It’s Not Too Late to Ban Online Sportsbook
Online sports betting is neither economically nor socially desirable. It doesn’t have to be tolerated
By Jude Russo, managing editor of The American Conservative and a contributing editor at The New York Sun
There is no joy in the Greenmount off-track betting parlor in Hampstead, Maryland. It is 1pm on a Friday, and the handful of bettors lounging in front of the TVs look something between bored and miserable, the sort of long-suffering faces you associate with photographs of war zones and natural disasters. The adjoining bar is comparably sleepy. The entire atmosphere discourages reporterly activities like asking for color quotes, tallying entrances and exits, and the like.
The Jockey Club of Maryland, the oldest sporting organization in the Western Hemisphere, licenses a few of these worthy dens of sin across the state, with the blessing of the Racing Commission and the legislature at Annapolis. Not long ago, for your avid gambler this sort of place was one of the few ways to scratch the itch. There was Keno in bars and bowling alleys, there was the state lottery, and there were the Pimlico and Laurel tracks.
But now, instead of schlepping to this gray room with its wall of televisions between the hours of 11 and 11, you need only pick up your smartphone and make your way to any of the killer apps where you can take exotic configurations of action on splendid contests of strength, skill, and speed across five continents.
No wonder it’s a blue Friday at Hampstead. It’s not that there are fewer gamblers; there are more than ever.
Why is gambling regarded as a vice? First, some people—addicts we call them, although there are quibbles with this terminology—engage in it to a degree at which they begin to suffer serious personal damages. Nala dices away his kingdom in the Mahabharata. More recently, there are anecdotes of Navy paymasters in the Second World War withholding wages until coming to shore because the men would waste their substance gambling.
Even among the vice industries, gambling is notable, perhaps unique, in that it does not offer any service or goods besides making those who pay into it poorer in aggregate, unlike the concrete benefits derived at the watering hole, crack den, or cathouse. This is also distinct from financial markets, to which gambling is so often compared. In financial markets, at least notionally there is some sort of ownership and profit-sharing of underlying production.
Historical gambling regulation in America has gravitated toward two principles. First, limiting the times and places in which gambling can occur. The six-hour track day, the betting parlor, the casino—these all place inherent physical limits on access to wagering, consequently discouraging or rendering impossible the compulsive version of the behavior. They also allow for the easier policing of gambling’s social comorbidities—loan sharking, public drunkenness, and so on.
Second, the statesmen of yesteryear tended to use the economic rents resulting from these limits on gambling to subsidize causes or groups deemed desirable for society at large. Charitable associations’ table game nights or firehouse bingos are the most obvious examples. The 1988 Indian Gaming Regulatory Act was a late-blooming product of this older legal gambling paradigm. It gave American Indian tribes the privilege of running gambling concerns on their reservations, many of which are remote and poor in resources or industrial prospects. Casinos and slot parlors gave them a way to attract consumers to the reservations that would otherwise see little or no economic traffic. Even horse racing nodded toward this principle; 19th-century jockey club charters underline the importance of racing for “improving the breed of horses,” which was once upon a time a major public interest.
To these general principles, we may add a refinement regarding sports gambling. Sportsbook is different from casino gambling in that it is dependent on another industry. A persistent concern in the modern era has been the influence of gambling interests on the honesty of sports. The mixture of gambling and organized sports has, at best, a checkered history in the United States. The Black Sox Scandal of 1919, in which a bookmaker fixed the World Series, led to the establishment of the modern baseball regulatory regime; the strenuous efforts of subsequent Major League Baseball commissioners to preserve the game’s image of integrity kept gambling at more than arm’s length.
Hence, the late Pete Rose’s lifetime ban from baseball over sports betting. Hence also the banishment of Mickey Mantle and Willie Mays from any involvement with Major League Baseball for doing promotional work for casinos in their retirement. George Steinbrenner, the late owner of the Yankees, decried this punishment. “I think it’s a crying shame that two great center fielders, two of the greatest in the history of the game, are both unable to have an active part in baseball because of casinos,” Steinbrenner said. “Gambling is part of the way of life in this country. The states have made it legal in casino form.”
Sports integrity remained a prevalent concern even as national gambling restrictions faded. “Sports gambling raises people’s suspicions about point-shaving and game-fixing. Where sports-gambling occurs, fans cannot help but wonder if a missed free throw, dropped fly ball, or a missed extra point was part of a player’s scheme to fix the game,” wrote Sen. Bill Bradley, the New Jersey Democrat, in support of the 1992 Professional and Amateur Sports Protection Act (PASPA), which froze the spread of state-level sports gambling legalization. “If sports betting is legalized, fans will question every coaching decision and official’s call.”
