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Legalized Online Sports Betting in America
In 2018, the Supreme Court of the United States made a landmark ruling in favor of New Jersey when it declared the Professional and Amateur Sports Protection Act unconstitutional. That opened the doors for each state to determine whether or not online gambling, including sports betting, would be legal.
Pre-1990s U.S. Sports Betting in a Nutshell
The first known racetrack in North America was built on Long Island in 1665, and sports betting in what would become the United States dates back at least that far. Betting on boxing was neither legal nor illegal and was quite common in the early 1900s. But the early 1900s also gave us the Black Sox scandal, which would result in the first commissioner of a U.S. sports league. Judge Kenesaw Mountain Landis would set the template not just for the MLB but NFL, NHL, NBA and so forth, and as these leagues became more powerful, these philosophies would shape the U.S. approach to gambling.
Sports betting became legal in Nevada in 1949 but remained illegal throughout most of the U.S. Racetrack betting and in some cases off-track betting remained an exception in many states, but the otherwise widespread illegalization provided a lucrative opportunity for organized crime. This would lead to The Federal Wire Act of 1961 and various aspects of the 1970 RICO Act. Despite these efforts and the fact that the government could regulate sports betting on a federal level, it opted not to.
Professional and Amateur Sports Protection Act
That would change in the 1990s. During the late 1970s and throughout the 1980s, there were various point-shaving and game-fixing scandals that helped build momentum for federal legislation. What pushed it over the top was Pete Rose being banned from baseball in 1989. The resulting legislation in 1992 was the Professional and Amateur Sports Protection Act, which is often called PASPA or the Bradley Act. PASPA essentially illegalized sports betting throughout the U.S. It excluded horse and dog racing and also provided grandfather clauses for four states: Delaware, Montana, Nevada and Oregon.
The Bradley Act refers to Bill Bradley who is a former New York Knicks player and a then-senator from New Jersey. He was a driving force for the bill. PASPA actually instituted a one-year window in which a state could legalize sports betting and be grandfathered in. This clause was clearly aimed at New Jersey, which legalized gambling exclusively in Atlantic City. Under its then-leadership, New Jersey chose not to. It would almost immediately regret this decision and would spend years trying to undo the mistake.
Unlawful Internet Gambling Enforcement Act
Recognizing that the demand for gambling was being filled via Internet-based services, Congress passed the UIGEA in 2006. This was sweeping legislation that effectively made it illegal to gamble online. The date it when into effect is often referred to as Black Friday due to how it affected the poker industry. It also caused many overseas casinos and sportsbooks to stop serving U.S.-based customers.
Delaware vs. the NFL
Delaware was one of the states exempt from PASPA in part, and this was because it had allowed NFL parlay betting at one point. In 2009, it relegalized three- to 12-team parlay betting. It also attempted to legalize single-game bets, but it was challenged in court by the NFL and NCAA and lost. The court deemed that it was in violation of a part of PASPA of which it was not exempt.
New Jersey Takes on PASPA
At this point, Atlantic City has been in decline for some time, and New Jersey believed that legalized sports betting would be the shot in the arm that the area needed. State senator Ray Lesniak begins challenging PASPA, and at first, he did not fare much better than Delaware. In fact, the lower courts ruled against him on multiple occasions as he attacked the law from various legal angles.
Eventually, Lesniak and then-governor Chris Christie would take a different approach. They updated the New Jersey Casino Control Act to allow casinos and racetracks to accept sports bets. As expected, the NFL and NCAA sued New Jersey. This time, New Jersey argued that PASPA not only violated its state sovereignty but its equal sovereignty, which is the concept that all states must be treated equal. The lower court did not rule in its favor, but one judge dissented, and the argument gained traction.
New Jersey would lose once more in the lower courts, but at this point, it was clear that public sentiment was in favor of New Jersey. Perhaps reflective of this was a 2014 NY Time op-ed written by NBA Commissioner Adam Silver. Silver opined that the current laws did not prevent sports betting but rather prevented it from being regulated. Two years later, New Jersey requested a Supreme Court review, which at the time seemed like a longshot due to how few cases are accepted in this manner.
But Congress did accept the case, which some newspaper headlines referred to as New Jersey completing a Hail Mary. But NJ would do much more than that. It would the game. In a 6-3 decision, the Supreme Court ruled that PASPA was unconstitutional. In essence, its decision was that Congress could regulate sports gambling if it chose to but that PASPA did violate equal sovereignty.
How the UIGEA Factors In
The ‘U’ in UIGEA stands for unlawful. It refers to sportsbooks that are not licensed in the U.S. With the Supreme Court decision, states now had the right to license sportsbooks and other entities. But it also means that online sports betting in the U.S. is entirely state based. An online-sportsbook licensed in Michigan, for instance, can only take bets from people who are physically in Michigan.
Sports Betting in the U.S. On a State-by-State Basis
As of this writing in September 2021, there are 17 states—in addition to Washington D.C. — where online sports betting is legal and facilitated throughout the entire state. These are:
• New Hampshire
• New Jersey
• New York
• Rhode Island
• West Virginia