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Sports betting in the United States.


In late August 2009, the United State Court of Appeals for the Third Circuit ruled that the State of Delaware's proposal to allow single game sports betting would violate a 1992 federal ban on such wagering. (1) The ruling, which essentially halted Delaware's plan was applauded by the professional sports leagues in the United States: the National Football League (NFL), Major League Baseball (MLB), the National Basketball Association(NBA) and the National Hockey League (NHL), as well as the National Collegiate Athletic Associate (NCAA), which claimed that the new proposal would not only violate the federal Professional and Amateur Sports Protection Act, but that it would also harm their reputations and expose young people to gambling.

With more and more states looking at legalized gambling as a means to make up for financial shortfalls in their state budgets, the purpose of this paper is to examine current state of legalized sports betting in the United States. The paper will begin with a brief history of sports betting in United States. Next, as a result of some high profile betting scandals surrounding match fixing, the paper examines the various laws passed to regulate the industry. The paper concludes by examining the Delaware case and why Delaware believed that it could use sport betting to help balance the state's budget and what impact.

I. History of Sports Betting in United States

Like many people in the World, Americans enjoy gambling in a variety of forms, ranging from state run lotteries, bingo, card rooms and casino games. In fact, gambling has been a part of America since colonial times when each of the original thirteen colonies employed lotteries to raise revenue. (2) Today, gambling is so popular, that in 2007 the Gross Gambling Revenues in the United States topped $92 billion. (3) Although illegal in every state except Nevada, one of the most popular forms of gambling is betting on the outcome of sporting events. It should be noted, however, that while Nevada is the only state that allows betting on specific games, Oregon, Montana and Delaware allow limited betting on sports via a lottery. In 2008, over $2.5 billion was legally wagered in Nevada's sports books, while according to the National Gambling Impact Study Commission (NGISC) as much as $380 billion is bet illegal annually. The most popular sporting event to bet on, or the event that attracts the most bets, is the NFL's annual Super Bowl. In 2009, approximately $81.5 million was wagered at the Nevada's sports books on the Super Bowl; down from the $92 million wagered on the 2008 Super Bowl. (4) It is estimated, however, that only a small amount of the total money bet on the game, about 1.5 percent, is actually wagered legally in at the Nevada's sports books.

With so much money being wagered legally and illegally on sports, it is not surprising that there have been a series of match fixing and gambling scandals. For example, Major League Baseball's history with match fixing and illegal gamblers goes all the way back to 1914, when it was rumored that the heavily favored Philadelphia Athletics intentionally lost the World Series to Boston. (5) The most infamous scandal in baseball, however, occurred in 1919. Known as the Black Sox Scandal, eight members of the Chicago White Sox accepted money to lose that year's World Series against Cincinnati. (6) When the newspapers broke the story in 1920, all eight of the players were arrested eventually tried in criminal court. Although as least two of the players had signed confessions admitting to their part in the scandal, none of the players were convicted of criminal charges. All of the players, however, were eventually banned for life from playing professional baseball.

Baseball was forced to endure another black eye from a betting scandal in 1989, when Pete Rose, baseball's all-time leader in hits, agreed to a lifetime ban in return for MLB ending its' investigation into his gambling. Although Rose denied betting on baseball for many years, in his 2004 book, Rose finally admitted to gambling on baseball games in which he played and managed. Rose justified his actions, however, by stated that he only bet on his teams to win.

