The Legalities of Sports Betting

The Legalities of Sports Betting

Sports betting has a deeply complicated past here in the United States. While it has been a part of the country’s history since even before its founding, lawmakers and morality leaders have spent plenty of time working to make it illegal or, at least, harder to actually do. Oftentimes, those opposed to sports betting wanted it banned in the name of keeping the “integrity” of the game.

And this makes sense as a concern, especially if you remember the major betting scandals that rocked the sports world over the years. Players were actively throwing games because of pressure from bettors and organized crime, and people were doubting whether a game would have a truly fair outcome.

Today, sports betting is legal in some states in the U.S., and more are moving forward with plans to legalize and regulate it in the coming years. The whole process has a tangled history, to be sure. Here, we outline some of the attempts to outlaw sports betting in the U.S., the challenges to those laws over the years, and how states are slowly changing their minds on whether or not they want to embrace sports betting themselves.

1961 – The Interstate Wire Act: A Noble Attempt That Created a Continual Quagmire

When Robert F. Kennedy was appointed as the United States Attorney General, he suggested to Congress that they should pass legislation that would make interstate gambling illegal. The goal was to help the Department of Justice stop organized crime, which had become deeply embroiled in gambling within the United States.

The Interstate Wire Act was passed in 1961. The language of the bill states that anyone engaged in the business of using a wire communication (telephones, etc.) across state lines to gamble or to even gain information about “any sporting event or contest” shall be fined or go to prison for no more than two years.

The concern here was that the integrity of any sports competition could be compromised by black-market bookmaking. In addition, illegal sports betting was a source of massive wealth for organized crime, which gave those criminal organizations more power. By making a federal law instead of relying on states to set the laws and punishments associated with sports gambling, law enforcement could put mobsters away for longer sentences than previously possible.

Confusion has continued to ensue since the Wire Act’s ratification in 1961. Did the act strictly apply to sports betting, or did it encompass all gambling? In 2001, as online casinos were becoming more prevalent, the Bush administration said that it did apply to all forms of internet gambling. In 2002, the U.S. Fifth Circuit Court of Appeals wrote an opinion that the Wire Act clearly applies to internet sports betting but that its impact on other forms of internet gambling remained unclear.

In 2009, the states of New York and Illinois sought some clarity from the DOJ on whether or not the Wire Act prohibits in-state sales of lottery tickets if those sales had their payments processed between multiple states. In 2011, the DOJ concluded that the Wire Act applies only to sports gambling.

However, in 2018 the DOJ revisited the case and reversed its interpretation of the act by concluding that it makes all interstate online gambling illegal — whether it’s sports betting or playing online casino games. The DOJ gave companies until June 2019 to bring their business models into compliance.

Multiple entities filed lawsuits challenging the opinion, many of them state-level lottery vendors. A federal court in New Hampshire heard the case New Hampshire Lottery Commission et al. v. Barr et al. in 2019, and they held that the Wire Act applies strictly to interstate sports gambling. In short, the court found that the wording of the act was ambiguous enough to require interpretation and that the DOJ’s opinion had misinterpreted the law.

As of 2020, the Supreme Court has never ruled on the meaning of the Federal Wire Act and how it pertains to online gambling.

1992 – PASPA Bans Sports Betting…Sort Of

Thirty years later, the U.S. government was still fighting against sports betting. This time, the law sought to ban sports betting as a whole across the United States. Of course, there were some exceptions — Nevada, Oregon, Delaware, and Montana were exempted from the bill because they were already running sports lotteries.

To give some background: Bill Bradley had been a distinguished NBA player over a 13-year career, but he eventually became a senator for New Jersey in 1979. He introduced a bill in 1991 that would work to ban all sports betting.

Legislators had started to become more and more concerned with what they saw as an expansion of gambling interests in the country. The Senate Judiciary Subcommittee on Patents, Copyrights and Trademarks issued a report that posited sports gambling was a “national problem,” emphasizing the potential for the “harm it inflicts” to spread nationwide.

