Economic Impact of Sports Betting Legalization in the US

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Over a year has passed since the Supreme Court declared there’s no ground to keep sports betting illegal in the US. By practically making it legal on the federal level, the Supreme Court left it to individual states to decide the legality of the activity on their own.

And soon afterward, a number of states have started working on laws regarding this form of gambling. Some decided to keep it illegal, some made it legal straight away, while some are still having second thoughts.

Actually, most states are still uncertain whether to legalize sports betting or not. One of the most important factors that will have an impact on their decisions is profitability. The obvious question is how do states which allow their citizens to bet do in terms of profits?

Let’s Talk Figures

Sports betting was decriminalized in the United States in May 2018 and by the end of the year, it had brought a significant boost in revenue. The tax collected from gambling activities throughout the United States was over 430 million dollars at the end of last year. Just a year before, it was almost two times smaller.

The amount the states received through tax from commercial casinos was just over $260 million in 2017. And by the end of 2019, the revenue generated from gambling activities in the USA is expected to reach its historic maximum.

The fact is that states like New Jersey are cashing in millions of dollars from gambling taxation every month. Considering that there are 11 states where sports betting is legal and regulated, it’s easy to calculate that the tax revenue is going to surpass the last years’ number by a mile. And as 24 other states are still pending legislation, the revenue can end up much higher than everyone’s expecting.

Revenue Made from Online Sports Betting

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New Jersey, the state responsible for putting in sports betting legalization in motion saw a major boost in profits recently. The state legalized this gambling form as soon as it became decriminalized on the federal level. The Garden State made both on-site and remote bets legal which proved to be a very lucrative decision.

According to GamblingNews.com, New Jersey bookies earn nearly 20 million dollars every month and more than four-fifths of that amount comes from online betting. For example, the total monthly handle (the amount of money wagered by the players) in July was $251.4M, of which $213M was made through online betting. The astonishing thing about this fact is that there are only 14 online wagering platforms that have a license issued by the New Jersey Division of Gaming Enforcement.

The Garden State is just one of a handful of states that have legalized remote betting. At the moment, apart from New Jersey, online betting is possible only in Nevada, Pennsylvania, and West Virginia. This is also legal in Rhode Island, but no bookmakers currently have a license for running online betting operations.

Once it becomes a more common thing, online sports wagering is guaranteed to give a huge boost to the tax revenue of bet-friendly states. That is the main reason why a number of the states that have legalized on-site sports betting are thinking to do the same with internet-based sportsbooks as well.

What the Future Holds for Sports Betting?

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Before it was made legal in the United States, Americans were spending more than 150 billion dollars every year at offshore sportsbooks. Although a percentage of that money did return back in form of winning bets, most of it still stayed offshore.

For instance, last February, American bettors wagered nearly five billion dollars in total on Super Bowl. The problem is that only a tiny percentage of that money was gambled in licensed US sportsbooks. A big majority of the players decided to bet offshore.

And that’s one of the main reasons in favor of legalization of this gambling form. Why let the money bleed out, when it can stay within the US borders? In fact, not only does legalization make the money stay in the United States, it also sends a big chunk of it to the states’ budgets.

A study conducted by the people from Oxford University a few years ago suggested that legalization of sports betting would possibly bring as much as 14 billion dollars to the GDP of the United States. Although we’re still far away from that number, there are many signs that the estimate could prove right.

Is There a Chance for Betting to Become Illegal Once Again?

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The Professional and Amateur Sports Protection Act (PASPA) of 1992 was the legislation that made wagering illegal on the federal level, with a few exceptions, e.g. Nevada. It took 26 years before the Supreme Court ruled that banning betting was unconstitutional, a decision that still splits opinions in the US.

The main reasons against legalizing this form of gambling is that it could have a negative impact on the fairness of professional matches. A century ago, when there were no special legislation outlawing sports betting, match rigging was a huge problem.

In 1919, the Black Sox match-fixing scandal, in which a group of elite baseball players deliberately rigged the World Series, caused a public outcry to ban this gambling form. Apart from fans who felt offended by the scandal (and many other similar scandals), the officials from major game leagues also wanted to banish gambling across all professional sports. However, a hundred years later, the position of representatives of major American sports leagues (NFL, MLB, NBA, and NHL) is completely different.

And as the money keeps on pouring inside the stats’ tax accounts, it seems pretty unlikely that some of them would decide to get back on the decision to legalize sports betting. Actually, just the opposite is expected to happen. If the trend continues, it’s expected that in five years’ time, as many as 40 states are going to open their doors to sports betting. And that means that by 2024, more than half of all Americans will live in states where gambling on their favourite sport is legal.

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