On May 14, 2018, the Supreme Court of the United States
overturned the Professional and Amateur Sports Protection Act (PASPA). This
action was taken after the state of New
Jersey sued PASPA in the case of Murphy v. National Collegiate Athletic
Association, claiming that the law infringed the Tenth Amendment of the United
States Constitution.

Following
the revocation of PASPA by the Supreme Court, sports betting can now be legalised in the United States of America. Attention
now turns to the individual states while they dictate as to whether or not
betting on sports becomes an available and legalised activity under their
jurisdiction.

Why was PASPA in breach?

The
Professional and Amateur Sports Protection Act, enacted in 1992, did not make
sports betting illegal as sports betting was
already outlawed. With the exception of
the state of Nevada as well as Delaware, Oregon, and Montana in part, PASPA stopped
states from creating laws that regulated
and taxed sports betting. Preventing states from making law infringes the Tenth
Amendment; thus the Supreme Court opted
to repeal PASPA following a six to three majority decision.

What does PASPA’s revocation mean?

With PASPA
gone, states are now able to create laws that legalise and regulate sports
betting. It does not automatically mean that betting on sports is now legal; PASPA’s
repeal is merely the first step towards legalisation.

In the
running to the Supreme Court’s decision, 18 states reportedly started to
introduce legislation to legalise sports betting, including Delaware, New
Jersey, and West Virginia. PASPA’s repeal only grants states the opportunity to
legalise sports betting. As it is voluntary, not all states will create sports
betting statutes immediately, or even at all. Thus, sports betting may never
become a legalised activity throughout the USA, as is the case with the
recreational and prescribed use of specific psychoactive drugs.

As for betting
operators, a truly free market does not appear the way that states are heading.
Although the markets are expected to be very lucrative, states that are making
the first moves to legalise betting have proposed limited licensing structures.

It is estimated
that around $150 billion was wagered on sports in the USA each year while PASPA
was in power: 97 per cent of which was bet illegally. Now, estimates for a
legalised sports betting market in the USA range between $57 billion and $400
billion per year.

As states
will regulate which operators can offer betting services under their
jurisdiction, potential bettors within those states will benefit from a
protected betting environment that is safe, regulated, legal, and protects
wagers. This safety net will increase the popularity of sports betting which,
up until now, has been overruled by deviancy in the USA.

What does it mean for a state to
legalise sports betting?

States
passing legislation to legalise sports betting are expected to establish many
regulations which operators must comply with before they can offer their
services to the people of that state. Once operators comply, they will be able
to offer their services within the state, but to no one outside of that state.

One of the
most pertinent statutes stopping the USA from allowing all of its residents to
engage in sports betting is the Interstate Wire Act of 1961. Also known as the
Federal Wire Act, this law prohibits interstate sports wagering via telephone
or the internet. The Federal Wire Act does,
however, allow the placing of bets on a sporting event from a state where
betting on sport is legal into a state where it is also legal. To avoid infringing this statue, operators may
utilise geo-location technology to ensure that their services are not available
to those residing outside of the confines of a legalised state.

As of June 5th,
Delaware became the first new state to offer sports betting, with three
locations open for business.

Other states
like West Virginia and New Jersey seek to have a full-scale offering in place
while Delaware will continue to grow from these three locations. The Diamond
State already has the necessary legal and regulatory authority to build a
full-scale gambling operation.

Potential bumps along the road

While the market
is predicted to be very lucrative, some operators may choose to not enter into
certain state markets due to the new laws and regulations enacted. A proposal
in Pennsylvania penned a one-time license fee of as much as $10 million along
with up to a 34 per cent tax on gross
receipts. As the legalisation of sports betting is going to be regulated by each state individually, some states are
expected to begin as hotspots for operators.

New federal
legislation may also prove to be a problem as, in theory, federal law could
step in to stop sports betting before it properly begins. One of the four
authors of PASPA, Senator Orrin Hatch (R-Utah), has announced that he will
introduce new legislation that will protect honesty and principle in the
athletic arena. But, some predict that federal legislation will not arrive
until after the mid-term elections.

Another
potential issue is that the NBA and MLB are trying
to claim a 1 per cent sports
integrity fee from bookmakers. If this were to come to fruition, many operators
would see the market as a non-starter. The majority of sportsbooks only keep
around 5 per cent of wagers. This
integrity fee would also limit the amount of tax revenue that states could earn.
However, Nevada avoiding such a fee for decades should set a precedent.

It is still
early in the story of the legalisation of sports betting in the USA, and much
could infringe the popular gambling activity from establishing itself across
the nation. While many states are embracing the chance to allow sports betting
under their jurisdiction, with Delaware being the first new state to do so, it
seems very unlikely that every state in the USA will legalise and host sports
betting services anytime soon.