U.S. Supreme Court ruling on Sports Betting may have less impact in Florida than many believe

The United States Supreme Court has issued its ruling in Christie v. NCAA, Case 16-476, stating that the Professional and Amateur Sports Protection Act (PASPA) is unconstitutional.  Many people mistakenly think that this has legalized Sports Betting.  I expect the ruling to be far less consequential than many think, especially in Florida.

No one knows how much is wagered on illegal Sports Betting in the US today because it’s, well, …illegal.  I’ve seen estimates ranging from $107 billion to $300 billion.  I think that today’s accurate number is probably somewhere between $150 billion and $200 billion, based on averaging the numbers I’ve seen, even though they’re only guesstimates. Some people assume that all of those wagers and more will immediately go into legal Sports Betting.  I disagree.

People enjoy the traditional Office Pool on things like the NCAA Basketball tournament, and other events.  Most of those people won’t stop the pools to go wager at a casino.  Some people wager on credit with illegal bookies who have “creative” ways of collecting debts.  Those people will still go to bookies because of the credit issue. States will tax sports betting (some will do so with heavy taxes), private operators will want to make a profit, and the Sports Leagues have already demanded a cut. I think that the Sports Leagues and states are expecting a larger cut than will prove to be feasible.  With all of those takeouts, a bookie should be able to offer better odds.

The biggest issue about the size of the market is whether or not Sports Betting will be able to be offered online.  Most boosters say yes, but I don’t know why.  I believe that Sports Betting will, at least initially, be limited to bricks and mortar casinos.

Many people think that the famous December 23, 2011 “Christmas Surprise” ruling from the United Stated Department of Justice, Office of Legal Counsel, authorized internet gambling, including Sports Betting.  Incorrect.  The OLC ruling was much more limited.  It was based on an acknowledged conflict between the prior interpretation of the Wire Act of 1961, and the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA). The interpretation of the Wire Act had been that any type of Internet Gambling was illegal, but UIGEA specifically excluded Intrastate online gambling from penalties.  OLC issued the Christmas Surprise ruling announcing that their longtime previous interpretation of the Wire Act was incorrect, and that the Wire Act should only apply to Sports Betting, and that only Sports Betting is illegal over the internet.  Department of Justice Ruling December 2011 on Internet Gambling.  Let me include quotes from that opinion:

“We conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not, in our view, prohibit them.”

“The Criminal Division’s conclusion that the New York and Illinois lottery proposals may be unlawful rests on the premise that the Wire Act prohibits interstate wire transmissions of gambling-related communications that do not involve “any sporting event or contest.” See Crim. Mem. at 3; Crim. Supp. Mem. at 2. As noted above, both Illinois and New York dispute this premise, contending that the Wire Act prohibits only transmissions concerning sports-related wagering… We conclude that the Criminal Division’s premise is incorrect and that the Wire Act prohibits only the transmission of communications related to bets or wagers on sporting events or contests.”

This provision contains two broad clauses. The first bars anyone engaged in the business of betting or wagering from knowingly using a wire communication facility “for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” Id. The second bars any such person from knowingly using a wire communication facility to transmit communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.” Id.5”

“Reading the entire subsection, including its second clause, as limited to sports-related betting also makes functional sense of the statute. Cf. Corley v. United States, 129 S. Ct. 1558, 1567 n.5 (2009) (construing the statute as a whole to avoid “the absurd results of a literal reading”). On this reading, all of subsection 1084(a)’s prohibitions serve the same end, forbidding wagering, information, and winnings transmissions of the same scope: No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet.”

Based on the DOJ opinion, a consensus has emerged among serious attorneys that the Wire Act prohibits interstate internet gambling, but permits intra-state internet gambling if authorized by the legislature of that state. It is not clear if interstate compacts are permitted.  Information on shared pari-mutuel pools through the internet, although apparently otherwise prohibited by the Wire Act, are expressly permitted through the later Interstate Horse Racing Act.

It currently appears to me that the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, continue to prohibit internet wagering on sports betting.  It is not clear to me at this time if even sports betting at local brick and mortar casinos in states that authorize sports betting would be permitted if that wagering is part of interstate pools.  Remember that the Wire Act prohibits not only wagering on sport events, but also prohibits “ information assisting in the placing of bets or wagers.”

Finally, the prospects are even worse in Florida.  Florida is unlikely to have an opportunity to have a Special Session of the Legislature prior to the elections.  There will be a referendum on the November ballot pertaining to voter control of gambling that may or may not impact sports betting.  It is also certainly possible that competition between the different gambling industries in Florida, and opposition from the same forces that are pushing the anti-gambling referendum (such as Disney) may result in an inability of Florida to pass any sports betting legislation.

 

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