That same year, then-NBA commissioner David Stern testified in front of Congress during a public hearing on the matter. He supported eliminating further expansion of sports betting and spoke out in favor of at least amending the current laws to restrict its practice.

This all helped to push Congress to create restrictions on any further expansions of sports-based betting. This eventually became the Professional and Amateur Sports Protection Act, or PASPA.

The Interstate Wire Act had only banned sports gambling across state lines; it didn’t outright ban sports gambling on a federal level and left the states to set their own laws about the matter. But now in 1992, PASPA had banned states (grandfathering out those four states mentioned above) from regulating and taxing sports betting completely.

Congress did provide a one-year window for states that operated licensed casino gaming to pass their own laws allowing sports betting. New Jersey would have easily been allowed to do so, but they didn’t take advantage of this opening in time.

Was PASPA successful? Not really. Instead, it simply drove sports betting further underground with zero oversight and no opportunities for states to earn revenue off of the practice.

2006 – The Unlawful Internet Gambling Enforcement Act Goes After Online Casinos

Throughout the 1990s and into the 2000s, online casinos had proliferated widely across the internet. Real-money gambling online was readily available, and because no pre-existing laws were capable of regulating the internet, online gaming (aside from sports betting) existed in a legal gray area.

Online casinos hadn’t technically been legalized in any formal sense, and no enforcement methods existed to stop companies from processing payments from players. Meanwhile, the 2002 ruling on the Federal Wire Act by the Fifth Circuit had ensured that only sports betting was illegal online.

This shifted with the introduction of the Unlawful Internet Gambling Enforcement Act, which was included as part of the SAFE Port Act of 2006. The UIGEA prohibits businesses from accepting payments from players who place a bet via the internet from a state that hasn’t legalized gambling. It still doesn’t make gambling online illegal; rather, it’s illegal for American-based gambling websites to process payments from anyone who doesn’t live within the site’s home jurisdiction.

The states that have legalized online gambling allow web casinos to take money only from residents — in fact, many online casinos based in New Jersey require proof of residence, like a driver’s license, in order to register on their sites.

2012 – New Jersey Passes Its Sports Wagering Act in Defiance of Federal Law

In 2011, New Jersey put a constitutional amendment on the ballot that would allow sports betting. More than 60% of voters elected to approve the measure. Less than two weeks later, two members of the state legislature introduced the Sports Wagering Act, which was passed in January 2012 with Gov. Chris Christie signing.

To be able to engage in sports betting as a business, a person or entity needed to obtain a “sports pool license,” which only a Casino Control Commission-licensed casino or Racing Commission-licensed racetrack could apply for.

The law placed no limits on wagering on professional sports teams but did prohibit wagering on collegiate sports events taking place in New Jersey or involving a New Jersey-based team. It also contained other limitations, like limiting bets to the Atlantic City casinos and the four horse-racing tracks in the state.

Lawmakers who supported the bill wanted to present a legal challenge to the federal ban created by PASPA. They viewed PASPA as unfair and unconstitutional, and they felt that it gave the four grandfathered states a monopoly on the sports-betting market. They also hoped that allowing sports betting would reinvigorate a financially hard-hit Atlantic City.

In August of 2012, numerous sports commissions sued Christie: the NCAA, MLB, NHL, NFL, and NBA. They all argued that the new state law violated PASPA. In response, the Christie administration countered that PASPA violated the U.S. Constitution’s anti-commandeering doctrine that says the federal government can’t require states to adopt or enforce federal law. (While this isn’t explicitly stated as law in the Tenth Amendment, since 1992 the U.S. Supreme Court has declared as unconstitutional any federal laws that compel the states to enforce federal statutes.)

The U.S. District Court for New Jersey ruled in favor of the sports commissions, striking down the Sports Wagering Act.

Come 2014, more New Jersey legislators tried again, creating a new Sports Wagering Act of 2014. The potential workaround here regarded state involvement: PASPA forbade states’ involvement in sports betting, and the 2012 act had involved the state of New Jersey in licensing and regulating sports betting. The new act allowed casinos and racetracks to offer sports betting without state regulation and licenses.