In addition to professional sports, college sports have also suffered a series of scandals involving gambling and match fixing. Since college athletes are not paid to pay, it is not surprising that gamblers have been able to entice athletes to fix matches for money. In fact, the only thing surprising is that it does not happen more often. Probably the most famous instance of match fixing in college sports happened between 1947 and 1951, when at least 86 college basketball games were fixed by at least thirty-five college players from a number of colleges in the New York City area and the University of Kentucky. Twenty of the players, and fourteen gamblers, were eventually arrested and served time in prison. Despite all the efforts by the NCAA and the criminal penalties handed down to the players, match fixing scandals have continued to the current days. (7)

The most recent match fixing scandal involved the NBA and one of it's referees. NBA referee Tim Donaghy was convicted in 2008 of illegally betting tens of thousands of dollars on games, some of which he worked, during the 2005-06 and 2006-07 NBA seasons. In addition, Donaghy also passed critical information about games to bookies, which allowed them to adjust the point spread. In 2008, Donaghy was sentenced to 15 months in prison. (8)

II. Federal Legislation Regulating Sports Betting

With the current recession causing havoc with local and state budgets, it was not surprising that governments at all levels are starting to look at legalized gambling as a means of making up some of their budget shortfalls. As a result, in the United States, 48 of 50 states have revised their state laws to allow some form of limited legalized gaming, including regulated casino-style games and state-run lotteries. (9)

The first state to legalize gambling on sports was Nevada in 1931. It was not until the 1976 that a second state legalized a form of sports gambling, when Delaware introduced a Scoreboard lottery, a form of parlay card wagering. (10) In order to win, the Delaware game required bettors to pick seven winners in seven selected NFL games. Unlike Nevada, the game did not allow betting on individual games.

Although Delaware discontinued its football lottery game after only one year, Oregon initiated a similar game in 1989. Faced with the growing popularity of sports gambling, in the early 1990s more and more states began to consider legalizing some form of sports wagering. Worried that a sudden proliferation of sports-based lotteries would pose a significant threat to the integrity of their sports, the major sports leagues petitioned Congress for assistance. (11)

The following section examines some of attempts by Congress to regulate gambling and sports betting in the United States.

1. The Gambling Devices Act of 1951

While Congress has generally left it to each state to regulate the gambling activities within each state, the federal government has passed a series of laws designed to assist the states regulate illegal gambling within the state. The first such law passed by Congress at the federal level was the Gambling Devices Act of 1951. The Act, which sought to assist states in eliminating the role o the role of organized crime in the gambling industry, made it a crime to transport gambling devices across state lines to locations not specifically exempted by local or state law. (12) While the law has little to do with sports gambling, it is important, because it shows Congress' willingness to regulate gambling activities and get involved in something that up until then was seen purely as a state matter.

2. The Wire Communications Act of 1961

The next legislation passed by Congress "to assist the various States, territories, and possessions of the United States and the District of Columbia in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses and to aid in the suppression of organized gambling activities" (13) was the Wire Communications Act of 1961 (Wire Act). (14)

The statute states that:

Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined not more than $ 10,000 or imprisoned not more than two years, or both. (15)

The Wire Act, therefore, makes it illegal to transmit via the telephone bets or wagers, use information assisting betting or wagering on a sports event or contest, or to engage in any communication that entitles the recipient to receive money or credit resulting from betting or wagering. In order to be convicted of violating the Wire Act, the government must show that an individual: (i) transmitted information through interstate wire facilities (this would encompasses almost all forms of communication, from telephones, to more modern forms of communication like email and texting) that assisted in the placing of wagers; and (ii) the defendant was involved in the business of wagering or betting. (16)

Federal prosecutions of gamblers under the Wire Act has been somewhat limited, however, because of the court's interpretation of the business of wagering or betting. Before convicting someone, the federal courts require that the defendant be a bookie (i.e. engaged in the business of receiving or taking bets), and not such a gambler or someone who simply bets on sports. (17)

3. The Illegal Gambling Business Act of 1970

In 1970, as part of the Organized Crime Control Act, (18) Congress passed the Illegal Gambling Business Act, a law prohibiting people from running an illegal gambling business. (19) In order to establish criminal activity under the Act, the government must establish the existence of a gambling business that: (i) violates state or local law, (ii) involves five or more people that conduct, finance, manage, supervise, direct, or own all or part of the business, and (iii) remains in substantially continuous operation for more than thirty days or has a gross revenue of $ 2000 in any single day. (20)

