Winners and Losers from the Supreme Court's Ruling on Sports Gambling
In accompanying Sports Illustrated articles, I break down keys from New Jersey’s big win in the sports betting case before the U.S. Supreme Court and how the ruling will impact American sports. Who are the big winners from the ruling? How about the potential losers?
Here’s my list:
Clear Winners
1. Chris Christie
Former New Jersey Governor Chris Christie has had a rough go of it over the last couple of years. Throughout 2016, Christie was maligned by the Fort Lee Lane closure scandal. Christie’s fortunes seemed to change on Nov. 8, 2016 when Donald Trump was elected President of the United States. Several months earlier, Trump had named the 55-year-old former prosecutor head of the Trump Transition team in the event Trump defeated former Secretary of State Hilary Clinton. Political experts wrote that Christie was primed for a major position in Trump’s cabinet, such as Attorney General or Secretary of Homeland Security.
But three days after winning the election, Trump abruptly re-assigned (i.e., fired) Christie. Some believe Trump’s decision was payback of sorts. While Christie was a U.S. Attorney in the early 2000s he prosecuted Charles Kushner, father of Trump’s son-in-law and close advisor, Jared Kushner. Others say that Christie had simply fallen out of favor with Trump for reasons unrelated to Kushner. Whatever the explanation for his abrupt ouster from Trump’s inner circle, Christie would be sticking around New Jersey for the remainder of his gubernatorial term.
Fast forward to June 2017. Christie had become almost politically radioactive, registering the lowest gubernatorial approval ratings in New Jersey history. A whopping 81% of New Jersey residents polled disapproved of Christie’s performance as governor. Even Christie’s beloved Dallas Cowboys disappointed in 2017. Christie left office in January.
Why New Jersey Won Its Supreme Court Battle to Legalize Sports Betting
Until Monday, the sports betting case had also been a loser for Christie. He lost in both federal district and federal appeals courts. It seemed the pro leagues, the NCAA and Justice Department had effectively debunked New Jersey’s legal arguments and, by extension, the decision of Christie to pursue sports betting.
Then came Justice Samuel Alito's opinion and order. Suddenly, Christie looks like a genius. He correctly reasoned that the federal government’s theory of regulating sports betting on a federal level violated the U.S. Constitution. If Christie had not made the risky decision in 2012 to embrace the Sports Wagering Act (co-sponsored by New Jersey Senators Raymond Lesniak and Jeff Van Drew) and take on pro leagues, the NCAA and eventually the Justice Department, it’s unclear when—or if—the Supreme Court would have invalidated the federal sports betting ban.
The case may have been renamed Christie v. NCAA to Murphy v. NCAA (on account of New Jersey’s new governor, Phil Murphy, taking office in January), but named or not, Christie is the winner.
2. Casinos and racetracks in states where sports betting becomes legal
Businesses that will soon become capable of taking bets on sports are the most obvious financial winners of the Supreme Court’s ruling. As has been said many times in gambling, “the house” usually wins bets. Casinos and racetracks are poised to earn related revenue—including the money visitors spend on affiliated hotels and restaurants—as well. For owners and investors in these businesses, the Supreme Court’s ruling is a gift.
This is already apparent in New Jersey, where the Monmouth Park racetrack has received attention for its partnership with the London-based bookmaker William Hill. Now empowered by the Supreme Court’s ruling, the partnership will enable Monmouth Park to operate a sports book. Expect other racetracks and casinos in New Jersey to follow suit. The same will hold true in Connecticut, Pennsylvania, West Virginia and other states that legalize sports betting.
3. People who are good at betting on sports
While the house usually wins, some bettors are clearly “better” than others. This is true in sport betting, where research, analytics and attention to trends can significantly improve one’s odds.
There are, of course, elements of luck in sports. Players get hurt. Weather forecasts prove wrong. The list goes on. But for talented sports bettors, the Supreme Court’s ruling will eventually open up new opportunities for them to back up their sports predictions with wagers. Their success could also lead them to obtain national profiles and accompanying endorsement deals.
Where is Sports Betting Legal: In Which States Can You Gamble on Sports?
4. Gambling compliance companies
As explained more fully in an accompanying article, the Supreme Court allowing states to legalize sports betting shouldn’t confused with states legalizing sports betting. The latter will require multiple steps, including adoption of sensible regulations on who is licensed to offer sports bets and who can place bets. Regulation will also impact the kinds of athletic contests for which wagers will be legal. To that end, each state that makes sports betting legal may devise unique approaches to these and related issues. Leagues and players’ associations are also relevant figures in these discussions, particularly in regards to “integrity fees.” These fees refer to payments to leagues (and possibly to players) for the costs incurred by leagues in monitoring and investigating sports betting activities.
