Opinion: Clarity Long Overdue On US Sports Betting Laws

Posted on June 19, 2020 - Last Updated on June 16, 2020

This is an opinion article representing the views of the author and not necessarily those of Legal Sports Report:

We are now more than two years on from the Supreme Court‘s landmark decision in Murphy.

The legal sports gambling industry took off; what began as a small handful of states quickly has become nearly 20 states up and running. There have also been big gains in the acceptance of other forms gambling like online gaming.

And then the sports world, and most of the rest of the world, stopped around the middle of March. COVID-19‘s impact has been felt far and wide.

States, businesses, individuals are all looking to get back to normal in the wake of an event that, at least I, never thought would occur in my lifetime. The idea of shutting down borders and sheltering in place was something out of a movie.

What should happen as the country reopens

But as we begin to move towards reopening (of course not knowing whether there will be or what effect a second wave will have,) the federal and state governments should take steps forward to protect our legal and regulated gambling market.

It is time to bring clarity to legal sports betting and gambling in the United States.

This can only happen by modifying or repealing obsolete statutes like the Wire Act, which now act primarily as an obstacle to the competitiveness of companies trying to compete legally. Many of these statutes appear to have very little deterrent effect on those accepting U.S. customers offshore, and instead cast a shadow primarily over those on the legal side of the market.

Need to promote and protect the legal marketplace

Statutes like the Wire Act were passed in a different era. They were never intended to handle a world where 20-plus states were operating legal sports betting.

The Wire Act, the Sports Bribery Act, and the Illegal Gambling Business Act were all statutes passed to target organized crime, and target their money-making businesses.

While organized crime still exists (and still operates illegal gambling businesses,) the legal sports gambling industry is a multi-billion dollar industry filled with publicly traded companies and multinational corporations. The industry now operates with the endorsement of many of the professional sports leagues in the United States.

The legal sports gambling industry is an important contributing member of society.

But by nature of statutes like the Wire Act that effectively confine sports gambling and many of the support systems for the industry intrastate, the companies that fuel the legal industry are at a disadvantage. The bookmakers themselves are forced to operate in intrastate silos of sorts, giving an advantage to operators offshore who do not have to incur these repeated costs.

Wire Act on trial

In 2018, when the Department of Justice reversed previous guidance on the Wire Act by finding the statute applied to activities beyond sports gambling, it sent shockwaves across the legal U.S. online gambling industry.

The New Hampshire Lottery and lottery supplier Neopollard challenged the new interpretation in federal court and prevailed, but the Justice Department appealed. The First Circuit Court of Appeals heard oral arguments in the case on June 18, and regardless of who wins, the losing side is likely to appeal to the Supreme Court.

The issue is bigger than whether the Wire Act should apply to only sports betting or online gambling more broadly. The real issue is this: why is the federal government keeping around an outdated statute that now serves primarily as a hindrance to a legal industry doing things like funding education and roads?

But they won’t enforce it against legal gambling?

There has been a suggestion that laws like the Wire Act are not a big deal to the regulated industry because the government is only interested in going after organized crime with statutes like the Wire Act.

But the fact of the matter is that they could pose a threat because the language is not precise enough to confine enforcement to those still-undesirable activities like gambling operations conducted by organized crime.

We have also seen the government can change its mind, as it did when they chose to reinterpret their previous guidance from 2011 that the Wire Act was intended only to apply to sports gambling.

Protect the customers and the regulated industry

The government’s job is to protect the citizens of their state and country, and provide a regulatory environment that enables companies to succeed while promoting competition.

Unfortunately, the federal regulatory environment has failed to do that for the regulated gambling industry, particularly online. The failures to adapt and repeal or update outdated federal and state laws threatens regulated gaming.

There are thousands of federal laws that go virtually unenforced; likely many of them should be repealed, replaced, or modernized.

But those laws impacting the gambling industry seem particularly suited to repeal or, at minimum, modernization because the industry has gone from an era without internet communication to an era where every cellphone can access the internet. Sports gambling has gone from almost totally illegal to legal in more than 20 states (and growing) across the country.

The fact that laws might pose a threat to the growth and success of a now-regulated market that was never conceived of when they were passed should be reason enough to update them to reflect the new reality.

Enforcement needed?

The Wire Act and several other federal laws need to be modernized to better reflect the modern world of widely legal gambling, sports and otherwise.

The laws created now should create an environment that allows legal operators and support systems to operate in a way that maximizes the benefits to the consumer and allows the legal sportsbooks to compete against those offshore who may possess some advantages that for reasons of public policy or consumer protection reasons legal operators simply will not offer.

Former Nebraska Attorney General Jon Bruning suggested to Congress that before passing new gambling laws, we need to begin enforcing the laws we have. There is, indeed, something to this, but I would first argue we need to update the laws we have to better reflect our present reality.

While the Wire Act serves as a highly topical example of the need for (gambling) laws to be updated to promote the growth of the regulated industry, the Wire Act is not alone. There are laws at both the state and federal levels that should be modernized or repealed to better reflect the legal gaming reality.

And when the laws we have are fixed or we pass new laws designed to protect legal and regulated industries, they should be enforced consistently to provide certainty of outcome and serve as a help to the regulated industry.

Failed efforts

Back when Sen. Orrin Hatch introduced legislation to provide a federal regulatory regime of sorts for sports betting there was discussion of updating some federal statutes.

But that conversation needs to be had again and again until something changes.

Until changes get made, the legal sports gambling industry will never fully reach its potential.

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John Holden

John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.

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