Once again NCAA et. al sued. And once again, the federal district court ruled in favor of the sports leagues. While the 2014 act meant that casinos and racetracks wouldn’t require state licensure, the court held that the law still violated PASPA because the state was granting permission for these establishments to bet on sports.

The case proceeded up through the court system through further appeals, until the case made it to the Supreme Court as Murphy v. NCAA.

2018 – The Supreme Court Hears Murphy v. NCAA

The U.S. Supreme Court heard this case in 2017, when it was originally being referred to as Christie v. NCAA. During the prolonged deliberation process, the case’s name was updated to Murphy v. NCAA because Christie had stepped down as the governor of New Jersey, with Philip Murphy taking over the role.

The entire crux of the case was whether or not PASPA violated the Tenth Amendment, specifically the anti-commandeering doctrine. NCAA et. al argued that PASPA prohibited any state government involvement in gambling. Meanwhile, New Jersey argued that Congress had unconstitutionally commandeered the state into enforcing federal programs by requiring them to adhere to PASPA’s gambling constraints.

In 2018, the Supreme Court ruled in a 6-3 decision that PASPA was unconstitutional under the anti-commandeering doctrine. Justice Alito, who is a native of New Jersey, even wrote the majority opinion that says either Congress can regulate sports betting directly or each state is free to make its own decision.

Once PASPA was stricken down, states were now free to establish their own regulated sports betting and collect revenue from such betting establishments.

Of course, the Interstate Wire Act is still in play, so interstate sports wagering is still prohibited.

How the Professional Sports Leagues’ Positions Have Shifted

Even before the Murphy v. NCAA ruling, professional sports leagues had begun to publicly acknowledge that legalized, regulated sports betting could be a boon for cash-strapped states that needed to generate more revenue.

NBA Commissioner Adam Silver had caused a stir in 2014 by penning a New York Times op-ed that showed his supportive stance on sports betting, despite the NBA having sued New Jersey over its attempts to legalize the practice. In short, he said that there is a major demand for sports betting in the U.S., which as a country was lagging behind global trends. He called on Congress to adopt a federal framework that would allow states to authorize betting on professional sports, with strict safeguards in place. Essentially, he was calling for a repeal of PASPA.

In 2017, Major League Soccer Commissioner Don Garber said that he also supported legalized sports betting. Because betting on matches is such an inevitable part of soccer around the world, he felt that it was only an inevitability that the practice would finally come to America. “We might as well be in front of it,” he said. Many also felt that sports betting could help the MLS gain greater popularity.

The NBA and MLB have since also joined the ranks of leaguers that embrace sports betting. Overall, it seems that commissioners have been realizing that PASPA was, ultimately, a failure. Sports betting scandals would be more likely to happen in an unregulated environment, where everything is underground and has no oversight.

The NFL was a longtime holdout on the matter. In 2015, the commission shut down a fantasy football convention in Las Vegas, allegedly because it was going to be held in a building adjacent to a casino. But changes really began in early 2020, when the NFL started to allow teams to accept sponsorships from sportsbooks.

It honestly wasn’t that big of a jump for the NFL to finally support legalized sports betting — for years, they’d already had a lucrative licensing deal with DraftKings, the daily fantasy sports operator.

In the end, getting sportsbook sponsorships and otherwise playing along with the states that have legalized sports betting allows these leagues to have an additional revenue stream. And it’s hard to argue with profits.

States That Allow Sports Betting

After the Murphy v. NCAA ruling, different states immediately jumped on the task of setting up their own laws allowing sports betting. By mid-2019, 11 states had already legalized sports betting within their borders and had implemented their regulations.

Each state’s regulations include whether or not they’ll allow online or mobile wagering platforms. Those that don’t offer an online option require in-person betting only, most likely at a state-licensed casino or racetrack.

