Because the Leagues Want it, Nationwide Legalized Sports Betting Will Happen

NBA Commissioner Adam Silver
NBA Commissioner Adam Silver
Photo by Keith Allison

It's a late Sunday evening in November. The final whistle sounds in the last game of another long weekend of NFL action. The Broncos beat the Chiefs 29-16 to run their record to 9-3, but more important to Andrew, whose final bet of the weekend was "Broncos -1," Denver covered the spread.

Andrew scurries over to his computer and opens up his browser to check the (illegal) wagering website of his (rogue) local bookmaker, and happily sees that the Broncos' win has pushed his balance above his weekly payout number, which means he'll be getting an envelope with some Christmas spending money this Tuesday. All hail Regular Season Peyton Manning!

Two days later, on Tuesday morning, Andrew meets a runner (illegal-wagering speak for "dude who collects and distributes cash") for his bookmaker in a parking lot behind an IHOP along a Houston toll road. Not wasting any time, Andrew tracks down the black Lincoln Town Car at the back of the lot, parks next to it, quickly gathers a manila envelope from the driver and then speeds away before the two can attract any attention.

Unseemly as it feels, the transaction is complete, and Andrew is $714 richer, just in time for the holidays.

In 2014, unless you live in or travel to the state of Nevada or are willing to give a credit card to a shady offshore betting outfit, this is how you conduct your sports betting. In fact, this is how a vast majority of the estimated $400 billion that is legally and illegally wagered annually on sports in this country is transacted, underground and unregulated. Bets are placed on web portals on "per head" sites, and when the time comes, envelopes of cash are illegally and hastily exchanged in a clandestine parking lot amid the aroma of pancakes.

While the business of illegally wagering on sports has come a long way technologically from the days when non-Nevada bettors made a phone call to an underground bookie (who was often named "Lefty" and whose bosses were involved in "waste management consulting") who would then track the bets and balances using pencils and a notebook, it is no more legal or regulated than it's ever been outside of Nevada and three other "grandfathered" states.

As American pastimes go, sports betting is the $400 billion elephant in the room, wildly popular and clearly occurring on a massive level but with only about 1 percent of the action flowing through legal channels. On the Super Bowl alone, it's estimated that $119.4 million was wagered legally in Nevada last year, and more than a billion dollars illegally around the country. In short, the popularity of sports betting is growing exponentially in the United States, while its legality has remained unchanged.

Since the passage of the Professional and Amateur Sports Protection Act (also known as "Paspa") in 1992, sports betting has been prohibited outside of the states of Nevada, Delaware, Oregon and Montana. However, momentum is slowly building to knock down the walls of sports-betting exclusivity for these four states, legitimize the business and make that $400 billion work for someone other than underground bookmakers.

And incredibly, for states looking to salvage their economies and bettors looking for a less seedy way to get their action down, their allies for this fight may come from among the unlikeliest of bedfellows -- the sports leagues themselves, who for years have distanced themselves from the "evils" of wagering while reaping billions in television revenue driven in no small part by television ratings fueled by gamblers.

A couple of months ago, in an op-ed piece for The New York Times, first-year NBA Commissioner Adam Silver took the bold step of declaring that the NBA and other professional sports leagues essentially need to acknowledge that sports betting is wildly popular and here to stay and that the best approach is to aid in its regulation as opposed to hindering its growth and ignoring its existence.

"Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards," Silver wrote in the piece.

"These requirements would include: mandatory monitoring and reporting of unusual betting-line movements; a licensing protocol to ensure betting operators are legitimate; minimum-age verification measures; geo-blocking technology to ensure betting is available only where it is legal; mechanisms to identify and exclude people with gambling problems; and education about responsible gaming."

For the brand-new commissioner of a league that as recently as 2007 had a referee, Tim Donaghy, embroiled in a game-fixing scandal, Silver's proclamation embracing sports betting was bold, although it's indicative of a trend that has seen all the major sports leagues begin to bend on their decades-long aversion to games of chance.

 

Just days before Silver penned his piece for the Times, the NBA purchased an equity stake in daily fantasy sports site FanDuel, which has more than 41 million participants who invest $4.55 billion annually in fantasy sports, which while technically not wagering certainly skews toward "game of chance."

Additionally, Major League Baseball has a working relationship with the daily fantasy site DraftKings, and the NFL allows its teams to sponsor daily fantasy contests and is constantly promoting fantasy stats. The NHL is considering an expansion franchise in Las Vegas, an initiative which about 15 years ago would've seemed as likely as one allowing players to use machetes in fights.

The potential revenue opportunity is now just too massive for the leagues to ignore, and the logical next step for these leagues, after partnering in fantasy sports, is to drop their token resistance to sports wagering. For his part, Silver will receive plenty of help from the betting community, since American Gaming Association CEO Geoff Freeman has said his Washington, D.C.-based trade organization will help nail down the "size and scope" of the U.S. illegal gaming market and partner with the NBA and other leagues.

All of this serves to legitimize sports betting as an accepted and potentially legal pastime, which is great news for the gaming community, according to R.J. Bell, the founder of pregame.com and one of the prominent voices behind the movement for nationwide legalization of sports betting.

"You've got to give Silver credit for the honesty because historically, the league was able to exploit the popularity of betting but stay above it and take the moral high ground," said Bell. "However, we are seeing politicians, as we evolve, realizing that [betting] is going to happen anyway, say, 'Why not regulate it? Why not tax it?'"

Opponents of sports-betting legalization, as part of their platform, have long brought up the concern that game fixing would become even more prevalent in a world where sports wagering has been approved. Bell contends, though, that legalization would have exactly the opposite effect.

"Not only would [legalization] generate money, but it would decrease the chances of fixed games," Bell said. "The more the bets are being watched by professional agencies, the less of a chance people will take by fixing games."

Once the federal framework is in place to regulate the sports gaming industry and clear the path for casinos everywhere to add sports books to their properties, then it's just a matter of time. "It'll happen state by state," Bell contends. "Big states like New Jersey and California, once they start to do it, then the dominoes will fall."

And does losing the exclusivity on this particular genre of betting hurt Las Vegas in any way? Not at all, says Bell, a Vegas resident. "[Other places] will be a lesser version of what we do here," he said. "They'll create a farm system for Nevada."

But for now, for sports betting, it's all about validation. If you think about it, aside from the higher volatility per transaction, functionally, sports betting is not really any different from the stock market. There are two sides to each transaction. There's risk. Someone wins, someone loses. Occasionally, wrongdoing occurs.

It's just that the stock market has been legitimized by an image -- suits, briefcases, Wall Street, CNBC. Sports betting? Well, the perception among the opposition is still dark rooms, smoke and the mob. Legitimacy, though, appears imminent.

"There's no reason the sports betting cannot compare favorably to the investment industry," Bell said.

Silver's salvo and the irresistible market forces that come with billions in new taxable dollars may mean that Andrew's future trips to IHOP will actually be just for pancakes.

Listen to Sean Pendergast on SportsRadio 610 from 2 to 6 p.m. weekdays. Also follow him on Twitter at twitter.com/SeanCablinasian or email him at sean.pendergast@cbsradio.com.


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