While Congress did not intend for individuals placing bets be counted as part of the five or more persons requirement, Congress did want to the courts to liberally count anyone engaged in the operation of the illegal gambling business "regardless of how minor their roles." (21) The Act also does not require absolute or total continuity in the gambling operations. Instead, the courts interpret the phrase substantially continuous to mean an operation conducted with some degree of regularity. (22)

In addition, the Illegal Gambling Business Act was part of the Organized Crime Control Act which included the Racketeer Influenced and Corrupt Organizations Act (RICO). (23) RICO was designed to eradicate organized crime by attacking the sources of its revenue, including syndicated gambling and bookmaking. RICO subjects an individual who engages in prohibited activities to criminal and civil penalty. (24)

4. The Professional and Amateur Sports Protection Act of 1992

The next major piece of federal legislation passed by Congress is the Professional and Amateur Sports Protection Act (Sports Protection Act). (25) Passed in 1992 in response to the professional sports leagues' concerns that Delaware and Oregon's sports-based lotteries posed a significant threat to the integrity of their sports, the Sports Protection Act is designed to stop the spread of State-sponsored sports gambling. (26) This was significant since there were at least an additional thirteen states considering some form of legalize state-sponsored sports betting at the time the Act was passed. (27)

The Sports Protection Act states that:

It shall be unlawful for-

1 a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or

2 a person to sponsor, operate, advertise, promote, pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games. (28)

Since at the time the law was passed, four states (Nevada, Oregon, Montana, and Delaware) had or previously had state statutes allowing sports betting, the four were exempt from the Act. Therefore, Nevada was allowed to continue to offer legalized sports betting and Oregon and Montana were allowed to continue their sports lotteries. As will be discussed in the last section of this paper, it is this exemption that Delaware bases its' attempt to introduce a new sport betting game.

III. State Legislation Regulating Sports Betting

Before passage of the Sports Protection Act, Congress had traditionally let individual states regulate gambling within their own jurisdictions. In taking this hands-off approach, Congress cited the Tenth Amendment to the United States Constitution which states that: the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." (29) As a result, every state has laws regulating gambling, with the majority of states outlawing all forms of sports betting.

As mentioned above, however, there are some exceptions to the Sports Protection Act that allows four states to offer some form of legalized sports gambling. For example, Nevada allows "the business of accepting wagers on sporting events by any system or method of wagering." 30 Oregon allows betting on football games through a game called Sports Action, which is a part of the Oregon Lottery. While Oregon allows individuals to bet on sports via the lottery, unlike Nevada, Oregon does not allow individuals to bet on individual sports event. In addition to Oregon, Montana also has authorized a sports pool game called Montana Sports Action. (31) Montana, just like Oregon, prohibits individuals from betting or wagering on individual sports event. (32)

IV. Delaware and the Move to Expand Legalized Sports Betting

While it is clear that the Sports Protection Act prohibits the creation of new state sponsored sports gambling programs, the Act also specifically exempted four states that had or previously had already offered sports gambling, including Delaware. Faced with an unprecedented shortfall in state tax revenues, Delaware in early 2009 proposed a lottery game to help balance the state's $3 billion budget. The new game would allow individuals to not only bet on single games, but also sports other than the NFL.

As a result of the proposed new lottery game, the NFL, as well as the other professional leagues and the NCAA, filed a motion for a preliminary injunction in the United States District Court for the District of Delaware seeking to enjoin the state of Delaware from commencing any "sports lottery" that permits: "(i) single-game sports betting, (ii) betting on sports other than professional football, or (iii) any other sports betting scheme that was not conducted by the State of Delaware in 1976.33 In particular, the leagues argued that the Delaware Sports Lottery Act, (34) and the regulations proposed pursuant to the Act violated the Sports Protection Act since it went beyond what was allowed by the exemption by not only allowing single-game betting, but also betting on sports other than professional football. (35)

