For over 20 years, the Professional and Amateur Sports Protection Act (PASPA) has blocked any expansion of the sports betting market in the U.S. For over 25 years, PASPA served as the federal sports betting ban, preventing 46 states from participating in the sports betting market as sports betting grew in popularity across the United States.
When the U.S. Supreme Court struck down PASPA in May 2018, the chains were broken and, for the first time, states were able to determine their own fate regarding state-regulated sports betting. State sports betting laws literally exploded as state legislators quickly drafted sports betting-related bills and began the legislative process. Some states had already passed sports betting bills in anticipation of the repeal of the law.
PASPA disrupts emerging gambling industry
The Professional and Amateur Sports Protection Act (PASPA) was conceived in the early '90s, when several states were in the process of legalizing sports betting and others were considering expanding their gambling laws. Within three years, states such as South Dakota, Iowa, Colorado, Mississippi, and Illinois had legalized casino gambling.
The conservative government at the time wanted to curb the expansion of sports betting by passing swift and decisive standards on this. Senator Bill Bradley was one of the authors of PASPA, introducing the bill to the Senate in 1992. The bill progressed from the Senate to the House of Representatives and then to President George Bush, who signed it into law in October of that year. PASPA officially went into effect on January 1, 1993.
This gambling law prohibited 46 states from starting any kind of state-regulated gambling activity, including lotteries, brick-and-mortar sportsbooks, or joint ventures with existing casinos. As part of PASPA, states had one year to enact any kind of sports betting law, but none of them did so in time. Sports betting didn't seem to be on anyone's radar at the time, at least not until it was too late.
The lucky four
Four states were exempt from PASPA: Oregon, Montana, Delaware, and Nevada. The only reason these states were exempt was due to the fact that they already had some form of regulated gambling in place at the time the law was passed. Each state had a slightly different model for sports betting, but all were able to justify an exemption from PASPA.
Of the four states, only Nevada had single-game betting. This is not surprising given the presence of Las Vegas, America's biggest gambling venue. Other states had parlay betting options on NFL/NBA games, or casual bar betting pool options. Still, the major sports leagues were not in favor of anyone profiting off their leagues, so they pressured people to have lottery options.
Oregon shut down gambling services under pressure from the league, and Delaware only allowed gambling options that existed at the time PASPA was enacted, not new ones, meaning no new gambling parlours were allowed.
Demand for sports betting drives change
There has always been a demand for states that allow sports betting. Residents of states where PASPA is banned wanted a gambling option that toes the line between legal and illegal. Thanks to the Internet, Americans now have access to a multitude of online betting sites that cater to residents who don't otherwise offer sports betting.
Licensed and regulated overseas sportsbooks became the major betting operators. Best of all, they were legal in the eyes of the U.S. Federal Government. The language of PASPA made no mention of overseas sportsbooks, encouraging their use. Most states had no laws banning the use of these sites, and only a few states passed new laws prohibiting their residents from betting with overseas operators, but enforcement is another story.
The major sports leagues were aware that overseas sportsbooks were being used, but there was nothing they could do about it. Americans continued to use these legal operators, which reduced revenue that would have been paid to the states. Eventually, opinions began to shift from “we shouldn't gamble” to “it's already being done elsewhere, so why not do it here?”
New Jersey starts
It's impossible to know what would have happened to PASPA without New Jersey. New Jersey repealed the law on its own after years of struggle. The state tried to allow existing casinos and racetracks to accept sports betting in 2011. The move was not well received by the major sports leagues, who turned to the government for help. The federal government stepped in and blocked this ambitious move. New Jersey lost several appeals after the fact.
New Jersey tried again in 2014. Again, sports leagues fought back, and the government stepped in to save the day. New Jersey again went through the appeals process, but lost multiple times in lower courts. Somehow, New Jersey managed to secure a visit to the U.S. Supreme Court, which signaled a chance for states to get their way, as the Supreme Court rarely weighs in on state matters. The Supreme Court even went against the words of the Acting Solicitor General, who advised the Supreme Court to stay out of the case and uphold the lower court's decision.
New Jersey argued that PASPA was unconstitutional and violated the state's Tenth Amendment rights. Major sports leagues argued that this was not true and that New Jersey should follow the law. When oral arguments began, the case went in favor of New Jersey. After some deliberation, the Supreme Court ultimately ruled that PASPA was indeed unconstitutional and moved to strike it from the statute books.
How has domestic sports betting changed since the repeal of PASPA?
With PASPA repealed, states now have a clear path to legalize sports betting in their countries. The Supreme Court ruled that if states chose to legalize sports betting, they had to vote. Several states had already passed laws in anticipation of sports betting becoming legal. Delaware became the first state to offer its residents legal regulated gambling options in the post-PASPA era. New Jersey won the lawsuit but wasn't 100% ready to launch.
Delaware quickly moved to implement a legal gambling option. New Jersey followed soon after, launching gambling options at land-based facilities such as Monmouth. Several other states will also make gambling options available in the coming weeks, with the number of states continuing to grow. While the repeal of PASPA was groundbreaking, it is important to remember that it only applies to brick-and-mortar gambling options.
States are attempting to implement online and mobile gambling capabilities, but they are technically subject to federal law, the Federal Wire Act. It will be interesting to see how states try to get around this law, or if it will be repealed.
