In the six years since the U.S. Supreme Court cleared the way for states to offer sports betting, each successive year has set a record for the amount of money wagered legally.
Another new high-water mark of close to $130 billion is expected by the end of 2024. It coincides with what has been a year of reckoning rocked by high-profile scandals.
The bad publicity included former Toronto Raptors player Jontay Porter’s lifetime ban from the NBA after a league investigation found he disclosed confidential information to bettors and faked ailments in games to fix proposition bets related to his own performance. There was also the case of Ippei Mizuhara, the former interpreter for Shohei Ohtani who pleaded guilty to bank and tax fraud in a case in which prosecutors said he stole nearly $17 million from the Japanese baseball star to pay off illegal gambling debts.
Ohtani was cleared of any wrongdoing, but his proximity to such malfeasance heaped negative attention on baseball’s biggest name.
“When you have people betting on sports, you have people trying to corrupt sports — they go hand in hand,” said John Holden, an associate professor at Indiana University who conducts research on gambling and college athletics policy. “So, these were things that were going to happen. I think it’s opening people’s eyes that the legalization of sports betting in the U.S. wasn’t going to be the exception to the problems that come with sports betting everywhere else in the world.”
Porter was on a two-way contract at the time of his violations, which meant he could bounce back and forth between the Raptors and their G League affiliate. His salary was $410,000, and a standard NBA contract would have been more than $2 million. In pleading guilty to federal conspiracy charges in July, Porter acknowledged wrongdoing, saying he did it “to get out from under large gambling debts.”
“Certainly, prop bets, depending on how precise they are, lend themselves to more shenanigans than other kinds of bets,” NBA Commissioner Adam Silver said in May.
In light of Porter’s banishment, BetMGM Sportsbook said in October that it would not take NBA prop bets on players on two-way or 10-day contracts. It joined several others taking this action, including U.S. sportsbook giants DraftKings and FanDuel, as well as ESPN BET.
Still, Andrew Brandt, the executive director of Villanova’s Moorad Center for Sports Law, said it’s hard to know what kind of lasting impact these scandals will have.
“Porter was an ‘easy’ ban as he was a low-level player that could be sent away as a message to other players,” Brandt said. “The Ippei-Shohei relationship seems to be less about gambling than an issue of trust. ... We will see.”
Tough terrain for new states
The Porter and Mizuhara incidents could also have played a factor in the slim margin by which Missouri voters approved sports betting legalization in November, with 50.05% voting in favor of the ballot measure after legislation had repeatedly stalled in the state Senate. DraftKings and FanDuel spent heavily on what turned out to be a Missouri ballot initiative record $43 million campaign.
Longtime industry insider Matt Para believes that, along with an oversaturation of advertising and lower than anticipated tax benefits in the 38 states that currently allow betting, has contributed to what is an ongoing moral “reboot” surrounding the public’s attitude toward the industry.
“I would say the public has soured on sports betting as a whole,” said Para, a consultant who has more than 20 years’ experience working in online gambling. “I think they’re upset that they can’t watch sporting events with their kids without seeing gambling pop up. ... There’s a cap, I think. And we’ve reached that point to what the public is willing to accept.”
Next year isn’t likely to see any additional states enter the sports betting fray. That includes potentially lucrative markets like Texas and California.
In 2022, California voters defeated two rival proposals to legalize sports betting after interest groups spent roughly $450 million either promoting or opposing the measures.
The Texas Legislature meets every two years and will be back in session in 2025, but so far it hasn’t seemed to have an appetite for getting into sports gambling. While Texas has been a state generally opposed to all forms of gambling, the biggest barrier currently is Republican Lt. Gov. Dan Patrick, who has great influence over what bills are put up for a vote. He isn’t sold that the tax benefits, that he’s previously said would pay for about half a day of Texas’ yearly budget, are worth it.
Money talks
According to the National Conference of State Legislatures, most states tax sports gambling at between 5% and 20%. But tax revenues have varied vastly because only 15 states collect at least 10% of every dollar wagered.
Studies by the Sports Betting Alliance, a lobbying consortium made up of sportsbooks and Texas professional sports teams, as well as one by an independent law firm, have estimated the state could make upwards of $250 million in tax revenue yearly from betting. But Texas spends $125 billion a year and currently has a budget surplus.
The estimates also would depend on Texas setting taxes on gambling that would be among the highest in the nation, as well as wagers generating record overall gambling revenue.
California, along with states like Oklahoma, also would likely have to work out some sort of revenue sharing deal with the Native American tribal entities that currently have legal gaming rights.
In California’s case, such a compromise seems likely at some point because of the additional revenue in a state that already garners $9 billion from its casinos. But legalization almost certainly would come through a statewide referendum, which could only come in an even-numbered year.
“I sort of think that of the remaining states, there might be a shocker here or there that pops up one year or another,” Holden said. “There are obstacles in place. So, I think this is one of these things where we aren’t going to see four states happen in a year again.”