Four years ago, betting on live sports was illegal in most of the United States. Now, fans watching matches or visiting them in stadiums are bombarded with ads encouraging them to bet on matchups rather than just watch as spectators.
This transformation of sports betting began nearly a decade ago, initially with the explosion of betting on fantasy sports. Then, in 2018, the Supreme Court paved the way for states to legalize wagering on live games. Today, 31 states and Washington, DC allow sports betting either online or in person, and five other states have passed legislation that will allow such wagering in the future. Professional sports in the US is now part of a multi-billion dollar gambling conglomerate.
This shift represents the largest expansion of gaming in the history of the United States. Several of my Times colleagues and I have spent months studying how the industry expanded, and today I want to highlight some of our findings.
As sports betting became more widely legalized, casinos teamed up with sports betting platforms like FanDuel and DraftKings, along with the major professional sports teams, to go state to state to push lawmakers to adopt it. Part of your persuasion toolbox? Millions of dollars in contributions from the sports betting companies and their allies to these lawmakers’ election campaigns.
We found that gambling industry officials had told lawmakers that they could expect significant tax benefits from sports betting. In many states, this windfall has been neglected.
Take Michigan, home of the Detroit Tigers, Lions, Red Wings and Pistons pro teams, along with another two dozen collegiate track and field NCAA programs — in short, a whole lot of sports to bet on. Online sports betting began in the state in January 2021, and the American Gaming Association predicted that state legislators could expect more than $40 million a year in tax revenue. What has Michigan collected over the past year? Just $21 million in state and local taxes, according to the Michigan Gaming Control Board.
The gaming industry also urged states to keep sports betting tax rates low, warning that if tax rates got too high, sports fans would turn to the black market to place bets on unregulated sites. These warnings were misplaced. Some states, including New York and New Hampshire, ignored industry advice and instituted the highest tax rates on betting. You’ve seen bets being placed at a higher per capita rate than in many low-tax states. New York has seen so much betting — even with a hefty 51 percent tax rate — that the state took in a staggering $546 million in taxes in the first 10 months of this year. That amount is equivalent to half of all state sports betting tax revenue nationwide.
Many of the states also allowed the gambling industry to issue hundreds of millions of dollars worth of tax-free bets to players, essentially to market the industry. The promotions are designed to entice new customers to develop a new habit: placing bets on games. It’s the modern day equivalent of the free bus ride to Atlantic City’s casinos with a roll of coins inserted into the slot machines. Arizona sportsbooks alone gave out $205 million in free bets. But for states, the result has been large shortfalls in expected tax revenues in places like Michigan and Virginia. Some, including Virginia, tried to restrict tax-free betting.
The promotions were an example of regulators being outdone in an attempt to police an industry that was growing so rapidly. Enforcement of the rules was scattered, penalties were minor or infrequent, and regulators often turned to the gaming industry to police themselves.
A casino company, Penn Entertainment, has teamed up with David Portnoy, founder of Barstool Sports, who has a history of misogynist and racist behavior, and made him a public spokesman for sports betting.
participation of the university
To market their expansion of sports betting, gambling sites have struck unusual deals with at least eight universities, including Michigan State, the University of Colorado at Boulder and Louisiana State University. The schools became partners with the companies in exchange for millions of dollars in payments. Those deals have raised questions about whether promoting gambling on campus — particularly for people of an age when they are vulnerable to gambling disorders — is in line with the mission of higher education.
There’s more to come
At least $161 billion worth of wagers have been placed since the general legalization of sports betting in the United States. This gambling explosion is just the beginning. Betting companies have made it clear that the ultimate goal is to introduce so-called iGaming to states across the country where customers can use their cell phones to play blackjack, poker and other casino-style games.
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