Fewer than two years before the coronavirus pandemic pushed nearly all of society online, sports betting pools of all kinds were illegal throughout most of the US, and online sports betting was virtually non-existent. Until 2018, sports betting was restricted by the Professional and Amateur Sports Protection Act of 1992 (PASPA). Barring four states (DE, NV, OR, MT) with grandfathered sports betting operations, PASPA prohibited any state or person from sponsoring, operating, advertising, promoting licensing or authorizing sports betting schemes. On May 14, 2018, the Supreme Court issued an opinion in Murphy v. National Collegiate Athletic Association that ruled PASPA unconstitutional on the basis that it placed state legislatures under the direct control of Congress. PASPA was not a valid exercise of federal preemption under the Supremacy Clause for the following reasons: it did not represent the exercise of a power conferred on Congress by the Constitution, and it regulated state rather than private actors.
This note will briefly explore how both retail and online sports betting have rapidly proliferated and expanded since Murphy.
New Jersey, New York, Pennsylvania and Mississippi positioned themselves for the advent of sports betting by passing sports betting legislation even before PASPA was overturned as unconstitutional, and most other US jurisdictions have since followed suit. Today, US states and territories fall into six distinct categories with respect to sports betting. First, jurisdictions in which both retail and online sports betting are authorized (AZ, CO, CT, DC, IA, IL, IN, LA, MD, MI, NH, NJ, NY, NV, OR, PA, PR, RI, TN, VA, WV, WY). Second, jurisdictions in which only retail sports betting is authorized (AR, DE, MS, MT, NE, SD). Third, jurisdictions in which retail sports betting is authorized solely for tribal entities (NC, ND, NM, WA, WI). Fourth, jurisdictions that have already authorized but have not launched one of the foregoing (ME, KS, OH, NE, WI) or that have votes pending to authorize one or more of the foregoing (CA, MA, SC). Fifth, Florida – where online sports betting was halted after it began in November 2021. Sixth, jurisdictions that have neither authorized sports betting nor have pending legislation (AK, AL, GA, ID, HI, KY, MN, MO, OK, TX, UT, VT).
Californians will likely vote on sportsbetting ballot proposals in November2022. One such proposal would authorizeretail sports betting solely at tribal properties and certain horse tracks,while the other proposal would authorize commercial online operators to partner with tribes. Massachusetts and South Carolina are also considering legislation but as yet have no clear path toward passing the same proposal.
Finally, Florida launched online sports betting in November 2021 via a 30-year compact with the Seminole Indian Tribe but was forced to pause sports betting operations when a US District Court held the compact to violate the Indian Gaming Regulatory Act by not geographically restricting wagers to Indian lands. Florida appealed and is also considering whether to enable state-wide sports betting via a 2023 ballot proposal.Billions of dollars in sports bets came out of the shadows after the Supreme Court struck down PASPA’s federal ban. Just three short years after the 2018 Murphy case, only about a dozen states have yet to authorize any form of sports betting. Although a number of states and territories have limited sports betting to retail locations, the pandemichas taught us to live our lives online, and jurisdictions that forego online wagering may find that they are leaving increasingly large sums of money on the table. Indeed, tax rates applied to online sports betting are often higher than tax rates applied to retail sportsbetting. Also, tax rates for sports bettingcan reach up to 51% of gross gaming revenue, making in an attractive option for governments looking to raise funds.