Few social changes have come with the swiftness and lack of opposition that mass gambling liberalization has, particularly sports gambling. As recently as 2017, most forms of wagering were forbidden or heavily regulated at the state level. The moral force behind such regulation had long since collapsed; the Supreme Court in 2018 gave the rotten edifice of anti-gambling law a final and apparently decisive kick by overturning PASPA. A 2022 Pew study found most Americans indifferent in the face of broadly legalized sports betting, with almost one-in-five adults saying they had actually placed bets in the past year.
This apathy is of fairly recent vintage. While the spread of gambling has waxed and waned—cyclical spurts of deregulation and casino-building in the late 20th century were interspersed with periods of closures and increased regulatory pressure—there was usually an argument. Between then and now, something happened to American moral sensibilities, and these unresolved questions stopped being of interest.
Something else happened in those two, three decades: the Internet. Online gambling abolished the strictures of time and space that previous generations of lawmakers had assiduously cultivated; hence the legal suppression of online poker and casino games in the early 2000s, the last gasp of anti-gambling legislation.
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Americans are, on the whole, hesitant to legislate morality. This is one of their more charming qualities. They also have observed, wisely, that not all ills are tractable by state action, and that many efforts at uplift end in tears and worse. Any given effort at prohibiting an activity leads invariably to comparisons to Prohibition with a big P. By the standard reception, Prohibition was unpopular, expensive, and not very effective at its stated goals; it also caused strange and unexpected distortions in the American economy and society, from a massive spike in the price of raisins to the crudessence of what today would be called “transnational criminal organizations.”
And gambling appears to be a comparatively mild vice. It does not have the malign effects on physical health and public order of demon rum, let alone hard drugs. It does not afford prostitution’s rampant opportunities for personal abuse. Even among churchgoing Americans, there is little conviction that gambling, including sports betting, is inherently wrong.
To this it must be added that PASPA was a bad law. Its mechanism was a clever but ill-fated effort to have the cake and eat it, too. Instead of an outright national ban on sports betting, it attempted to conserve a long-standing status quo, namely the existence of sports betting at casinos in Nevada and the sports pools in Delaware, by banning states from passing new laws pertaining to sports betting. This was a common-sense violation of the Eleventh Amendment; while the federal government may (within reason) pass a law that preempts state-level law, passing laws about the types of law the states may pass does not pass the sniff test.
This legal tangle was the push towards sportsbook legalization; the pull was the promises of the pro-gambling interests.
One of the arguments put forward by proponents of sportsbook legalization was that it would stimulate an employment bonanza. In the Internet Age, this theory is dubious. You just don’t need very many employees to run a digital book. FanDuel, one of the ten largest American sports betting concerns (which, we blandly note, is owned by an Irish conglomerate), employs roughly 3,700 workers.
By contrast, Foxwoods Resort Casino, as of 2009, employed 13,000 workers; the building of casinos at least temporarily employs large numbers of construction workers, the blue-collar jobs for constituents so coveted by your standard American politico.
The only way digital gambling can deliver significant growth in jobs is if there is significant growth in the total handle—that is, if the number of dollars being bet gets much larger.
This sits unhappily with two of the other arguments advanced for legalization. One was that it merely brings ineradicable black market activity into the legitimate market. If that were the case, the effect on employment would be minimal. (Someone has to run the illegal sportsbooks, after all.) The other was that legalizing sportsbook would not stimulate problem gambling, and would in fact encourage problem gamblers to seek help in greater numbers, a sort of parallel to the harm-reduction approach to drug use. But if the handle increases, that means either more bettors or more intense betting—both of which conditions seem unlikely to coexist with a static or decreasing incidence of problem betting.
The final, and perhaps determinative, argument of the pro-gambling crowd was that liberalization generally, and sportsbook particularly, would be a coup for state treasuries. By bringing illegal wagering into the light of day (and expanding it, depending on which side of his mouth a pro-gambling writer was talking out of in a given paragraph), the chronically cash-strapped governors of this fair land would be swimming in instant dosh. Who wouldn’t bet on that?