As of 2020, these are the jurisdictions that allow sports betting within their borders:

Arkansas

This state allows only in-person gambling, so anyone looking to place a sports bet has to go to a physical location. So far, only Oaklawn Racing Casino Resort and Southland Casino Racing are the only facilities that offer sportsbooks.

In Arkansas, you can bet on all college and professional sports, but you cannot bet on high school athletics or e-sports.

Colorado

Residents of Colorado have plenty of options when it comes to state-regulated sportsbook apps, from the daily fantasy operators DraftKings and FanDuel to casino-based apps like BetWildwood and Sky Ute. There are currently no casinos that offer land-based sportsbooks, but it is in Colorado’s future to have them (sadly, the coronavirus outbreak of 2020 delayed this process).

There are no limitations on what you can wager on in Colorado, though the local sportsbook apps have fewer options than the offshore apps.

Delaware

Delaware was among the four states that were grandfathered in with the passing of PASPA in 1992. Their state lottery had run a parlay system for only one season, but that was enough to earn an exclusion from the ban. After the Murphy v. NCAA decision, Delaware was so quick to launch sports betting that their timeline was faster than that of New Jersey. Their three casinos were the first locations to start taking sports bets.

The state lottery has an agreement with William Hill, which partnered with the state’s casinos to offer their sportsbooks: Delaware Park Casino, Dover Downs, and Harrington Raceway and Casino. Online sports betting isn’t illegal in Delaware, but no one has launched any online sportsbooks yet due to the costs.

The only restriction on sports betting in Delaware is that you cannot place bets on in-state teams.

Illinois

In March 2020, Illinois opened its first online sportsbook, BetRivers Sportsbook, through the Rivers Casino. Two other casinos, Argosy and Grand Victoria, offer land-based sportsbooks. There are also your basic online sportsbooks from DraftKings and FanDuel.

As for restrictions: You cannot place bets on college teams based in the state, and sports league personnel cannot bet on their own sports.

Indiana

At first, Indiana actually seemed like a longshot when it came to legalizing sports betting online, though the state was willing to allow land-based wagers. One state representative fought hard to keep the online format out of the upcoming sports-betting bill, but eventually the bill passed to allow both in-person and mobile sports betting.

Now, more than a dozen casinos and racetracks have opened sportsbooks, and residents have access to eight online betting apps.

No one is allowed to bet on e-sports or amateur athletes under age 18 in Indiana.

Iowa

Sports betting in Iowa is allowed at all 19 tribally owned casinos as well as at the plethora of horse-racing tracks (dog racing is illegal in the state). Residents also have access to six different sports betting apps for their online option.

Restrictions include no betting on e-sports and no in-game prop bets on in-state collegiate teams. Also, any sports league personnel can’t bet on their own sports.

Michigan

By 2019, the state’s three commercial casinos and 23 tribal casinos all were permitted to offer sports betting. But as of 2020, only the commercial casinos — MGM Grand Detroit, Greektown Casino, and MotorCity — and the tribe-owned FireKeepers Casino actually offer sportsbooks, due to coronavirus shutdowns throughout the state.

Online sports betting is now legal in the state, but the rollout has been delayed. Meanwhile, there are no restrictions to what you can bet on in Michigan.

Mississippi

Mississippi was another state to quickly jump on the sports-betting opportunity after the ruling on PASPA. As of 2020, only in-person betting is allowed on sports, though there are 29 sportsbooks located at casinos (both land- and water-based) around the state.

Montana

Montana was one of the four states that was grandfathered in when PASPA was introduced because they allowed pool betting, which is a form of social gambling. Today, the Montana Lottery allows a limited form of online sports betting and the ability to bet on sports at kiosks inside bars and restaurants.

For online sports betting, Montana residents can use the Sports Bet Montana app, but users are limited to on-propety mobile betting — bettors must be within the geofenced footprint of an approved retail sports betting outlet in order to place wagers from their phones.

The global lottery company Intralot maintains the betting kiosks. Montana has over 140 of them throughout the state, and bettors can wager up to $250 at one.

