Supreme Court Strikes Down Federal Ban on Sports Gambling

Back in December I attended the Supreme Court's oral arguments on the state of New Jersey's quest to strike down a federal prohibition on sports gambling. Immediately after that hearing, based on the questions and answers at oral argument, I Tweeted that I believed the federal prohibition on sports gambling would be struck down by a 6-3 margin. Turns out, I was one vote wrong, it was actually 7-2. (In case you're wondering, the two most liberal justices dissented from the ruling permitting your state to allow you to gamble on sports, Ruth Bader Ginsburg and Sonia Sotomayor).

You can read the entire Supreme Court case here and you can also sign up for Outkick the Weekend at the Hard Rock in Las Vegas, where we will be hosting our first annual Outkick Sports Media and Gambling Conference on August 23rd-26th. For the lawyers who want to come, we will also provide eight hours of CLE training at this event. So if you're interested at all in the legalization of sports gambling and what the impact will be on the sports world, you need to be there.

This is a massive decision that immediately becomes the fourth most important technological and social innovation in the past forty years of sports that will forever alter the way fans consume games. The first was the advent of cable television, which brought abundant sports broadcasts to the masses. The second was the 1983 Supreme Court decision which struck down the NCAA's restraint of college sports broadcasts, increased individual conference power, and officially made ESPN a viable business, the third was the rise of fantasy sports and now comes the fourth, sports gambling being permitted if individual states elect to allow it.

I believe the sports gambling case will actually have the most substantial impact of all.

So let's talk about the ruling.

What does it actually mean?

1. Today's decision leaves whether or not to permit sports gambling up to the individual states.

Right now 44 states allow lotteries.

My prediction is that each state that allows lotteries will eventually allow sports gambling as well. After all, if you're going to allow lotteries, how do you not allow sports fans to bet on sports?

Thirteen states, including New Jersey, which will be able to permit sports gambling in short order, have already begun the process of legalizing sports gambling. Just as each state has the right to allow or not allow lotteries, each state will now be able to make a decision about whether to permit sports gambling as well.

This means the days of only the state of Nevada having sports books and permitting individual game sports wagering will end.

Every state will be different on the timing, but many of you reading this right now will be able to legally wager on football games inside your state borders by this fall.

2. What kind of sports gambling will my state allow and will the federal government get involved?

That will be for each state to decide because I believe the odds of your federal government being able to pass a comprehensive federal sports gambling bill before states start acting will be minimal.

Some states may require you to place a bet in person, others may permit you to bet online within state borders from your phone.

Each state will make its own determination about how bets should be placed in its state borders.

To the extent there are state legislators reading this right now, I'd advise allowing mobile wagering on phones because if you don't, everyone will continue to do it anyway. But some states won't listen to me and they'll require you to travel to a physical location to place a bet.

3. This will be like alcohol sales, in that each state will have its own rules. 

You know how every state has its own rules as it pertains to alcohol? Some states sell beer, liquor and wine together, others sell them separately. Some grocery stores can sell liquor and some can't; every state has different hours when alcohol can be purchased and when it can't. Essentially there's a hodge podge of confusing regulations across our country when it comes to alcohol.

I suspect that will be the eventual impact with sports gambling too.

And just as there are five or six decent-sized beer brands in your state, I suspect the same will eventually be true for sports gambling as well.

4. How will the state tax sports bets?

Good question.

That's still to be determined.

And I suspect each state will behave differently. The easiest way to tax sports wagering would be just to tax the companies with sports gambling licenses in your state, but we'll see if the easiest way ends up being the most likely.

Citizens would, of course, remain responsible for paying taxes on their sports wager winnings just like they're supposed to do now.

5. What about offshore sites?

Those will still exist and, I suspect, remain popular based on ease of use.

But the biggest challenge they will face is the trust factor for new gamblers. That is, once sports gambling exists in the country and is available in your state, will you trust that can get your money out of the offshores as easily as you can from, for instance, a sports book in your own state? That's why SportsBookReview.com rates each of the offshore sports book right now.

It also remains to be seen how progressive states will be about permitting online sports gambling.

If, for instance, your state requires you to travel to a physical location to place a bet, it's not like many people are going to get in their cars and drive to that location to place a halftime bet. They're just going to pull their phones out and place it there.

So much remains to be determined.

6. How will sports broadcasts change?

First, the advertising will be a tremendous benefit to the sports TV networks, sports radio and sports leagues.

I suspect advertising for sports books will rapidly exceed a billion dollars a year.

From a pure business perspective, this will be an absolute windfall for sports TV Networks, sports radio, sports leagues, and, honestly, sites like this one employing people to write about sports.

But this will partly be impacted by how the states roll out legal sports gambling. Which companies will come to dominate? And how will those companies allocate their money?

Remember when Fan Duel and Draft Kings bought up every ad during commercial breaks advertising Daily Fantasy a few years ago, look out, it's coming again.

Second, I would expect that announcers will now regularly mention the sports lines in their broadcasts. Studies have shown that sports gamblers are much more likely to watch entire games since while the outcome of a game might be decided, as most of you reading this right now know, it's very common for the point spread or an over/under to be in play until the final second of a game.

There might even be some sports TV networks that go all in on sports gambling and make it their identity. Honestly, why wouldn't ESPN and Fox Sports, for instance, make one of their networks all sports gambling all the time? Would you rather have ESPN News or ESPN Gambling? Would you rather have FS2 or FSGambling?

I think the money will be that significant.

7. What's your ideal solution?

I'd love to see a stock market for sports gambling.

Where individual sports gamblers place peer-to-peer wagers -- the house keeps a small share to store the bet -- and the winner gets the money deposited in his account while the loser has his lost wager debited. I'd also like to see a perpetual digital market for futures tickets. For example, what if you got a team to win a title at a great price -- for instance, the Vegas Golden Knights before the season started at 300-1 -- but you want to unload that futures ticket before the season ends? Then I believe there should be a digital stock market for sports wagering with prices constantly going up and down.

You should be able to buy and sell gambling picks just as easily as you can buy and sell stocks.

I suspect there will be extremely rapid innovation in this space and the business behind sports gambling will have a tremendous and long lasting impact on sports in general.

If you look to Europe and Australia as an example, there are gambling machines inside their stadiums. You can bet on a game just as easily as you can buy a beer. Many of the companies are sponsored by the gambling companies themselves, either on the jersey or in ads inside the stadium.

Whatever solution is adopted, I hope state legislatures think progressively as opposed to regressively. Sports gambling on phones has to be efficient, easy, and legal.

Honestly, I can't wait to see what happens in the next few months and years. It's going to be a wild ride, but a fun one too.