January 25, 2024

  • William J. Pascrell III, Partner at Princeton Public Affairs Group

The case for legalized gambling: how legal, regulated sports betting benefits society

The legalized sports betting industry is proliferating in the U.S. – and shows no signs of slowing down. Thirty-five states and Washington D.C. have launched legal, regulated sports betting markets[1], and an additional three states have passed legislation to legalize and regulate sports betting, although these markets are not yet operational.

While the expansion of the legal sports betting industry is a significant boon to the industry, this upswing in growth also brings about substantial benefits to consumers and communities at large. The proliferation of legal sports betting across the United States makes a compelling case for how its legalization contributes positively to the well-being of both bettors and society.

Visibility and protection

The rise in legal sports betting is an essential check to the longstanding alternative to consumers: the illegal betting market. Sports betting has been a widespread activity since long before the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) in 2018, opening the door to legal sports betting throughout the country. Before PASPA’s repeal, sports bettors in now-legal states placed their wagers in offshore platforms and through illegal channels, which lure individuals with unrestricted gambling[2] and encourage heavy gambling despite signs that some individuals are vulnerable to addiction.

Strongly regulated, state-sanctioned betting markets benefit from ensuring their bettors’ long-term safety and well-being. The regulated industry is obligated to adhere to strict guidelines and standards, guaranteeing fair treatment of customers and execution of payouts as promised. States that have legalized sports betting can regulate problem gambling, including educating and warning people[3] on the dangers and signs of gambling addiction, screening people for problem gambling, and offering voluntary bans and betting limits to people. Unregulated markets, meanwhile, have no such interests or concern over protecting individuals engaging in problem gambling.

Thanks to the rapid growth of the legal sports betting industry in the U.S., major operators have been able to collaborate over the best ways to protect customers and promote responsible gambling. Last year, a coalition of market-leading operators agreed on industry principles for responsible gambling[4], including commitments to support a unified, nationwide responsible gaming toll-free helpline and provide applicable employees with responsible gaming training upon hire and regularly thereafter. This level of cooperation would not be possible in a black market, and it is ultimately to the benefit of the industry’s customers.

 While the legal betting age varies based on the state and type of gambling, every state in the country with some form of legal, regulated gambling has a minimum age requirement between 18 and 21. Black market sites have limited safeguards in place to prevent underage bettors from accessing their platforms, which opens the door to underage gambling and harm. Regulated, licensed operators, however, have comprehensive standards to ensure that only those of legal age can gamble. The practical implementation of age restrictions in legal markets allows us to regulate and operate the sports betting industry responsibly, to the benefit of bettors and sportsbooks alike.

As more states pass legislation legalizing and regulating sports betting, the industry experiences gains in visibility and oversight. The main benefit of passing sports betting legislation is simple: by legalizing, legitimizing, and regulating sports betting, we can adequately track the industry and its customers to ensure a safe, fun, and transparent environment.

Economic growth

 When states decide to regulate and legalize sports betting, they create new statewide industries that generate revenue and career opportunities. From sportsbook operators and marketers to hospitality staff and technology experts, the sports betting industry’s growth is creating careers — not just employment — across the nation.

In New Jersey, a pioneer in the legal sports betting market, thousands of jobs were generated within the first year of legalization[5]. This trend has been consistent across states that have embraced regulated sports betting, and it is poised to continue as the industry expands.

The economic stimulus of sports betting extends beyond the operators themselves. Ancillary businesses, such as sports bars, merchandise stores, and local event planners, have grown significantly thanks to the sports betting industry. Consider Buffalo Wild Wings, a popular sports bar chain that has embraced sports betting by offering customers a seamless betting experience. This move not only enhances the customer experience but also translates into increased revenues for the restaurant chain.

The economic ripple effects of legalized sports betting extend further into the realm of sponsorships, advertising, and partnerships. As the industry grows, it attracts investments from major players, including sports teams and media outlets. This growth not only infuses valuable capital into the underlying sports industry but also strengthens ties between various sectors of the economy[6].

Increased tax revenues for critical social services

The sports betting black market is a $USmulti-billion business, with Americans spending an estimated US$63+ billion annually on illegal betting[7]. These revenues are neither tracked nor taxed, and they can easily fund illicit activities. Further, black market activity robs state governments of substantial tax revenues that support essential public services.

Each state with legal, regulated sports betting has its own approach to funding critical programs with its newfound tax revenue. Nevada’s gaming revenue supports public education, local governments, and problem gambling resources. New York’s revenue funds sports programs for underserved youths, problem gambling education and treatment, and education aid. Since the legalization of sports betting in Indiana, the state has witnessed annual tax revenues exceeding $40 million[8], which supported public infrastructure and education.