New Hampshire

As of 2020, New Hampshire currently offers only one online sportsbook through DraftKings. Sports betting is legal at land-based retail locations, but the coronavirus pandemic delayed the opening process for many establishments.

Bettors can wager on professional and collegiate sports in New Hampshire, except for in-state college games.

Nevada

One of the states that was given immunity from PASPA in 1992, Nevada allows gambling of nearly any sort. Sports betting has been legal there since 1949, and there are always huge sporting events happening in Las Vegas like boxing matches.

Multiple casino companies in Las Vegas offer their own sportsbooks, like the Wynn, Caesars, and MGM Resorts International. For online options, Nevada residents have plenty of casino-operated apps to choose from.

You can bet on nearly any sport imaginable in Nevada, from college and professional football to e-sports and virtual horse racing.

New Jersey

New Jersey led the charge for getting PASPA overturned, so they were quick to jump on getting sports betting fully integrated in Atlantic City and beyond. Some casinos in Atlantic City run their own sportsbooks, like Borgata, Harrah’s, Hard Rock, Golden Nugget, and Caesars.

Other casinos in Atlantic City have licensed sportsbooks from outside operators (such as DraftKings), like Resorts Casino and Bally’s.

You still can’t bet on any New Jersey college teams within the state, but you’re free to bet on any professional sport.

New Mexico

New Mexico is one of the states that offers only in-person sports betting. They have nearly 30 tribal casinos and several state-licensed racinos, and while only five tribal casinos offer sports betting (as of 2020), more have plans to offer their own sportsbooks in the next couple of years.

Sports betting in New Mexico technically operates in a legal gray area. It’s not expressly legal, but it’s not illegal either — at least, not at tribal casinos. Tribe-run casinos have permission to offer any type of Class III gaming, which includes common casino games like roulette, blackjack, and any other wagering game (including sports betting).

The Pueblo of Santa Ana Tribe was the first to offer sports betting at their Santa Ana Star Casino, and other casinos like Inn of the Mountain Gods and Isleta Resort & Casino have followed suit.

Each tribe’s sportsbook comes with its own limitations. For example, the Santa Ana Star won’t accept bets on the University of New Mexico or New Mexico State. Meanwhile, Isleta Resort will accept bets on local schools.

New York

New York is another state that has only in-person gambling, but their approach to it is far less legally convoluted than New Mexico’s. The state officially legalized sports betting in 2019, with several tribal and commercial casinos offering their own sportsbooks.

As for restrictions: You cannot bet on college teams from New York or any NCAA events happening in the state.

Oregon

Oregon was another one of the four states that was given immunity when PASPA became law in 1992. The state had already legalized parlay betting with a game called “Sports Action,” which was run by the Oregon Lottery and allowed a maximum wager of $20. By 2007, though, the lottery game was discontinued.

In 2019, the state moved to allow broader sports betting action with the app Scoreboard, run by the state lottery. This is the only sports wagering app available in the state and your only option to bet on sports online as an Oregonian.

The tribal casinos in Oregon are the only ones allowed to offer casino gaming, and as of 2020 only Chinook Winds offers a retail sportsbook.

You cannot bet on college sports in Oregon. This is most likely tied to the fact that lottery and sports-betting proceeds benefit the state’s higher education programs.

Pennsylvania

Twelve casinos are located in Pennsylvania, with half of those being racinos. As of 2020, eight of the state’s casinos offer sportsbooks for land-based betting, including SugarHouse and Harrah’s.  For the online option, Pennsylvanians can use apps from DraftKings, FanDuel, BetRivers, Unibet, and Parx.

You can bet on all professional sports, college games, and international sporting events in Pennsylvania. Betting on e-sports is not allowed.

Rhode Island

Only two casinos operate within Rhode Island — Twin River and Tiverton — neither of which is a tribal casino. The Rhode Island Lottery oversees all sports betting in the state, and they offer Sportsbook Rhode Island as the mobile app for betting online.

