What’s the outlook for legal sports betting in the Trump era?

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With the state-level battles over daily fantasy sports (DFS) largely settled, the online gambling industry, along with professional and recreational sports bettors, are speculating how the incoming Trump administration and Republican-controlled Congress will respond to growing calls for greater legalization of sports betting, particularly in the online sphere.

In 2015 and early 2016 there were a flurry of inquiries and accusations by numerous state attorneys general as to whether DFS constituted a form of illegal online sports betting. In the end, only a few states pushed ahead with prosecution or legislative bans. That relatively libertarian outcome has raised hopes that 2017 will see progress on a rewrite or repeal of the 1992 Professional and Amateur Sports Protection Act (PASPA), the federal law that limits legal sports betting to four states: Nevada, Oregon, Delaware and Montana. PASPA, the Unlawful Internet Gambling Enforcement Act (UIGEA) and the Wire Act are the only major federal laws that specifically regulate or prohibit gambling. All other gambling laws and regulation are at the state level.

Still, debate over legal gambling divides the GOP. PASPA and UIGEA, which effectively banned internet poker and casino-type games in the United States, were products of Republican lawmakers. On the other hand, while internet gambling in general did not come up during the Republican primary debates, most candidates—including Jeb Bush and New Jersey Gov. Chris Christie—were cool to the idea of banning DFS.

There’s already been some discussion as to how the new administration might approach sports betting (examples here and here). There are reasons for sports bettors to be encouraged and disheartened. Here are some of them:

Why legal sports betting will expand

  • Both the federal and state governments need sources of revenue

The federal deficit has hit $20 trillion. Entitlement spending continues to grow. Even if the Affordable Care Act is repealed or changed, it is likely to be a year or two before there would be any potential impact on Medicare and Medicaid costs. President-elect Donald Trump has proposed a $1 trillion infrastructure plan while promising to reduce marginal tax rates on individuals and businesses. Meanwhile, states and cities are bumping up against their own fiscal issues, especially in regard to pension obligations. Gambling revenue becomes increasingly attractive as a solution to budget challenges.

Legalization of sports betting would bring what a National Basketball Association report claims could be as much as $380 billion a year in underground wagering activity out of the shadows. Even if that figure is inflated, other research has shown that Americans wager $95 billion a year on professional and college football and $9 billion on the annual National Collegiate Athletic Association’s men’s basketball tournament alone.

To be sure, a portion of this money makes up office pools and friendly wagers. A fraction is handled by sports books in Nevada, the only state where wagering on individual games is legal. Yet that fraction produced $224 million in revenue for Nevada casinos in 2014. Global gaming research firm GamblingCompliance projects that a fully developed legal American market—where bets are placed at casinos, online and at retail bookmaking shops—would produce $12.4 billion in annual revenue, all of which would be subject to taxation.

The $70 million Colorado raised in 2015 from taxing marijuana sales has shown states that there is genuine economic benefit to legalizing and taxing activities that otherwise law-abiding citizens enjoy in private. Greater legalization will reduce the risks consumers take when they place illegal bets. It will also encourage offshore sports books to set up operations in the United States. Currently, these sites take billions in action from U.S. bettors, but pay taxes on those earnings to other governments.

In addition, as sports books would be operating in the daylight, wagering activity would be documented and auditable by third parties. Like casinos, legal sports books would be to obliged to report big payoffs through W-2G forms with the Internal Revenue Service.

  • Trump has a background in the casino business

While not as successful as international casino magnates Steve Wynn or Sheldon Adelson, Trump—who built casinos in Atlantic City and Las Vegas—has no record of moral opposition to gambling as a business. There’s no reason to believe that expanding prohibition is on his agenda, or that he would be opposed to greater liberalization, especially if it can create or increase revenue streams for his economic agenda.

  • Momentum

Now that the popularity of DFS has shown bans can be politically problematic, some see 2017 as an opportunity to overturn PASPA. DFS also cracked the wall of uniform and adamant opposition that professional sports leagues have had to legal sports betting for decades. NBA Commissioner Adam Silver openly supports legalized sports betting, acknowledging that it generates interest—and TV viewers—for games outside local markets. Major League Baseball and the National Hockey League are sending mixed signals, embracing DFS but stopping short of endorsing legal wagering on games. Only the NFL remains steadfastly opposed to expanding sports betting, despite the fact that two team owners own stakes in DFS companies and that the league’s own cable channel, NFL Network, promotes DFS and “game picks” during its regular programming.

Why legal sports betting won’t expand

  • Republican opposition in Congress

Republicans will control both houses of Congress in 2017, but gambling is a social issue that divides the party. The only meaningful legislation introduced this year, a bill to “harmonize” PASPA, the Wire Act and UIGEA, came from Rep. Frank Pallone, D-N.J., ranking member of the House Committee on Energy and Commerce. That bill went nowhere. Any new gambling legislation is likely to go through the Commerce Committee, which is chaired by Fred Upton, R-Mich. Upton himself has consistently voted to keep internet gambling out of the United States. In addition, Vice President-elect Mike Pence, who will preside over the Senate, has come out in the past against online poker.

Prospective opposition, however, must be balanced against the fact that the Republican Party dropped opposition to online gambling from its 2016 platform. Also, the proactive Restoration of America’s Wire Act (RAWA), which would have reversed the 2011 Department of Justice (DOJ) interpretation that the Wire Act does not ban in-state online gambling, gained no traction despite support from Sens. Lindsey Graham, R-S.C., Tom Cotton, R-Ark., and Mike Lee, R-Utah.

  • Jeff Sessions as attorney general

Enforcement of the Wire Act now falls to Jeff Sessions, who stands to be the most conservative attorney general on social issues since John Ashcroft. It was a memo from President Barack Obama’s Justice Department that opened the door to intrastate internet poker in Nevada, New Jersey and Delaware. Although it would be a daring move that probably would lead to mountains of lawsuits, there’s nothing to stop Sessions from reversing that decision.

Trump appears to have nominated Sessions for his hard line record on immigration and that stands to be the department’s priority at the outset. The rest comes down to how much freedom Trump gives Sessions to set an agenda. An early signal might be the amount of resources given to enforcement of existing gambling laws, particularly crackdowns on illegal movement of cash to offshore sites. The feds like to score public relations points around the Super Bowl and March Madness. The scope of these operations and the quality of the targets they take down could be a good barometer as to the administration’s attitude toward gambling expansion.


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