Regulating Sports Wagering

• Author: John T. Holden
• Position: Assistant Professor in the Department of Management at the Spears School of Business at Oklahoma State University
• Pages: 575-620

575

Regulating Sports Wagering

John T. Holden*

ABSTRACT: The Supreme Court decision in Murphy v. National

Collegiate Athletic Association has opened a door that has remained

closed for more than a quarter century, allowing states to begin legalizing

sports gaming. State lawmakers’ excitement in seeking a new way to generate

revenue is palpable through the more than 25 different bills that have been

introduced to legalize sports betting since the May 2018 Supreme Court

decision. In addition to the interest shown by state lawmakers, Senators Orrin

Hatch and Charles Schumer introduced a federal sports gambling bill. The

desire to generate revenue for states via a source other than new taxes is

understandable; however, there has been a rush in many states to implement

sports wagering schemes that either provide maximum benefit to the state,

while trying to be first in the region offering sports betting, and seemingly

neglecting wholesale objectives such as recapturing money from sports betting’s

vast $150 billion black market. The regulation of sports betting is a

complicated topic often involving state, tribal, and federal governments. This

Article discusses the challenges of regulating sports betting at the state, tribal,

and federal levels, before identifying and suggesting best practices for

regulation in the space and reviewing possible alternative schemes for

regulation.

I. INTRODUCTION ............................................................................. 576

II.WAITING FOR MURPHY .................................................................. 580

A.PRIOR TO PASPA .................................................................... 581

B.THE 1990S TO MURPHY ......................................................... 583

C.THE POST-MURPHY WORLD .................................................... 587

III.THE FEDERAL SCENARIOS ............................................................. 590

A.THE SPORTS WAGERING MARKET INTEGRITY ACT OF 2018 ...... 591

B.THE INTERSTATE HORSE RACING ACT MODEL ......................... 594

*

John T. Holden is an Assistant Professor in the Department of Management at the

Spears School of Business at Oklahoma State University. Holden received his Ph.D. from Florida

State University, and his J.D. from Michigan State University. He filed two amicus curiae briefs

during the case that resulted in the Murphy decision. Holden can be reached at

john.holden@okstate.edu.

576 IOWA LAW REVIEW [Vol. 105:575

IV.THE STATE SCENARIOS.................................................................. 596

A.THE NEVADA MODEL............................................................... 596

B.THE GAMING CONTROL BOARD MODEL ................................... 598

C.THE LOTTERY MODEL ............................................................. 600

D.OTHER STATE REGULATORY CONSIDERATIONS ......................... 603

V.THE TRIBAL GAMING SITUATION .................................................. 604

A.THE NEW MEXICO SCENARIO ................................................... 605

B.THE INDIAN GAMING REGULATORY ACT .................................. 605

VI.HOW BEST TO MOVE FORWARD? .................................................. 609

A.BEST PRACTICES CONSIDERATIONS ........................................... 611

B.ALTERNATIVE MODELS ............................................................ 614

1.The Financial Market Regulation Model .................... 614

2.The Australian Model ................................................... 617

VII. CONCLUSION ................................................................................ 619

I. INTRODUCTION

The relationship between sports and gambling has been linked for

millennia.1 Ball games have been traced back to around 2000 B.C., with high

stakes gambling tightly intertwined with these games.2 Gambling on

gladiatorial events was a staple of the games held at the Circus Maximus in

Ancient Rome, and this relationship between sports and gambling continued

through the eighteenth and nineteenth centuries in many places within the

British Empire as a game within the game for sporting events spectators.3

While the twentieth century saw growing concerns over gambling

expenditures, largely by the working class, sports betting persisted during the

Second World War in both Europe and the United States.4 The post-war years

in the United States, however, brought forth major concerns from the federal

government that returning soldiers would transcend into delinquency fueled

by gambling.5 United States officials’ concerns included a fear of organized

1. Warren D. Hill & John E. Clark, Sports, Gambling, and Government: America’s First Social

Compact?, 103 AM. ANTHROPOLOGIST 331, 331 (2001).

