Illustration by Cierra Pedro

U.S. Supreme Court to Hear Case That Will Influence the Future of Legal Sports Betting

The outcome of Christie v. National Collegiate Athletic Association will determine if a federal ban on states’ ability to legalize sports betting is unconstitutional.

It’s not often that the U.S. Supreme Court hears a case that directly touches on casinos, but they will be doing that this week.

Oral arguments are slated to be heard in the case of Christie v. National Collegiate Athletic Association, which hinges on the question of whether a federal ban on states’ ability to legalize sports betting is unconstitutional. They won’t be arguing point spreads or even the social utility of legalized wagering on sports, but instead will be talking about commandeering federal actions that overstep the 10th amendment, which reserves powers not explicitly delegated to the national government to the states, or the people.

The case stems from New Jersey’s attempts to legalize sports betting, in contravention of PASPA, a 1992 law that banned new states from legalizing sports betting. Although New Jersey had a chance to authorize legal betting before PASPA took effect, the state punted. In 2012, its legislature legalized sports betting, which was struck down by federal courts. Like a Bruce Springsteen song, the state did not give up, and that effort has brought us to New Jersey Governor Chris Christie’s suit seeking to overturn PASPA.

As a non-lawyer, I won’t attempt to handicap Christie’s chance of prevailing here. Instead, as a historian, I’ll consider what happens next, whatever the court decides.

It’s important to note that Las Vegas gaming operators have not been on the sidelines for Christie’s sport betting push. With geographical expansion of casinos close to its limit, the industry lacks the growth potential that defined it from the 1990s through recent years. National gaming revenues are growing modestly, but it appears that demand for casino gambling—limited to cards, dice, and slot machines—is mostly being filled. There’s simply not that many more (politically feasible) places to add casinos. That might be why the American Gaming Association, the industry’s trade group, has aggressively promoted the broader legalization of sports betting.

If the Supreme Court sides with Christie and strikes down PASPA, what happens next? Some may push for a federal system of sports wagering regulation, while others may opt for states to continue to oversee (and tax) this variety of gambling. There are pros and cons to each approach for a variety of interested parties, but, again, I’ll refrain from hypothesizing about the outcome here because I honestly don’t have enough information to make anything more than a series of semi-educated guesses.

If I had to, I would guess that politics will come into play, and that there will be some winners and some losers. This is not, I understand, a ground-breaking revelation. But depending on how these decisions are made, we could see any one (or all) of potential operators, from state lottery commissions to commercial casinos to racetracks to tribal gaming authorities.

Even if the Supreme Court does not strike down PASPA, the United States could end up with legal sports betting. Congress would simply have to pass a law striking down, in whole or in part, PASPA, which, again, could lead to a variety of outcomes and potential regulatory and operational regimes.

The big question has been, how much money is there to be made in sports betting? And that’s a hard question to answer. We have a known sample set, Nevada’s legal industry, and the by-definition unknown size of the national illegal betting market.

There are plenty of ways to calculate the potential size of the market, and many of them are quite logical. In any kind of speculative exercise, there are always assumptions that must be made; these assumptions can lead to something close to the truth or strand the inquiry on the rocks of confusion.

Which is my way of saying that I’m going out on a limb here.

There are many questions over whether legalized sports betting would push out illegal wagering, or whether it would lead to more betting overall, in which case a legal market would be bigger, possibly substantially bigger, than the illegal one. There is also the question of the degree to which legal sports betting would merely siphon money from one gambling activity to another—the lottery may be particularly susceptible here.

I’ve chosen to base my extremely cautious estimate of a potential national sports betting market on the one number we can feel confident about—Nevada’s legal market. It has grown up in a state with an abundance of gambling options (though no lottery). And, in recent years, it has represented about 2 percent of all casino gaming revenue.

In 2016, all Nevada sports books, combined, won about $219 million. Keep in mind that wagering is not restricted to casinos, but also takes place over mobile devices and other remote methods. It’s worth remembering that Nevada’s gaming revenue is skewed by international high rollers that contribute disproportionately to the win numbers compared to other states. But it’s also true that much of Nevada’s sports betting comes from visitors. So the numbers might balance out.

For the sake of argument, let’s assume that all states with tribal or commercial casinos legalize sports betting, and that gamblers in those states bet in the same proportion as those in Nevada do. With total annual combined revenues of about $72 billion, that would mean a national sports betting market of about $1.4 billion.

This is not written in stone. Some states might not legalize sports betting, leading to a smaller market. The demand for sports betting nationally may be greater than in Nevada, leading to a bigger one. Americans may fundamentally shift how they gamble, dedicating more money to sports wagering than other forms of gambling.

In the end, the future of sport wagering in the United States is frustratingly like placing a bet on a big fight or game. You have all the information in front of you, and you choose what you think are the best predictors of a future outcome. It’s only after someone’s hand has been raised, though, that you learn whether you were looking in the right place at all.