The U.S. Sports Betting Index classifies and ranks all 50 states according to how consumer-friendly and accessible their sports betting market is. This index quantifies and ranks states according to legality, where and how consumers can place bets, who controls betting, and the number of sportsbooks per capita in each state.
Consumer choice for sports betting has never been greater in the U.S. Since the Supreme Court case Murphy v. NCAA and the subsequent overturning of the Professional and Amateur Sports Protection Act in 2018 the the sports betting industry has exploded. In the aftermath of the decision, 30 states and Washington D.C. have moved to legalize sports betting in some capacity, with roughly 10 more states looking to follow suit. We have seen an increase of over 2000% in bets placed, from $310 million wagered in June of 2018, to $7 billion wagered in October 2021. The market’s growth has been exponential in the U.S. as Las Vegas casinos are no longer the only locations where consumers can bet on their sport of choice. Now, in many states, one can simply place a bet from their couch using their phone or laptop.
While the sports betting market has grown considerably, it still faces opposition either directly through bans or through accessibility limitations placed on consumers by their state government. Many states upheld their sports gambling ban due to support from major professional leagues such as the NFL and NBA. However, said league’s stances have since changed in favor of sports betting. Additionally, states would cite past occurrences where sports gambling was tied to organized crime as a justification for maintaining their ban. Today, many states have legalized sports betting, but several of them have regulations on the type of sports one can bet on, as well as specific locations where customers can place bets, limiting their freedom of choice. Limitations without concrete and rational justifications creates inefficiencies in the marketplace, which incentivize consumers to place bets via the illegal market. With the exponential rise of illegal online gambling options, sports gambling is inevitable, the only question is will people participate in a legal manner, or illegally?
When sports betting is illegal consumers open themselves to unnecessary risks posed by the illegal sports betting market. Most illegal sports betting occurs through offshore websites which advertise themselves as being legal. Because many people are unsure of sports gambling laws state to state, they are deceived into participating in an illegitimate market. In the U.S. approximately 52% of bettors are participants in the illegal sports betting market and about 82% of the same bettors were surprised that they were participating in an illegal market. Black markets for sports betting not only subtract possible revenue from government institutions but, more importantly, place consumers in harm’s way, an issue which can be mitigated through the legalization of sports betting.
Why does legal sports betting matter?
The illegal sports betting market has always had a presence in the U.S., particularly after the expansion of the internet which facilitated the creation of illegal, unregulated, offshore sports betting sites. In 2018, right before the overturning of the Professional and Amateur Sports Protection Act, illegal betting was so widespread it was estimated approximately $4.76 billion were wagered on Super Bowl LII, 97% of which was done so illegally. Most of these bets were facilitated by offshore sites. Offshore sportsbooks are enticing to consumers as they commonly advertise themselves as being legal by playing off of the general confusion surrounding sports betting regulations, due to variations from state to state.
Additionally, offshore sites seem to be a more viable option by offering more favorable bets and better money lines than legal sites. Illegal sportsbooks do not have the pressure of state taxes siphoning off a portion of their revenue, something which forces legal sportsbooks to have marginally worse bets and money lines. The dangers a consumer participating in the illegal market faces include but are not limited to: loss of deposited money if the federal government initiates any proceedings against the illegal book, lack of data privacy, and absence of any monetary insurance policy if issues arise with the bettor’s wager. The illegal U.S. market, despite its risks, generated an estimated $50 billion-$200 billion in 2020. Although the illegal sports betting market is growing, there is a way to mitigate that growth, primarily by legalizing sports betting and having open competitive markets between different sportsbooks nationwide.
While illegal books offer the advantage of better money lines and anonymity, they pose a significant risk for consumers, most of which are not known to the consumer using the illegal sportsbook. There are solutions to minimizing the danger of the illegal sports betting market, most of which require a great deal of consumer education, something which is lacking regarding sports betting. One primary issue is how different gambling laws are on a state-to-state basis. Some states have total bans on gambling such as South Carolina. Meanwhile, North Carolina allows only in-person betting and its neighbor Tennessee only allows online wagering. Legalizing sports betting both in-person and online creates greater clarity and gives consumers more options to choose from when legally participating in sports betting. Having legal options both in-person and online can help to dissuade consumers from participating in the illegal market.
Legalizing online sports betting in every state is the first step in minimizing the black market’s scope. In-person only betting restrictions encourage bettors to look for offshore websites that offer the sports betting experience without having to drive to a casino in order to place their wager. Another issue with black market sites is the lack of taxation they face. As a result, offshore books are able to offer more enticing money lines and bets than their legal counterparts. To counter the market incentive for consumers, state taxes on sportsbooks and their revenues need to stay low so they can offer competitive money lines and odds to their customers.
Constant exchange of information between states on how to best regulate bookmakers, how to ensure financial integrity of both bettors and sportsbooks, and how to address any unique issues which may arise is key for the legal market to gain a leg up on black-market offshore sites. Around 73% of consumers who currently bet on sports believe it is best to do so in a legal manner as it is the safer, and more secure option. Consumers desire safety and security when placing bets and states have the capacity to provide said security. To reap the greatest benefit for consumers, states must work together to minimize the influence of illegal sportsbooks.
States need to practice careful regulation of the sports betting industry if it is going to legally flourish in the U.S. A safe, secure, and well-balanced legal sports betting market offers consumers currently betting illegally a huge incentive to switch. For prospective consumers, the existence of an open and legal market helps ensure that they are not drawn into the illegal market and exposed to the risks which come with it.
Nationwide, legalized sports betting is not only a boon for consumers. Mass legalization of sports betting possesses great benefits for the states as well. With legalization of sports wagering, a new, taxable revenue stream becomes available. For example, New York, which just legalized in-person and online sports betting in January 2022, has already generated $70 million in tax revenue, all of which is marked to be used in financing education, youth sports, property tax relief, and treatment for those with problem gambling habits.
Using the boost in tax revenue states can do a lot of good and have greater flexibility to tackle issues they may have lacked proper funding for. Additionally, an increased number of jobs will be created with the legalization of sports betting. The effect of legalizing online betting in particular is significant. According to an economic impact modeling system called IMPLAN, in a typical California-styled internet business, online sports betting companies have a 7.3:1 ratio for jobs generated. Meaning, with the opening of a new sportsbook in a state, there are about 7 new jobs created with an online sportsbook for every one created by a physical casino. Better yet, those same online positions created have a 49% higher income rate than working in an in-person sports betting retailer. With greater employment opportunities and a larger tax base to utilize for the betterment of their state, state governments and consumers alike have a lot to gain from the legalization of sports betting nationwide.
Since the overturning of PASPA, sports betting is legal in 30 States and there is approved legislation for its legalization in 5 more states in the near future. The professional and amateur sports act of 1992 was overturned by judicial decision in 2018 making sports gambling legal at the federal level, leaving individual states the option to legalize sports gambling. Before PASPA was overturned the sports betting industry in the US, which is a multi-billion dollar industry, was exclusively run by overseas betting websites, and books with ties to organized crime. Before the overturning of PASPA, the federal government and state government’s saw no benefit from the rise in online sports betting, as they were unable to generate any revenue from that economic activity.