2. Id. at 336 (“In one example, an Aztec noble, Xihuitlemoc, was taunted into competing

in a ballgame by his rival, Axayacatl. Both players staked the rulership of their respective

communities on the outcome of the match.”).

3. David Forrest, Sport and Gambling, in W

LADIMIR ANDREFF & STEFAN SZYMANSKI,

HANDBOOK ON THE ECONOMICS OF SPORT 40–49 (2006).

4. See generally Mike Huggins, Sports Gambling during the Second World War: A British

Entertainment for Critical Times or a National Evil?, 32 INT’L J. HIST. SPORT 667 (2015) (describing

sports gambling in England during the Second World War).

5. DAVID G. SCHWARTZ, CUTTING THE WIRE: GAMING PROHIBITION AND THE INTERNET

124 (2005).

2020] REGULATING SPORTS WAGERING 577

crime, and many officials viewed sports betting as a malignancy attached to

the power of criminals.6

The federal government’s fear that sports betting would send the country

down a dangerous path of crime persisted for the better part of 75 years.7

Beginning with hearings in the 1950s on legislation that would ultimately

become the Wire Act, the federal government linked sports betting with

revenue generation for organized crime.8 This perceived link would remain

enshrined in federal law through the 1960s and 1970s as the government

continued to struggle to corral organized crime which was perceived to have

a widening grasp as it spread across the country.9 In the 1960s and 1970s the

federal government also became concerned that state law enforcement

officials were not prioritizing the policing of organized crime’s money making

businesses, and therefore frequently invoked the commerce clause in order

to police matters that otherwise might not trigger federal jurisdiction.10 By the

early 1990s, however, the government’s sports betting focus had been

redirected, in no small part due to testimony from professional sports leagues

like the National Football League (“NFL”), National Basketball Association

(“NBA”), and Major League Baseball (“MLB”), along with the National

Collegiate Athletic Association (“NCAA”), which argued that sports betting

posed a dire threat to the integrity of sport.11

The passage of the Professional and Amateur Sports Protection Act

(“PASPA”) in 1992 was a watershed moment for federal sports gambling

policy, while not an outright ban, PASPA marked the first time that the federal

government had prohibited states from offering sports betting if they were

not already doing so at the time of the law’s passage.12 This near-total

prohibition on sports wagering in the United States continued even as

attitudes towards sports gambling evolved, and more than half of Americans

6. John T. Holden, Prohibitive Failure: The Demise of the Ban on Sports Betting, 35 GA. ST. U. L.

REV. 329, 334–35 (2019).

7. Id.

8. 18 U.S.C. § 1084 (2012). The Wire Act does not specifically mention organized crime

in the statute, but instead refers to those in “the business of betting or wagering,” a phrase that

would incorporate organized criminal bookmaking operations. Id. § 1084(a).

9. In 1970, Congress passed the Illegal Gamb ling Businesses Act, which created a federal

prohibition on some gambling operations that violated state law. See id. § 1955.

10. Brett Smiley, Mailbag Mythbusting: The Illegal Gambling Businesses Act and Sports Betting,

SPORTS HANDLE (June 18, 2018), https://sportshandle.com/mailbag-mythbusting-the-illegal-

gambling-businesses-act-and-sports-betting [https://perma.cc/F996-LYCF].

11. See generally Ryan M. Rodenberg & John T. Holden, Sports Betting Has an Equal Sovereignty

Problem, 67 DUKE L.J. ONLINE 1 (2017) (describing the arguments many major sports leagues put

forth to encourage the governments continued ban on sports betting) [hereinafter Rodenberg

& Holden, Sports Betting Has an Equal Sovereignty Problem].

12. 28 U.S.C. §§ 3701–3704 (1992). PASPA’s exemption was commonly thought to exempt

only Nevada, Delaware, Montana, and Oregon from the ban on sports wagering, but in reality, a

variety of other jurisdictions were exempted in limited capacities as well. See Rodenberg

& Holden, Sports Betting Has an Equal Sovereignty Problem, supra note 11, at 3–6.