People in Rhode Island can wager on professional, collegiate, and international sports; however, betting isn’t allowed on college events that involve a Rhode Island college team or that take place in Rhode Island.

Tennessee

Tennessee’s legalization of sports betting includes the stipulation that all sports betting will be done online. Why? Because there are no casinos in the state. This could change in the future, but using an app is the only way to wager on sports in Tennessee for now.

There are four apps available to Tennessee residents in 2020: BetMGM, DraftKings, and FanDuel are the big commercial apps, and Tennessee Action 24/7 is the state-owned and operated sportsbook.

In Tennessee, you cannot bet on amateur or high-school sports.

West Virginia

This state has five casinos, all of which offer sportsbooks at their locations. As for online sportsbooks, West Virginia residents can use DraftKings, FanDuel, and BetMGM.

There don’t appear to be any limitations to what sports you can bet on in West Virginia.

Washington, D.C.

Even though there are no casinos in the District of Columbia, the city passed legislation to allow in-person and online sports betting within its boundaries. However, none of these options were able to open in 2020 due to coronavirus shutdowns.

Wagering will most likely take place via a combination of mobile apps, kiosks, and retail locations like local stadiums. The D.C. Lottery’s app will eventually add in sports-betting functionality, too.

More states have expressed their interest in legalizing sports betting sometime in the future. Within the next couple of years, probably most states will allow sports betting in some form.

It’s important to note that, if a state permits online sports betting, they have to protect their license and ensure that you’re actually gambling within their borders. Sports-betting apps use geolocation to see if you’re physically within the allowable jurisdiction. If you’re using a website, you’ll oftentimes be asked to upload proof of residency when registering your account.

How To Bet on Sports If You Live in a State That Doesn’t Allow It

While plenty of states now offer sports betting in some capacity, there are still a fair number that don’t yet allow it. Let’s say that you have a really good feeling about this one team, but you live in a state that hasn’t legalized sports betting. Can you still place a bet with a bookmaker?

Legally speaking, you could bet on sports only through an offshore online sportsbook. They’re an established, safer alternative to using an unregulated bookmaker. There’s no federal law prohibiting American citizens from gambling on offshore websites, whether they belong to a casino or a dedicated sportsbook.

Yet, two states do have actual laws that specifically make gambling via offshore sites illegal — these are Connecticut and Washington. These two jurisdictions have dedicated anti-gambling laws that outlaw all forms of gambling on the internet.

In addition, as of 2020, four states have laws that specifically prohibit state-regulated sports betting:

• Alaska
• Hawaii
• Utah
• Vermont

Offshore Sportsbooks

If you’re not in Connecticut or Washington state, there are a slew of offshore betting apps and websites that you can use. You also won’t encounter any limits to what types of sports or teams you can bet on when you’re placing your wagers with an offshore sportsbook.

Of course, be sure to do some research first before signing up with the first international online sportsbook you find. Read reviews to see how users feel about a site’s security, customer service, and general user experience.

You should also look into where the sportsbook is based out of. Different countries have different levels of regulation when it comes to running gambling websites. Some places will offer a license to anyone who applies for the low tax rate, while others enforce rigorous controls over player safety. Look to see if your offshore sportsbook has its license from one of these jurisdictions if you’re looking for top-tier operator integrity:

• Antigua and Barbuda
• Belgium
• Denmark
• Isle of Man
• Malta
• Philippines
• United Kingdom

In the End, Sports Betting Is Here To Stay

While federally regulated sports betting would probably be easier, that’s most likely not going to be the case. Interstate sports betting is still looking to be in the distant future, if at all. In order for that to happen, the Interstate Wire Act would need to be overturned.

In the meantime, more and more states are enacting legislation to permit sports betting, giving more people access to the pastime through legal, regulated channels. This means we get to watch as more states embrace sports betting and all of the revenue it can create.

Make sure you’re all brushed up on the legalities of sports betting in your particular state. And, if you can, enjoy adding a bit more of a thrill to an upcoming game with a fun wager.