On August 10, 2009, the District Court for the District of Delaware rejected the sports leagues' motion for a preliminary injunction. 36 In support of its' decision, the court held that based on the record, it was not convinced that the sports leagues would suffer irreparable harm without an injunction, that the state would not be irreparably harmed with it, or that the injunction would be in the public interest. Therefore, the court held that considering and balancing the preliminary injunction factors, and in light of the present record, at this early stage of the case, a preliminary injunction was not appropriate. (37)

With Delaware's three race tracks /casinos working to open sports books in time for the NFL's opening game on September 10, 2009, the sports leagues appealed the District Court's decision to the United States Court of Appeals for the Third Circuit. In a somewhat surprising decision, the three-judge panel of the Third Circuit Court of Appeals instead of just ruling on the NFL's preliminary injunction request, leapfrogged the injunction request and ruled that Delaware's betting plan violated the Sports Protection Act. 38 Although a written opinion of the decision and the judges' reasoning was not available at the time this article went to press, the decision basically ended Delaware's plan.



At the time this article went to press, Delaware Governor Jack Markell was waiting for the Third Circuit Court's written decision before deciding whether to appeal. However, needing the additional tax revenue, Markell did say that Delaware would likely offer some form of parlay wagering involving the outcome of two or more games when the NFL season started.

While the NFL and the other leagues may have won the case, it was interesting to note that one of the main arguments made by the leagues was that any gambling on its games would damage the sports good will and reputation for integrity. However, as the District Court noted, sports and gambling are already intertwined. In support of this conclusion, the District Court noted that the NHL not only hosted its 2009 Player Awards in the Palms Casino, but allows the co-owner of the Detroit Red Wings, Marian Ilitch to also own the Motorcity Casino. In baseball, Marian Ilitch's husband Michael owns the Detroit Tigers. In addition, the court noted that the MLB recently loosened its policy on casino and gambling sponsorship, so Harrah's Casino is a signature partner of the New York Mets and the Mohegan Sun Hotel & Casino operates a Mohegan Sports Bar at Yankee Stadium. In the NBA, the Sacramento Kings are owned by the same people who own the Palms Casino in Las Vegas, while the Chairman and CEO of Harrah's owns a stake in the Boston Celtics. In the NFL, the league allows broadcast affiliates to broadcast betting information, betting lines, injury reports. In addition, NFL teams are allowing their team names to be used on state lottery games. For example, Massachusetts, not one of the four states exempt from the Sports Protection Act, is selling the instance scratch tickets with the New England Patriots team logo.

By going into court to prevent Delaware from starting the new betting program, the professional sports leagues, therefore, seem to be more interested in guarding their own revenue streams, than protecting the good will and reputation for integrity of the sports. If the sports leagues were really worried about their good will and the integrity of the sports they would ban all associations with gambling and state lotteries. Instead of allowing it only when it is profitable to them.

* Professor and Department Chair of the Sport Management & Media Department at Ithaca College, Itaca, New York, United States of America. Paper presented at the Ninth Asser Annual International Sports Law Lecture concerning "Sports betting policy in a European legal perspective: freedom of services versus general interest", The Hague, The Netherlands, 16 September 2009.

(1) A.J. Perez, Court foils Delaware sports betting plan, USA Today, August 25, 2009, at 1C

(2) Macchiarola,M.C., Dec. 2008). Securities Linked to the Performance of Tiger Woods? Not Such a Long Shot, 42 Creighton Law Review 29.

(3) American Gaming Association (2009). Gaming revenue: 10-Year trends. Retrieved August 30, 2009, from y/factsheets/statistics_detail.cfv?id=8

(4) American Gaming Association (2009). Sports Wagering. Retrieved August 30, 2009, from http://www.americangaming. org/Industry/factsheets/issues_detail.c fv?id=16

(5) Cabot, A.N. and Faiss, R.D., (Spring 2002). Gaming Law Symposium: Sports Gambling in the Cyberspace Era, 5 Chapman Law Review 1.

