Four Things Congress Could Do On US Sports Betting That Would Actually Be Useful

Posted on July 22, 2020

Congress will hold a hearing on Wednesday entitled “Protecting The Integrity of College Athletics.” A part of that hearing will have to do with how sports betting in the US intersects with college sports and the NCAA.

Congress (and the federal government in general) are not likely to dive into any kind of policy change regarding the expansion of sports betting in the short term. That being said, there are several things Congress and the federal government could do regarding sports betting that would be useful.

1. Stay out of sports betting altogether

All of the below options would be a good use of federal resources and efforts. But Congress just staying out of the way would be a great outcome.

If Congress gets into policymaking on sports betting, it would likely just create another level of bureaucracy that makes it more difficult for legal US sportsbooks to operate.

Regulating gambling (outside of horse betting and Native American casinos) has been the purview of states. While not all states have a perfect regulatory scheme in place for sports betting or any other form of gambling, adding more regulation from the feds isn’t likely to do much good.

2. Enforce existing gambling laws

The best thing the federal government could do on sports betting: Help to enforce the laws that already ban unregulated sports gambling.

Offshore sportsbooks serve US bettors with abandon, even though they are operating contrary to a number of state and federal laws.  States clearly do not have the resources or wherewithal to combat offshore sportsbooks that take bets in their states. The Department of Justice does.

Of course, if it were easy to stop offshore sportsbooks from serving the US, someone might have tried to stop it already. Still, hundreds of billions of dollars are being bet annually at online sportsbooks and casinos serving the US illegally.

You would think that number would demand the attention of the federal government two years after the US Supreme Court struck down the federal ban on sports gambling. Offshore sportsbooks and casinos were serving the US before and after that ruling, after all.

Anyway, enforcement of existing gambling laws would be a great place to start before making new ones. If Congress wants to get involved, it should ask the DOJ to get involved.

3. Fix the Wire Act

The federal Wire Act of 1961 is a mess. Shockingly, a law made well before the internet was a thing is not great for today’s world.

The DOJ’s new interpretation of the Wire Act in 2019 has landed in federal court, which has raised all sorts of questions about the legal footing for interstate gambling, online casinos and online lottery, for starters.

Even with its most liberal interpretation, the Wire Act still applies to online sports betting and prevents it from taking place on an interstate basis. All forms of sports betting are ring-fenced by state.

Clearing up how the Wire Act is supposed to work in the era of the internet would be a good start, but also making it clear that sports betting can take place across state lines — in the states where it is legal — would help the industry out. Each state is still passing different laws, but taking away the additional burden of having to conform to the Wire Act is a worthy goal.

4. Put the federal excise tax on sports betting to good use

This has been a footnote to the expansion of legal US sports betting, but most US sportsbook operators have to pay a federal excise tax equal to .25% of all wagers they take, aka handle.

Sports betting since the fall of the federal ban has accounted for more than $20 billion in handle. And while not every single one of those dollars is subject to the excise tax, that’s still tens of millions of dollars flowing to the federal government.

It’s not even clear where that excise tax money goes specifically, but it doesn’t seem like it goes to anything that has anything to do with sports betting. While it was apparently intended to battle illegal gambling, as outlined above that isn’t happening to any meaningful degree.

You could, of course, get rid of the handle tax. But leveraging it for something useful would also be a good idea. What could you do?

  • Fund DOJ efforts to stop offshore sports betting.
  • Fund problem gambling initiatives.
  • Send some of it back to the states with legal sports betting for either of the above.

Anyway, the excise tax is doing nothing useful on the gambling front (at least that we know of). But earmarking it for something useful to the expansion of sports betting in the US would be an improvement.

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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.

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