Taken together, these dynamics create opportunities for businesses with expertise in compliance to play larger roles in the American sports betting industry. There are a variety of compliance businesses that have operated in Las Vegas and other parts of the world where sports betting has been legal. They understand the needs of various stakeholders to ensure that bets do not interfere with the integrity of games. These companies will now enjoy new opportunities for business in the U.S.
5. Ted Olson
For decades, attorney Theodore “Ted” Olson has played a uniquely influential role in the American legal system. He is best known for successfully arguing on behalf of then-Texas Governor George W. Bush in the 2000 U.S. Supreme Court case Bush v. Gore. Olson later became President George W. Bush’s Solicitor General. More recently, Olson led a legal effort to successfully challenge California’s “Prop 8” which had banned same-sex marriages. He also has successfully represented Apple in its battle with the FBI over access to encrypted data.
Olson has also played a critical role in American sports law. He argued for NFL players during the 2011 NFL lockout and was retained by Tom Brady to take on the NFL in Deflategate.
Christie and New Jersey also called on Olson to persuade the U.S. Supreme Court that the federal ban on states’ licensing sports betting was unconstitutional. It looks like they made the right call.
Losers and Potential Losers
1. Pro leagues, the NCAA and the Justice Department
After winning before federal district and federal circuit appeals courts, the leagues, NCAA and the Justice Department likely believed they had successfully defended the Professional and Amateur Sports Protection Act of 1992 (PASPA) once and for all. In the early 90s, the leagues had lobbied for this law on grounds that sports betting endangers the integrity of games and invites corrupt persons into the orbit of managers, coaches and players. On Monday, those arguments failed to persuade a majority of U.S. Supreme Court justices.
All is not lost for these losing parties. As I detail in an accompanying piece, the leagues stand to earn considerable revenue from sports betting through integrity fees. They (and teams owners) could also earn direct revenue through ownership of casinos and sports books.
Also, as NBA commissioner Adam Silver has advocated, the leagues, NCAA and other interested parties could propose a different federal law and lobby for it. A law that makes sports betting legal, but in a tightly regulated form, could attract significant support.
2. Gambling addicts
There is significant scientific literature on gambling addiction, which is a psychological dependency on placing bets and engaging in other gambling activities. Gambling addiction can lead to disastrous financial and family problems for addicts. It’s been reported that about 3% of Americans have significant gambling problems. Some of those persons are considered addicted to gambling.
While it is unclear how the legalization of sports betting in more states will impact gambling addictions, logic suggests that increased opportunities to bet will to some degree increase the number of persons with addictions. There will likely be public health consequences that attract more attention as time goes on.
3. Las Vegas
The main beneficiary of PASPA was Las Vegas, where since 1949 sports betting has been legal. PASPA carved out an exception for Las Vegas to continue to dominate this industry and grow, while other cities—including Atlantic City—were sidelined.
Those days are over. Las Vegas will now face competition for visitors and tourists who wish to place bets on sports. For bettors living on the East Coast, they might prefer a local trip to New Jersey, Connecticut, Pennsylvania or West Virginia instead of flying across country.
The actual impact on Las Vegas remains to be seen. There are numerous reasons to visit Las Vegas, which offers a diversity and quality of casinos and accompanying hotels found nowhere else in the U.S. There are also numerous high-quality entertainment and dining options there. The Supreme Court’s ruling won’t signal the demise of Las Vegas. But it could mean more competition over the same dollars.
4. Offshore sports betting companies
Even though placing bets online with offshore sports betting websites technically runs afoul of federal law, Americans have been doing it for years. These foreign websites will now have new competition in the form of U.S. based sports books and operators. These American-based companies will soon legally take bets in person and online (at least in states where sports betting will be lawful).
5. Daily Fantasy Sports and eSports companies
Daily fantasy sports companies have to some degree filled a vacuum for persons interested in applying their knowledge about sports to make predictions about sports outcomes and to wager money that these predictions will prove true. Unlike sports betting, DFS has generally been viewed as legal in the U.S. This is mainly because of the Unlawful Internet Gambling and Enforcement Act of 2006 (UIGEA). While UIGEA bans certain forms of online poker and other games, it carves out an exception for fantasy sports games that are determined more by skill than luck and that do not link cash prizes to the amount of fees necessary to play. For several years DFS companies have long argued this exception applies to them.
To the extent sports betting and DFS draws on the same set of customers, Monday's Supreme Court ruling could mean more competition for DFS. The same concept would hold true with persons who bet on eSports, which refers to competitions between gamers playing video games and computer games.
That said, an announcement by DraftKings on Monday indicates the company plans to embrace, rather than worry about, the Supreme Court’s ruling. DraftKings says it plans to enter the sports betting market. Given its brand-recognition with consumers who like to make predictions on sports, DraftKings seems well positioned to enter this market.
Michael McCann, is SI's legal analyst. He is also the Associate Dean for Academic Affairs at the University of New Hampshire School of Law and co-author with Ed O'Bannon of the new book Court Justice: The Inside Story of My Battle Against the NCAA.
