Closer examination of legalized sports betting merits

Over 57 million Americans logged onto sites like DraftKings.com and FanDuel.com this year to take part in the multi-billion dollar fantasy sports industry. Bloomberg Business reports that during the first week of the NFL, FanDuel and DraftKings alone were projected to bring in $60 million in entry fees — twice the amount Las Vegas was expected to earn. The industry is ubiquitous throughout the nation and is growing every year. Recently, Yahoo Sports introduced a system that allows for Daily Fantasy sports allowing fans to wager daily.

First question I asked when I saw the ads for these sites was, “How is this legal?” The industry requires participants to pay entry fees — which I argue are wagers — and has to pre-establish the prize money regardless of the number of participants. And finally, due to a 2006 law, betting is made legal because the game is considered “skill based” rather than luck based.

Having played fantasy sports before, I can tell you yes, there are a few people who take the endeavor seriously — and sometimes to an annoying degree. Outside of those few people, most participants are casual fans who use the guise of “entry fees” to legally gamble on the sports they watch. And to its credit, the game is skill based. Data from Sports Business Daily says that 80% of the players on Daily Fantasy Sports will on average pay an “entry fee” of $49 and walk away with $25. The vast majority of “entry fees” are paid by the top 1.3% of players who again are the same people who take the fantasy sports game seriously to an annoying degree.

But why can’t we just bet on sports without having to play the legal hopscotch of calling wagers “entry fees” and pretending the majority of the people who bet on these sports are betting based on their perception of skill?

The laws governing land-based gambling stem from a law called the “Professional and Amateur Sports Protection Act of 1992,” which effectively banned sports gambling in the United States with the exceptions of Nevada, Montana, Oregon and Delaware. The law is a relic of the past and is something that genuinely does not fit into modern society. Arguably, most of us are aware of the underground betting that happens in the United States through “bookies.” Adam Silver also penned a pretty compelling case on taking the gambling out of the dark, so I won’t repeat here.

Given the fiscal state facing municipalities across the nation, this might be the opportune moment to repeal such an antiquated law. An estimated $95 billion is wagered on the NFL and college football seasons this year, with only $2 billion wagered legally. If one were to conservatively double that amount to include all other sports betting — NBA, MLB, Boxing, etc. — to get to a $190 billion dollar market and then tax that market, the financial fallout for many states would be incredible — possibly enough to help lighten the fall of the 51 municipalities that have declared bankruptcy over the last five years.

I won’t make a moral argument for the legalization of sports betting in the United States given the prevalence of the practice and the lack of side effects. Given the potential financial benefits for the state and the lack of significant potential harms from legalization of the practice, there are few reasons not to look intensely at the legalization of the practice.

related stories