It did not quite go according to plan. The revenue that sportsbook legalization has brought in for states has been disappointing, to say the least:
Per Bloomberg, between June 2018 and October 2021, the amount wagered on sports went from $310 million to $7.1 billion. In 2021, Goldman Sachs projected that it would rise to $39 billion. Yet the revenue benefits in many states have in fact been minimal. Kansas’s cut of the $350 million wagered by its residents in January to October 2022? $271,000. In 2022, $478 million was wagered in Maryland; in 2023 through March, $386 million. What are the benefits to the state? Since December 2021, sports betting has brought Maryland $21 million for the state’s education development program, which aims to increase school funding by $3.8 billion annually. The overall Maryland budget for fiscal year 2024 will be $63 billion. Two years of sportsbook revenue have amounted to a budget rounding error. As a kicker, in many states, the free bets offered as promotionals by the apps are tax deductible.
Not very much instant dosh for our humble public servants, despite a massive increase in handle. Oh, well.
What about actual human beings—how have they fared? As has been amply demonstrated by cannabis legalization, hard drug decriminalization, and, for that matter, alcohol legalization, social dysfunction is not necessarily reduced or channeled by making a particular activity legal. Surveys suggest that incidence of gambling addiction is higher. There is sound empirical evidence correlating sports betting with domestic abuse. Likewise, there is sound empirical evidence correlating gambling generally with a host of economic dysfunctions, particularly bankruptcies and mortgage defaults.
For the let-’em-rot libertarians in the crowd, it is worth underlining that these dysfunctions are not without direct economic cost to other citizens, whether via greater demand on public resources like the police or via mortgage insurance pools. Widespread social dysfunction is in fact bad for business in tangible ways. The market is in part a mechanism for distributing costs, not all of which are voluntary.
And, while it is perhaps a distant priority relative to the strength of the fisc and the health of the American family, it is worth asking: what about sports integrity? It is common knowledge that aspects of baseball umpiring have been changed by the prevalence of national sportsbooks. 10 NFL players were suspended at the beginning of the 2023 season for infractions of the league betting policy. A new urgency was injected into the discussion when the Dodgers’ star pitcher, Shohei Ohtani, was implicated in a gambling scandal centered on his former interpreter.
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There are several things to consider when weighing a ban on an activity. Ought the state legislate morality at all? At least when a given behavior threatens widespread dysfunction, including economic dysfunction that affects innocent parties, we tend to say yes. And is it possible for an activity to be prohibited? As noted above, the popular memory of Prohibition haunts the American public.
One difference between online sports betting and alcohol consumption is that, within relatively recent memory, sports betting was forbidden in nearly all the United States. It is not yet difficult to remember the time when one was not bombarded with advertisements for online sportsbook on the television, on the radio, and on public transit. Should the social ills of gambling grow sufficiently pronounced, some politically sanctioned regulatory reaction could wander down the pike, analogous to Portland ending its catastrophic experiment in drug decriminalization.
Surprisingly, in addition to opposition from the tattered remnants of anti-gambling traditionalism on the right, nascent criticisms have come from the left—such as Matthew Yglesias’s Slow Boring blog and The New Republic—focusing particularly on the aspects of addiction and economic exploitation. This looks like the beginnings of a coalition.
Contrary to a popular line of criticism that the Internet makes every sort of enforcement impossible, online sports gambling is impossible to eradicate but quite easy to curtail. The largely successful suppression of online poker and casino games following the Unlawful Internet Gambling Enforcement Act of 2006 shows the way. That law banned banks from taking money from online gambling interests that operated in states where their activities were illegal. The nature of large-scale online gambling is that the operation must have a fairly visible public face. The FBI simply observed which operations continued illegally and shortly thereafter threw almost a dozen CEOs in jail for money-laundering, wire fraud, and a variety of other crimes and misdemeanors. This is an admirably simple and effective way to go about things.
The remaining question is whether the gravity of the pathologies arising from online sportsbook is sufficient to warrant state action against it. Try looking through this telescope from the other end: are the benefits of online sportsbook sufficient to warrant legalization? It creates few jobs, severely damages the lives of millions of Americans, and does not even generate significant tax revenue. There are other gambling outlets for Americans with sporting blood. It is not clear that this particular experiment in radical moral deregulation is worth the candle. Perhaps for once we can arrest and ameliorate a dysfunction before it bottoms out.
“Gambling is part of the way of life in this country,” Steinbrenner said, and he was right. Americans have always gambled. Formal “English-style” horse racing was introduced to the United States in 1745, and the first organized races were held even earlier outside New York in 1665. Mark Twain’s riverboat sharks, Hatfield the dandy in Stagecoach, the blackjack syndicate in 21—these are all part of the American heritage.
But another part of that heritage was the guardrails, one might even say fences, that were laboriously constructed over many years to mitigate the harms that arise from games of chance. In other words, online sportsbook isn’t just economically useless and socially destructive. It’s also un-American.