(6) Eliot Asinof, Eight Men Out: The Black Sox and the 1919 World Series (1963).

(7) Udovicic, A.E.,(1998). Special Report: Sports and Gambling a Good Mix? I Wouldn't Bet on It, 8 Marquette Sports Law Journal 401.

(8) M.S. Schmidt, Referee Gets 15 Months for His Role in Gambling Ring, N.Y. Times, July 30, 2008, at D7.

(9) Dunstan, R. (1997). Gambling in California. Sacramento, CA: California Research Bureau, California State Library. Retrieved August 31, 2009, from 003a.pdf.

(10) NFL v. Governor of Delaware, 435 F. Supp. 1372 (Del. 1977).

(11) Cabot, A.N. and Faiss, R.D., (Spring 2002). Gaming Law Symposium: Sports Gambling in the Cyberspace Era, 5 Chapman Law Review 1.

(12) Gambling Devices Transportation Act, 15 U.S.C. [section]1171, et. seq. (2009).

(13) Martin v. United States, 389 F.2d 895 (5th Cir. 1968)

(14) 18 U.S.C. [section]1084 (2009)

(15) 18 U.S.C. [section] 1084(a).

(16) United States v.Alpirn, 307 F. Supp. 452 (S.D.N.Y. 1969)

(17) United States v. Tomeo, 459 F.2d 445 (10th Cir. 1972)

(18) Pub. L. 91-452, 84 Stat. 922 (1970).

(19) Illegal Gambling Business Act, 18 U.S.C. [section]1955 (2009).

(20) United States v. Sacco, 491 F.2d 995 (9th Cir. 1974).

(21) United States v. Schullo, 363 F.Supp. 246 (D.Minn. 1973).

(22) United States v. Trupiano, 11 F.3d 769, 773 (8th Cir. 1993).

(23) Pub. L. No. 91-452, [section] 901(a), 84 Stat. 941 (1970).

(24) 18 U.S.C.[section][section]1963, 1964 (2006).

(25) Professional and Amateur Sports Protection Act, 28 U.S.C. [section]3701, et. seq., (2009).

(26) Cabot, A.N. and Faiss, R.D., (Spring 2002). Gaming Law Symposium: Sports Gambling in the Cyberspace Era, 5 Chapman Law Review 1.

(27) Bradley, B. (1992). The Professional and Amateur Sports Protection Act - Policy Concerns Behind Senate Bill 474, 2 Seton Hall Journal of Sport Law 5.

(28) 28 U.S.C. [section]3701, et. seq., (2009).

(29) United States Constitution, Amendment X

(30) Nev. Rev. Stat. Ann. [section]463.0193, (2009)

(31) Mont. Code Ann., [section]23-5-502, (2009)

(32) Mont. Code Anno., [section]23-5-806, (2009)

(33) The Office of the Commissioner of Baseball, the National Basketball Association, the National Collegiate Athletic Association, the National Football League, and the National Hockey League, v. Markell, 2009 U.S. Dist. LEXIS 69816

(34) 29 Del. C. [section] 4825

(35) The Office of the Commissioner of Baseball, the National Basketball Association, the National Collegiate Athletic Association, the National Football League, and the National Hockey League, v. Markell, 2009 U.S. Dist. LEXIS 69816

(36) The Office of the Commissioner of Baseball, the National Basketball Association, the National Collegiate Athletic Association, the National Football League, and the National Hockey League, v. Markell, 2009 U.S. Dist. LEXIS 69816

(37) The Office of the Commissioner of Baseball, the National Basketball Association, the National Collegiate Athletic Association, the National Football League, and the National Hockey League, v. Markell, 2009 U.S. Dist. LEXIS 69816

(38) A.J. Perez, Court foils Delaware sports betting plan, USA Today, August 25, 2009, at 1C

by John T. Wolohan *
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Title Annotation:PAPERS
Author:Wolohan, John T.
Publication:The International Sports Law Journal
Geographic Code:1USA
Date:Jul 1, 2009
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