In the six years since the U.S. Supreme Court allowed states to offer sports betting, each successive year has set a record for the amount of money legally wagered.
A new record of nearly $130 billion is expected by the end of 2024. This coincides with a year of reckoning rocked by high-profile scandals.
The bad publicity included former Toronto Raptors player Jontay Porter. lifetime ban of the NBA after a league investigation found he leaked confidential information to bettors and faked illnesses during games to correct betting propositions tied to his own performance. There is also the case of Ippei Mizuhara, the former interpreter of Shohei Ohtani who pleaded guilty to bank and tax fraud in a case in which prosecutors said he stole nearly $17 million from the Japanese baseball star to pay off illegal gambling debts.
Ohtani was cleared of any wrongdoing, but his proximity to such misdeeds brought negative attention to the biggest name in baseball.
“When you have people betting on sports, you have people trying to corrupt sports — they go hand in hand,” said John Holden, an associate professor at Indiana University who conducts policy research playing and varsity athletics. “So these were things that were going to happen. I think this makes people realize that the legalization of sports betting in the United States will not be the exception to the problems that arise with sports betting everywhere else in the world.
Porter had a two-way contract at the time of his violations, which meant he could bounce between the Raptors and their G League affiliate. His salary was $410,000 and a standard NBA contract would have cost over $2 million. In plead guilty At federal conspiracy charges in July, Porter admitted wrongdoing, saying he did it “to free himself from significant gambling debts.”
“Certainly, prop bets, depending on their accuracy, lend themselves to more shenanigans than other types of bets,” NBA Commissioner Adam Silver said in May.
In light of Porter’s ban, BetMGM Sportsbook said in October that it would not accept NBA prop bets on players on two-way or 10-day contracts. He joined several others who have taken this step, including US sports betting giants DraftKings and FanDuel, as well as ESPN BET.
Still, Andrew Brandt, executive director of Villanova’s Moorad Center for Sports Law, said it’s difficult to know what kind of lasting impact these scandals would have.
“Porter was an ‘easy’ ban because he was a low-level player who could be sent back as a message to other players,” Brandt said. “The Ippei-Shohei relationship seems to be less about play and more about trust. …We’ll see.”
Difficult terrain for new states
The Porter and Mizuhara incidents may also have played a role in the narrow margin by which Missouri Voters Approved Legalization of Sports Betting in November, with 50.05% voting in favor of the ballot measure after the legislation was repeatedly blocked in the state Senate. DraftKings and FanDuel spent heavily on what turned out to be a record $43 million campaign on a Missouri ballot initiative.
Matt Para, a longtime industry insider, believes that, coupled with advertising oversaturation and lower-than-expected tax benefits in the 38 states that currently allow betting, this has contributed to what is a ” moral reboot” underway around public attitudes towards the industry.
“I would say the public is unhappy with sports betting as a whole,” said Para, a consultant who has more than 20 years of experience in online gambling. “I think they’re upset that they can’t watch sporting events with their kids without games of chance showing up. …There’s a ceiling, I think. And we’ve reached this point that the public is ready to accept.
Next year, it is unlikely that new states will enter the sports betting fray. This includes potentially lucrative markets like Texas and California.
In 2022, California voters rejected two rival proposals to legalize sports betting after interest groups spent about $450 million to promote or oppose the measures.
The Texas Legislature meets every two years and will resume sessions in 2025, but so far it doesn’t appear to have an appetite to get into sports gambling. Although Texas is a state generally opposed to all forms of gambling, the biggest obstacle currently is Republican Lt. Governor Dan Patrick, who has great influence over which bills come up for a vote. He’s not convinced the tax benefits, which he estimates would fund about half a day of Texas’ annual budget, are worth it.
Money talks
According to the National Conference of State Legislatures, most states tax sports gambling at the rate of between 5% and 20%. But tax revenues vary widely, with only 15 states collecting at least 10% of every dollar wagered.
Studies by the Sports Betting Alliance, a lobbying consortium of Texas sportsbooks and professional sports teams, as well as an independent law firm, estimated the state could gain more than $250 million of tax revenue per year thanks to betting. But Texas spends $125 billion a year and currently has a budget surplus.
Estimates would also depend on Texas setting some of the highest gambling taxes in the country, as well as betting generating record overall gaming revenue.
California, along with states like Oklahoma, would likely also have to enter into some sort of revenue-sharing agreement with Native American tribal entities that currently have legal gaming rights.
In California’s case, such a compromise seems likely at some point because of the additional revenue in a state that already rakes in $9 billion from its casinos. But legalization would almost certainly go through a statewide referendum, which could only happen in an even year.
“I kind of think that among the remaining states, there might be a shocker here or there that comes up some year or another,” Holden said. “There are obstacles in place. So I think it’s one of those things where we’re no longer going to see four states happen in one year.
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