Legalizing sports betting in America is nothing short of precarious. Naturally, there are proponents and opponents of legalization, but the final say depends on each American states’ lawmakers. Several factors need thorough evaluation as they can directly impact a state’s coffers, the lives of its citizens, job creation, and private enterprise.
This burgeoning industry’s issues and uncertainties are many. But there’s certainly no doubt that the far-reaching benefits that legalization offers are worthy of debate and serious consideration by all parties concerned.
The Sports Gambling Market Today
As America grapples with the simplest of sports betting economics, several countries had already legalized sports wagering. These countries have kindly made their services available to Americans burdened by harsh regulations and restrictions. The untapped market proved incredibly fruitful, with revenue estimates of $60 billion upwards per annum.
Offshore sports betting sites proved to be popular and are still attracting bettors from America. So popular that the global sports betting market was worth a whopping $200 billion in 2019, with the primary jurisdiction including the likes of England and Macau.
Critical Points on Sports Betting Legalization
Following the pandemic, states have scrambled to generate revenue, and one of the best ways to do so is by legalizing online sports betting. The revenue generated by sportsbooks is nothing short of impressive, and that’s one of the primary reasons that several states have followed suit.
The Rise of States to Legalize Sports Gambling
Thus far, a total of 22 states have legalized sports betting, with more to follow in anticipation of the financial rewards it promises. In addition to that, more states are passing bills to facilitate sports betting shortly.
Mobile Sports Betting
Mobile sports betting constitutes online sports betting. Some states find online betting problematic even though it minimizes entry barriers for most new sportsbooks that don’t have the assets or resources to compete in a brick-and-mortar scenario. Operating on a mobile platform allows new entrants into the market to grow and harness the flexibility and convenience of modern tech.
Furthermore, it allows bettors to access sportsbooks easily, which drives competition and market share. Not only that but betting online also allows a larger demographic and volume of bettors to place wagers. With overwhelming evidence that a mobile platform is essential, sportsbooks and leagues have agreed that mobile betting is imperative and an essential factor when considering legalization.
But each state has the final say about online betting, whether they opt to stifle the market or embrace growth and the tax revenues generated by online sportsbooks.
New York legalized mobile betting earlier this year, even though sports betting has been legal since 2019. The projected tax revenue from mobile betting alone is a hefty $99 million. But before that happens, the Gaming Commission needs to award licenses to sports betting platform providers. The licenses cost $25 million, and the betting platforms will also be required to pay a $5 million annual cost to the casino that houses its servers. Plus, the state will tax gross gaming revenue by no less than 12%.
Leagues Changing the Market Rules
A significant concern tabled by David Stern, an NBA commissioner that first introduces the damning PASPA Act of 1992, which incidentally took 26 years to overturn, was that sports betting would jeopardize leagues’ autonomy and make their players susceptible to match-fixing.
It certainly appears that this point is still one of the sporting industry’s and various leagues’ main concerns. Leagues are lobbying for rights to determine which bets are offered by sportsbooks and that leagues are given the power to opt-out of specific bets such as exotic bets based on a single play which are more prone to fraud.
Naturally, sportsbooks object to these restrictions as it would have a severe impact on betting revenue, and they would be taking instruction from leagues instead of being independent businesses. Furthermore, sportsbooks agree that negotiations should occur between individual sportsbooks and the leagues/government instead of all sportsbooks having to comply with one set of all-encompassing rules and regulations.
At the same time, leagues argue that these measurements are imperative to protect the integrity of the game. They have also recommended that sportsbooks grant leagues access to their betting data for fraud monitoring; this is problematic in itself as leagues are ill-equipped to become the primary monitoring source. If that wasn’t enough, leagues also want governments to impose integrity fees into law.
Several leagues have shifted their focus to individual deals with sportsbooks to address integrity concerns and generate additional sports betting revenue due to sportsbooks’ objections.
Advertising Impact
Widespread legalization would potentially open up a new market for sponsorship and advertising deals. However, it may also negatively impact existing sponsorship deals with sponsors that oppose sports betting, such as financial services firms.
Opposition is especially prevalent with some international sports associations which have outright banned gambling sponsorships. Still, it’s an entirely different matter in America, where leagues seem eager to embrace sponsorships of all kinds.
According to experts, the widespread legalization could lead to the dramatic growth of a new sponsorship category. At the same time, researchers estimate that the media industry would certainly benefit financially with a projected budget of around $615 million annually. On top of that, product fees will contribute a minimum of $500 million annually, while the total marketing revenue is estimated to be at least $3 billion annually.
Federal Regulations
As more states are legalizing sports betting, it has become necessary for the American Gaming Association (AGA) to publish a set of sports betting principles. These principles make it possible to construct consumer-friendly regulatory frameworks. These frameworks enable lawmakers in states where sports betting is up for discussion to ensure that there’s healthy marketplace competition, drive revenue towards legit sportsbooks and migrate bettors away from offshore sportsbooks to a particular state’s offerings.
During the PASPA Act reversal, Justice Samuel Alito indicated that Congress is entitled to regulate the sports betting industry should it wish to, but if it did not want to do so, each state has the freedom to do so on its own. It is, however, doubtful that the federal government will opt to regulate sports betting at a national level, thus leaving it in the hands of individual states.
The fact that regulation is up to a particular state doesn’t signify that the federal government will remain uninvolved as the market grows. Democrat Chuck Schumer and Republican Orrin Hatch introduced a bipartisan bill in 2018 to hold the federal government responsible for uniform and fundamental regulation for all states.
The bills’ three objectives are as follows:
- Create safety measures to protect consumers
- Preserve the integrity of sporting events
- Ensure the propriety of the sports wagering market
Without the bill’s introduction, each state would have the power to set its particular policies, making it increasingly difficult for leagues and sportsbooks to operate on a national level. As such, leagues have supported the bill and the federal framework.
The Future of The Sports Wagering Industry
As America struggles to convince lawmakers to legalize, offshore sportsbooks continue to accept bets from Americans facilitated by crypto and fintech. As technology progresses, sportsbooks will inevitably utilize tech to improve their service and offering, which will undoubtedly streamline wagering and attract a new breed of bettor.
Wrapping it all up
It’s only a matter of time before all American states offer sports betting, either via a physical sportsbook or online sports betting sites. The potential revenues are massive, and lawmakers can’t ignore the incredible tax revenues offered for much longer, especially in the wake of the pandemic. The tax revenues would undoubtedly alleviate any issues the states may be experiencing, and it would finally give bettors precisely what they’ve been asking for – legal sportsbooks in their cities and states.
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