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BETTING & FANTASY

How New Jersey Became a Gambling Stronghold

The state of New Jersey just announce that it hauled in $1.303 billion in legal sports gambling wagers in October, breaking September’s record of $1.01 billion. The money keeps coming in at a rate that is making Nevada jealous. And Monaco.

That is a $300 million jump in just one month, fueled in part by five football weekends last month. The Garden State brought in $10.6 million in tax revenue, and online casino gambling (blackjack, roulette, craps, etc. via mobile phones) accounted for nearly $317 million of the handle.

How did things get to this point?

None of this would have been possible if not for former Gov. Chris Christie of New Jersey, who sued the NCAA over the Professional and Amateur Sports Protection Act (PASPA). That was the law that limited sports gambling to the state of Nevada (with small carveouts for Delaware, Oregon and Montana) and which Christie felt was unfair to the other 46 states, but particularly his.

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After Christie left office, the case became known as Murphy v. NCAA, and the broad issue was whether the federal government had the right to control state lawmaking or whether that was a violation of the 10th Amendment of the U.S. Constitution.

New Jersey voters voted overwhelmingly in 2011 on a non-binding referendum to create a state constitutional amendment that would permit sports gambling. All of the big professional sports leagues joined with the NCAA in opposing the lawsuit, which is ironic now that we are seeing how much they support and embrace legalized sports gambling today. But at the time, gambling was still viewed as an unsavory component that could lead to game-fixing, and with the NBA coming off the Tim Donaghy scandal and being run by commissioner David Stern, the opposition was genuine.

The case was fought for several years. In 2012, New Jersey enacted the sports wagering act even though it was in violation of PASPA. The case went to court and New Jersey lost both at the District Court and the Third Circuit Court of Appeals level, and the U.S. Supreme Court initially refused to hear the case.

But Christie kept going, and a revised bill, instead of explicitly authorizing sports gambling, repealed portions of existing New Jersey laws from 1977 that had banned sports gambling. The NFL, NBA, MLB, NHL and the NCAA sued, and New Jersey lost again in District Court and in two Third Circuit Court of Appeals cases. But Christie, encouraged by dissenting opinions at the Court of Appeals level, took the case to the U.S. Supreme Court, which combined it with NJ Thoroughbred Horsemen v. NCAA.

The nine justices heard oral arguments on the case in December of 2017 and issued its 7-2 ruling on May 14, 2018, declaring PASPA unconstitutional. Justice Samuel Alito wrote that “Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”

States were then free to do as they pleased, and New Jersey quickly put the infrastructure in place to accept legal wagers on every sporting event that did not involve local colleges and universities. Delaware was one of the first states to open a legal sportsbook, constructing one virtually overnight at Dover Downs racetrack, and other states followed suit in different ways (West Virginia merely copied and pasted the New Jersey law and enacted it).

Sports gambling is now legal in 29 states along with the District Columbia, and it is coming soon to New York, Nebraska and Maryland, which have all legalized it and are building infrastructure and dealing with accompanying delays. California is expected to have legalized sports betting on the ballot in 2022, and Texas’ law changes have been pending in the state legislature since the spring.

The U.S. sports betting market is predicted to reach $37 billion by 2025, making it one of the country’s largest growth industries.

And as anyone who watches sports on television knows, the airwaves are inundated with sports gambling ads. Think about it: How many times did J.B. Smoove scream at you today or yesterday about salads and apps? His ads are for Caesars Sportsbook, which is running the first national sports gambling ad campaign.

We have yet to see another impropriety rivaling the Donaghy scandal in the NBA, but it is likely only a matter of time before somebody discovers that there was some monkey business going on in one of the major sports. College athletics is where we will probably see this, because it does not take a whole lot of money to convince a young athlete to drop a few of the passes he usually catches in exchange for a few thousand bucks.

The FBI keeps a close eye on everything related to sports gambling, and it alerts the sportsbooks when there is something fishy going on. But right now, there are so many sportsbooks competing in the U.S. marketplace (Colorado has 25 competing at the same time), along with an extraordinary amount of consolidation and/or acquisitions happening among European companies.

Every sports league is now feeding at the legalized sports gambling troth, and just this week the NBA gained a 3% equity stake in Sportradar, a company that only a few years ago was being given statistical data for free in order for the NBA to gain a foothold in Europe through sports gambling. (Sportradar’s revenue jumped 30% in the third quarter as business in the emerging U.S. sports betting market surged 119%, according to Sportico.) The NBA also has an equity deal with FanDuel, and folks in the industry still call it the “Wild Wild West” as offshore sportsbooks get squeezed out, state legislatures enact all sorts of different laws and sports fans are enticed to add a little excitement to their sports viewing by having a little action on the games.

Some people find it distasteful; others love it. Studies have found that young men in their 20s and 30s are the most avid sports gamblers, and men account for roughly 75% of the market.

Where this goes from here will be determined by how much stomach regular fans have for losing their hard-earned money. There are only a limited number of sharp gamblers out there — bettors who consistently win. And there is an old expression: There is a reason why they build big hotels in Las Vegas. That reason? The house always wins.

So sports gambling in the United States is what it is, and it is NOT going away. What it does to Americans and their wallets over the long haul remains to be seen. And right now, Americans and the people running their favorite sports leagues are embracing it.

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