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When Will States Embrace Sports Betting?

December 12, 2017
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article written for SBA by John Rothschild

Do you know how much is wagered on sports each year?
You can’t, because almost all is bet illegally. (Currently if you want to place a bet in person you have to fly to Las Vegas and there are small alternative options like a casino boat once it is in “international waters”)

My estimates are higher than you might think.
It’s approximately 225 Billion annually.
1) That’s more than the combined revenue of Microsoft, Goldman Sachs & McDonald’s.
2) It’s expected that 9 billion will be wagered during March Madness. That’s more than the NBA’s projected revenue for this season.

So, will it become legal?
I think so.

What’s happening now?
On Monday, December 4th the Supreme Court listened to arguments presented by the state of New Jersey, that the 1992 (PAPSA)* law is unconstitutional, because it violates the “anti-commandeering” principle of the 10th Amendment.

In brief layman’s terms, the federal government shouldn’t have jurisdiction over a state government(NJ), especially if voters previously approved. They did.

So, what happens next?
An answer is expected in June (The Game Act). It looks like some justices (Kennedy, Sotomayor, Kagan, Breyer) may be in favor of allowing the expansion of sports wagering in New Jersey.

Although the summary is only 3 pages, the initial bill is 26. There will be modifications and lots of regulations.

How about a summary of the summary?
1) Repeal PAPSA and allow individual states to choose
2) States must provide certain consumer protections to include: Licensing, Age, Transparency, Location Verification, Privacy, Tax Collection Procedures, etc..
3) Information also has to be forwarded to the FTC
4) Credit Cards cannot be considered as proof of age
5) Strict enforcement procedures
6) Gambling addiction programs
7) The Act shall not violate other state laws or prior tribal state compacts

You may be shocked how many states follow!
As we’ve seen with the legalization of casino gambling, it’s difficult to watch constituents leave a jurisdiction to wager in another local and contribute to the tax revenue of a neighboring state.

It’s expected that as many as 20 to 25 states will legalize sports betting as quickly as possible.

Mirroring casino expansion, sport’s betting will quickly go from a monopoly to an oligopoly (once ratified for New Jersey) to a relatively “free” market.

Somethings you might not know or maybe just didn’t think about.
1) Taxes: We’re not talking about the old (35%) or potentially
lower (15%) corporate rates. Instead, we’re talking about state mandated amounts to casinos
racetracks or sportsbooks. It’s going to be a demand market. States may attempt to tax at close to 50% of profits.
2) Licenses: The costs are yet to be determined, but I’m presuming they’ll be well into seven figures.
3) Exclusions: Certain leagues may initially attempt to opt-out, or be excluded. But this will probably not happen.

Hypocrisy and Gray Areas:
The NCAA has firmly stated that they would not like gambling allowed on football (or any of their sports). Do they really think that the majority of the country is watching a MAC conference game on a Tuesday evening because they follow the teams?

Without gambling, NFL ratings would plummet. Advertising fees would drop considerably. They certainly won’t be able to charge 5 million dollars for a thirty second Super Bowl Ad.

Commissioner Goodell has stated the he is against gambling on NFL games. His new contract is for over 200 million dollars. How much would it be if gamblers didn’t wager on football?

My guess is that in the not to distance future, you will be able to legally bet on a sporting event in your home state, or at least one close by.

Don’t politicize it.

Legalize it.
Tax it.
Responsibly enjoy it.

And for the 99% who will lose.
Deduct it.

-John Rothschild

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