Gambling has been on the rise across American society for a half-century now, and Victor Matheson provides an overview of the latest frontier in “Sports Gambling” (Milken Institute Review, Second Quarter 2023, pp. 12-21). He begins with some broader context:
The past 60 years have witnessed a massive transformation of the gambling landscape in the United States. In the early 1960s, the only legal casinos in the country operated in Nevada, no states ran lotteries, and essentially all sports bets were either made informally among friends or through illegal bookies. These days, 45 state governments sell $100 billion in lottery tickets each year, with multistate lotto games like Powerball and Mega Millions occasionally offering jackpots exceeding $1 billion. Nearly 1,000 casinos and card rooms operate across 41 states, generating over $50 billion in net gaming revenue. And nowhere has the gambling industry changed more rapidly than in sports betting, where nationwide expansion has led to an increase in legal wagering from just under $5 billion in 2017 to nearly $100 billion in 2022.
Matheson runs through a number of the most prominent US examples of how gambling on sports led to bribery of players and officials to alter the outcome of games. But for big-revenue sports, a huge share of the money comes from television and media rights in general–and gambling helps to drive that interest. People watch games they would not otherwise watch, and watch until the bitter end, if they have a bet placed on the game or the point spread.
In 2018, the Supreme Court decision in Murphy v. National Collegiate Athletic Association held that the Professional and Amateur Sports Protection Act of 1992 was unconstitutional. Under that law, the federal government could prevent a state from legalizing sports gambling. Just five years later, 28 states and the District of Columbia have legalized sports gambling, and more state are on the way. At least so far, however, California, Texas and Florida are hold-outs against the general trend.
But not all sports gambling is created equal. In some states, the gambler needs to actually show up in person at a casino or other designated location to place a bet. In other states, you can also bet through your computer or through smartphone apps. Matheson writes:
There is a world of difference in impact between mobile gambling and in-person wagering. In-person-only states typically averaged total betting of less than $100 per person in 2022, while the comparable figure in states with legal mobile betting is in the neighborhood of $1,000 per resident. In New York, for example, the sports handle (the total amount wagered on sport competitions) rose from $21 million in December 2021 to $1.7 billion in January 2022 after the state’s first mobile gambling apps went live.
Ironically, in New Jersey, which led to fight to overturn PASPA in order to revive the Atlantic City casinos, only $900 million of the $11 billion of sports betting that took place in the state in 2022 was wagered at its casinos. Even in Nevada, known for its casino pleasure palaces, two-thirds of all sports betting has moved out of the gaming rooms to mobile apps since the latter debuted in 2020.
The most common argument in favor of sports gambling is that having it above-ground and legal is better than having it be hidden away. The argument has some truth in it. Matheson writes:
[O]rganized sports’ dim views on gambling evolved for multiple reasons. … [G]ambling-related corruption in countries with legal sports gambling — notably, the UK — didn’t appear to be markedly worse than in the U.S. In fact, a reasonable case can be made that legalizing gambling actually reduces match-fixing by bringing betting out of the shadows. In a legal setting, leagues can partner with sportsbooks (companies that organize sports gambling) to identify athletes engaging in gambling. In addition, leagues can work with sportsbooks to identify patterns of suspicious betting — tracking that would be nearly impossible if the wagers were underground.
As someone who is overly interested in a wide variety of sports, seeing odds and how they evolve is one more interesting prism through which to view games. Moreover, I have my own preferences for blowing modest amounts of money on entertainment that would not necessarily be approved by others, so I try not to be obnoxious about how others spend their entertainment budget.
On the other side, I’ve been known to rail against pretty much all forms of legalized gambling, as essentially a tax on mathematical illiteracy. In the case of sports gambling, Matheson cites estimates that every dollar bet with sports books results in a loss of 7.7 cents. When you bet again and again, on average you lose again and again. Matheson writes: ” Between the court’s decision in June 2018 and the end of 2022, sports gamblers made over $190 billion in legal wagers generating $14 billion in gross revenues for the sportsbooks (that is, the amount taken in from bets minus payoffs to winners). This represents nearly a 20-fold increase in under five years.”
The enormous rise in legalized gambling across many settings is typically described as a fun and games, with just a soupçon of adults-only wickedness for added attractiveness. But the general pattern across gambling industries is that the bulk of revenue doesn’t come from people who bet, say, $20 on the Super Bowl. Instead, it comes from a relatively small share of the population (maybe 5-10%) that bets enough to cause real tradeoffs, sometimes severe tradeoffs, in their day-to-day economic lives. In the case of sport gambling, young men in particular are disproportionately vulnerable to the “all the cool dudes do it” vibe. The rise in gambling revenue across US society is built on such vulnerabilities.
