Since time immemorial, sports betting has been a popular pastime. Some experts believe that the ancient Greeks and Romans introduced sports betting to the world. Realizing its great revenue-generating potential, many countries decided to liberalize the industry. At the moment, the sports betting industry is legal in many countries across Europe.
Unfortunately, things are not that cut-and-clear in the United States because the sports betting industry is subject to state and federal regulations. Whether it is legal to bet on sports largely depends on the state you are physically located in. And even if you reside in a state that legalized sports betting, you cannot bet on sports if you are under the age of 21.
The History of Sports Betting in The USA
Before the 20th century, the most popular sport among US bettors was horse racing. Betting on traditional sports emerged on the surface with the establishment of the National League (NL) in 1876. Two decades later, the American League was founded and the popularity of sports betting kept on rising. At that time, sports betting was perceived as a form of entertainment and no regulations were in place.
But it did not take long for the first sports betting scandal to stir the pot. In 1919, eight members of the Chicago White Sox (a professional baseball team) were accused of being bribed to throw the game against Cincinnati Reds. Even though some states decided to restrict bookmakers from offering betting services, the demand for sports betting kept on increasing. This gave rise to illegal sports betting operations.
Nevada – The First State to Legalize Sports Betting
Out of doubt, Nevada, and more specifically Las Vegas, is the gambling Mecca in the USA. The state moved to regulate the sports betting industry back in 1949 in an attempt to boost its tourism industry. Interestingly, Nevada legalized most forms of gambling in 1931. A 10% tax was imposed on all sports bets. The heavy tax resulted in an exodus of operators from the market and the closure of betting shops. In a bid to reinvigorate the sports betting industry in the state, the US Congress lowered the tax to 2%.
The Federal Wire Act
In the meanwhile, organized crime kept on having a firm grip on sports betting operations throughout all other states except for Nevada. Legislators ramped up their efforts to crack down on illegal sports betting operations. In 1961, the Federal Wire Act was passed to prevent bookmakers from accepting bets on sports placed over wire communications. In fact, the federal law did not target bettors, but bookmakers.
But the law was enacted before the invention of the Internet. Hence, we can interpret “wire communications” as referring to bets placed over the phone. However, the Internet is also a form of wire communication, which means that the Federal Wire Act may pertain to online sports betting.
The Professional and Amateur Sports Protection Act
A growing number of states started eyeing the opportunity to regulate gambling and sports betting. In 1976, Delaware launched a sports lottery. At that time, New Jersey passed a referendum to allow casinos in the state. In 1986, the Montana Lottery was launched, and in 1989, the Oregon Sports Action parlay game came on the scene.
As a result, the US Congress decided to adopt stringent measures to stem the further expansion of the industry. In 1992, President George H.W. Bush signed the Professional and Amateur Sports Protection Act (PASPA) into law to ban states from regulating betting on professional or college sports events. The law became a hindrance to the development of the sports betting industry.
However, the states that have already regulated sports betting or some forms of it were exempt from PASPA. These include Oregon, Delaware, and Montana. Residents of Delaware were allowed to place parlay wagers on the outcomes of at least three NFL games. Montana could continue to offer sports pools and square betting.
Oregon sports fans could place parlay bets on NFL and NBA games until 2007 when the state forced the local lottery, also known as “Sports Action”, to cease operations in an attempt to attract collegiate basketball tournaments.
The US Congress provided New Jersey with a one-year window to regulate sports betting as casino gambling was already legal throughout the state. However, New Jersey failed to pass laws regulating the sports betting industry within this time frame and missed the opportunity to legalize its betting market.
The Legal Battle Against PASPA
It all started in 2011 when New Jersey held a referendum on whether PASPA should be amended to allow betting on sports at local racetracks and casinos. Voters approved the referendum, and the state presented a bill that was signed into law in 2012 by Governor Chris Christie. The NCAA, NFL, NBA, and NHL opposed the Governor’s decision.
