaware made an attempt to legalize sports betting that fizzled out when a circuit court ruled that PASPA trumped their new plans. Also in 2009, New Jersey state senator Raymond Lesniak publicly announced his intention to challenge the ban and made that challenge concrete in 2011 with the passing of a state resolution legalizing sports betting in the state.
The majority of both professional and amateur sports leagues banded together to oppose New Jersey’s high-profile act of defiance. The case was called Christie vs. NCAA* but was broadly referred to as the “New Jersey betting case”. Despite losing in district and circuit courts, then-governor Chris Christie loudly and publicly championed the case through the appeals process all the way to the US Supreme Court.
When SCOTUS decided to strike down PASPA, they didn’t just side for New Jersey, but also for sports bettors (and bookmakers) throughout the country.
The Pennsylvania legislature saw the writing on the wall
Some legal analysts predicted the court would rule the way they eventually did and Pennsylvania legislators were ready for it. In October of 2017, they passed a bill (H 271) legalizing not just sports betting, but also online poker, daily fantasy sports, and other online casino games. This bill was quickly signed into law by Governor Tom Wolf. Under this system, Pennsylvania gaming would be regulated by the Pennsylvania Gaming Control Board and taxed by the state. All that was required was for SCOTUS to set them free – which they did.
We can’t say exactly how the legal landscape of Pennsylvania’s gaming industry will emerge, but we know a few things. The twelve current land-based casino operators will be offered full gaming licenses at the “discount” price of $10 million each. Most (but perhaps not all) of these casinos will snatch these licenses up. If any decline, the licenses will be auctioned off to other potential operators. Also, partial licenses will be offered (i.e. for daily fantasy sports only) for $4 million and above. We also know that sports betting profits will be taxed at 36 percent. For perspective on that rate, Nevada sportsbooks are taxed at 6.75 percent.
While the fees and taxes are high, we are sure operators will still clamor for entry into the market. Pennsylvanians love their teams and love to make sports bets. It’s a great time for sports betting enthusiasts in Pennsylvania.
*The case was re-titled Murphy vs. NCAA when Phil Murphy replaced Chris Christie as governor of New Jersey.