Regulating sports betting further allows the associated tax revenues to be effectively tracked and utilized, with the appropriate monies going back toward communities and residents.

Technological innovation

One of the most under-appreciated benefits of legalizing sports betting is its impact on innovation in player protection. Licensed operators often invest in sophisticated software and data analysis tools to detect patterns of problematic gambling behavior. These identify early warning signs and provide personalized interventions to individuals at risk, allowing for timely interventions and support. By embracing these advancements, regulated markets can leverage the benefits of technology to address the issue of problem gambling proactively.

As sports betting finds its legal footing across the nation, the industry’s evolution is marked by a deep commitment to responsible gaming and player protection. Technology has played a pivotal role in this commitment, enabling operators to develop advanced tools and systems prioritizing customer safety and well-being.

One example of such innovation is applied through artificial intelligence and machine learning algorithms. These technologies allow operators to analyze vast datasets in real time, helping to identify the potential signs of problem gambling. Early detection is a crucial aspect of player protection, and AI-driven tools can flag concerning patterns of behavior, such as excessive spending or erratic betting habits.

More must be done

Legalizing sports betting has gained tremendous momentum in states throughout the U.S. and jurisdictions around the world. While it offers a broad range of benefits as outlined above, legalization alone is not a silver bullet solution to all the problems associated with gambling addiction.

A multifaceted approach is necessary to establish well-functioning markets where consumers are protected, state coffers swell, and licensed operators thrive. The prerequisites to these robust markets include strong legislation, dynamic regulation, sensible tax rates, and a commitment to enforcement against black market operators:

  • Strong legislation is the foundation of any successful sports betting market. Well-crafted laws[9] should strike a delicate balance between fostering a competitive market environment and safeguarding the interests of consumers. Legal frameworks must establish clear rules and regulations, including age restrictions, responsible gaming measures, and mechanisms for dispute resolution. Without robust legislation, negative consequences may overshadow the benefits of legalized sports betting.
  • Dynamic regulation is equally critical in adapting to the evolving landscape of sports betting. Regulations must be agile enough to accommodate technological advancements, changes in consumer behavior, and emerging trends in the industry. A regulatory framework[10] that remains static risks becoming outdated, hindering the ability to address new challenges and opportunities effectively.
  • Sensible tax rates play a pivotal role in the success of legalized sports betting. Excessive tax burdens on operators may lead to diminished competition, limiting consumer choice and potentially driving bettors toward unregulated alternatives. Striking the right balance in taxation[11] ensures that operators can thrive in a regulated market while contributing significantly to state coffers.
  • Enforcement against black market operators is a vital component of creating a secure and transparent sports betting ecosystem. A commitment to eradicating illegal gambling platforms[12] helps protect consumers from potential fraud, ensures fair competition among operators, and preserves the integrity of the betting markets. Regulatory bodies must collaborate with law enforcement agencies to actively pursue and prosecute those operating outside the legal framework.

Only through a comprehensive and well-balanced approach can jurisdictions establish a gambling landscape that maximizes benefits while mitigating the potential harms associated with excessive or problematic gambling behavior. Proactive measures to minimize harm, protect consumers, and support those in need should always accompany legalization.

The expansion of legal sports betting is a win-win scenario that fosters enormous societal benefits. As more states embrace this trend, the benefits become clear, and the case for legalized sports betting becomes stronger than ever.

[1] https://www.americangaming.org/research/state-gaming-map/

[2] https://www.racingpost.com/news/features/revealed-the-tactics-black-market-bookies-use-to-coax-punters-to-offshore-sites-avZsc8C48sRB/

[3] https://pausebeforeyouplay.org/2022/02/sports-betting-ads-how-much-is-too-much/

[4] https://www.entaingroup.com/news-insights/latest-news/2022/leading-us-online-operators-launch-principles-for-responsible-gaming/

[5] https://www.igbnorthamerica.com/study-nj-online-gambling-created-1851-jobs-last-year/

[6] https://www.cnbc.com/2019/07/01/the-business-of-sports-betting.html

[7] https://www.americangaming.org/new/new-aga-report-shows-americans-gamble-more-than-half-a-trillion-dollars-illegally-each-year/

[8] https://www.pickswise.com/sports-betting/indiana/revenue/

[9] https://www.cbssports.com/general/news/u-s-sports-betting-here-is-where-all-50-states-currently-stand-on-legalizing-online-sports-betting-sites/

[10] https://iclg.com/practice-areas/gambling-laws-and-regulations/usa-new-jersey

[11] https://www.bettingusa.com/sports/taxes-and-licenses/

[12] https://www.americangaming.org/illegal-sports-betting/