The District Court ruled against New Jersey’s bill, explaining that it violates PASPA. The Third Circuit Court of Appeals agreed with the ruling, and the Supreme Court declined to hear New Jersey’s case. In 2014, legislators in New Jersey introduced the so-called Senate Bill 2460 that was focused on repealing the existing provisions regarding sports betting at horse racing tracks and casinos located in Atlantic City.
Professional sports leagues contested the bill, stating that it violates PASPA because it aims at authorizing sports betting throughout the state. New Jersey’s bill again failed to pass, but state legislators did not give up. In 2017, the Supreme Court agreed to hear New Jersey’s sports betting case.
On 14th May 2018, the regulatory climate dramatically changed for New Jersey after the Supreme Court overturned PASPA. It was explained that PASPA violated the anti-commandeering provisions of the Tenth Amendment of the US Constitution. The repeal of PASPA paved the way for individual states to regulate the sports betting industry within their boundaries.
The Unlawful Internet Gambling Enforcement Act
In 2006, the US Congress enacted the Unlawful Internet Gambling Enforcement Act (UIGEA) in an attempt to stamp out online gambling and sports betting operations. Under UIGEA, online gambling and betting businesses are not allowed to process gambling-related payments. The Act was included in the SAFE Port Act. It was briefly introduced just before the congressional recess, so most Senators could not even understand what UIGEA is all about.
The word “Enforcement” plays a crucial role in interpreting the law. UIGEA can penalize existing offenders only. A common misconception is that UIGEA outlaws online gambling and sports betting, but in fact, it targets operators. This means that UIGEA does not penalize bettors. Daily fantasy sports (DFS), tribal gambling, horse racing, and lottery remained untouched by UIGEA were all exempt from UIGEA.
UIGEA forced many remote sports betting and gambling companies to look for alternative payment solutions, while others decided to leave the US market. This piece of legislation is the cause of poker’s “Black Friday”. Poker fans might remember that on 15th April 2011, the US Department of Justice issued an indictment against PokerStars, Full Tilt Poker, and Absolute Poker.
The three poker websites were accused of violating UIGEA. A civil complaint against the companies was also filed. As a result, PokerStars and Full Tilt Poker ceased operations in the USA immediately. This shook the thriving online poker industry to the ground.
Over the years, UIGEA has started to lose ground among players and bettors. At the moment, many reputable online sportsbooks accept punters from the US, providing them with convenient and safe payment solutions.
US States That Legalized Online Sports Betting
After the Supreme Court struck down PASPA, many US states decided to regulate the sports betting industry. Sports betting is an attractive source of revenue for the states. Besides, a regulated sports betting market provides a high level of consumer protection and curbs illegal operations. In the lines below, we will discuss the US states that have already regulated the sports betting industry.
US Sports Betting Markets Pending Launch
The regulatory climate is constantly changing, and more and more states are about to legalize online sports betting. While some US states are still considering whether and how to legalize online sports betting, several others already introduced bills that were approved and are currently pending market launch.
Connecticut is one of the latest states to regulate the sports betting industry. Governor Ned Lamont reached a deal with the Mashantucket Pequot and Mohegan tribes in 2021, paving the way for retail and mobile sports betting. The passage of HB6451 provides the state lottery with the opportunity to operate up to 15 retail sports betting shops.
Online sports betting will be launched on 7th October 2021, with DraftKings, FanDuel, and Rush Street Interactive said to be the bookmakers that will provide online and retail sports betting services. The Mohegan Sun and Foxwoods casinos kicked off their sportsbooks on 30th September 2021.
On 18th May 2021, Governor Larry Hogan signed HB 940 into law, legalizing the sports betting industry in Maryland. The piece of legislation allows for 60 online and 30 retail sportsbooks to receive a license. However, the Maryland Lottery and Gaming Control Agency have to craft the legal framework that will govern the industry. Sports bettors in Maryland are still not able to place bets. According to forecasts, the sports betting market will go live by the end of the year.
After a referendum passed by Louisiana voters in 2020, lawmakers introduced bills to legalize and tax the sports betting industry in 55 parishes. Governor John Bel Edwards signed both bills into law. Allegedly, 41 online sportsbooks and 20 retail sportsbooks are to enter Louisiana’s market. The Louisiana Gaming Control Board is responsible for regulating the industry. Experts hope that the sports betting market will be launched by the end of 2021.
In April 2021, New York Governor Andre Cuomo signed a bill into law, legalizing online sports betting throughout the state. The online sports betting market is currently pending launch. New York State Senator Joseph Addabbo Jr. expressed his hopes that sports fans will be able to bet online on the 2022 Super Bowl that is scheduled to kick off on 13th February. At the moment, punters can place bets on their favorite teams by visiting one of the state’s land-based casinos that take sports wagers.
In May this year, the Florida legislature ratified a gaming compact between the state government and the Seminole Indian Tribe. Florida is among the US states with the highest resident population, and by regulating the sports betting industry, the government will significantly boost its economy. Under the gaming compact, the Seminole Tribe will hold a monopoly over the sports betting operations in Florida. The tribe will receive a share from all sports bets, including the ones made through portable devices.
Even though the gaming compact was not approved by the federal Department of the Interior, it was allowed to proceed. However, the gaming compact did not enjoy a smooth sail. In August, two gaming businesses based in Florida sued the Department of Interior over their decision to pass the gaming compact. In late September, a limited liability company, the No Casinos group, and several individuals filed a new suit against the gaming compact. If all legal hurdles are cleared soon, spots fans residing in Florida will have a good reason to celebrate.
US States with Retail Sports Betting Only
Most states that legalized online sports betting allow operators to provide betting services online only if they operate in partnership with in-state physical establishments. These can be land-based sports betting shops, tribal casinos, betting kiosks, racinos, etc. Only two states offer online-only sports betting, including Tennessee and Wyoming.
On the other hand, some US states decided to legalize retail sports betting only. This means that punters have to visit a land-based betting establishment to place a bet. Below, our readers will find a list of the states that allow sports betting in land-based betting venues only:
- New Mexico
- North Carolina
- South Dakota
In states such as Mississippi and Montana, online sports betting is technically legal. However, sports fans are not allowed to place wagers from anywhere within the two states. Punters have to visit an authorized physical gambling or betting establishment to place a bet online.
States Still Considering the Legalization of Sports Betting
Sports betting is not legalized in all US states, but the list of states with regulated sports betting industry keeps on growing. At the moment, several states are making legalization efforts. In the lines below, you can find more information about these states and what actions they have already taken to liberalize their sports betting markets.
Betting on Daily Fantasy Sports
Daily fantasy sports (DFS) is an industry that keeps on growing at a rapid pace. According to Research & Markets, the global fantasy sports market will grow by 9.5% up to $22.31 billion. The rise is mainly propelled by the young population, the advent of technology, and the launch of daily fantasy sports apps.
In the USA, DFS started to gain steam in 2006 when UIGEA came into force. In 2013, DFS enjoyed unprecedented growth. Two years later, DraftKings became the official partner of Major League Baseball (MLB). At the moment, DraftKings and FanDuel are the biggest daily fantasy companies in the USA. The legalization of DFS was possible because it was classed as a game of skill by the US court. On the other hand, betting on regular sports was defined as a game of chance.
That is why DFS has never been subject to anti-gambling laws in the USA. It is regulated in some states in which the legalization of online sports betting is still under discussion. What is more, not all daily fantasy operators accept players from every state due to legal concerns. But if the state you are residing in does not explicitly ban DFS, you will most likely find a DFS operator to serve your needs.
For example, DraftKings does not accept players who are physically located in Alabama, Iowa, Nevada, Hawaii, Louisiana, Washington, Idaho, or Montana. FanDuel restricts the same states as DraftKings, with Arizona added to the list. Interestingly, no DFS brand operates in Nevada. The reason for this is because the state defines DFS as a gambling product and operators do not agree with this classification. Hence, no DFS operator wants to provide its services to players located in Nevada.
In some states, the legal status of DFS remains murky. For example, South Dakota does not regulate the industry, but the law does not penalize operators or players. At the moment, FanDuel, DraftKings, Fantasy Draft, and Yahoo Daily Fantasy accept players located in South Dakota. The states in which no DFS operator does business are: