Online Sports Betting

History of Online Betting

Gambling has been around for probably as long as there have been men who like to think they can one up their neighbor. In early American history, gambling took place mainly via lotteries, but eventually all gambling was banned at the tail end of the 19th century. It started to return ironically around the time the Great Depression took place and would become fully legalized in Nevada in 1931. Nevada, primarily through the boom town Las Vegas, would be the primary place for those wishing to bet on something until the 1970’s when laws were passed allowing Indian tribes to establish casinos and for properties on water to also allow gambling (mainly in the form of riverboats, but later ingenuity would lead to full-fledged casinos being built right at the edge of the water).

The emergence of the Internet led to a new way for people to place wagers and the first online casino began operation in 1994. These sites mainly operated off-shore from American soil due to American laws with the establishment of the Kahnawake Gaming Commission providing a form of licensing and regulation for online operations. It would become a burgeoning industry as it would only take a year for it to go from 15 online casinos to over 200. Politicians attempted to introduce legislation in 1999 via the Internet Gaming Prohibition Act to make it illegal for any company to offer online gambling in the United States. This measure did not pass. Since then, the industry has only blossomed going from estimated revenues of $830 million dollars in 1998 to over $50 billion dollars presently.

The United States government long held that the Federal Wire Act, legislation passed in 1961, prohibited electronic transmission of information for sports betting across telecommunications lines. This essentially made all forms of betting on the Internet illegal. Further legislation directly impacting online gambling was passed in 2006 via the Unlawful Internet Gambling Enforcement Act (UIGEA). This act essentially prohibited gambling financial transactions from taking place over the Internet. However, the act specifically excluded fantasy sports that met certain requirements which would lead to the introduction of Daily Fantasy Sports.

The Bradley Act and its Impact on Sports Betting

In June of 1991, public hearings were held by a Senate Judiciary Subcommittee on sports gambling. It determined that it was a national problem that inflicted harm to the citizens of the United States. As a result of these findings, Congress enacted Senate Bill 474, the Professional and Amateur Sports Protection ACT (“PASPA”) also known as the Bradley Act. The legislation made it unlawful for any government entity or person to be involved in a sports gambling or wagering scheme that involved competitive games in which amateur or professional athletes participated. PASPA did provide a grandfather clause for states that had operated legal sports wagering thus exempting the states of Oregon, Delaware, and Nevada for their existing sports betting operations.

The Supreme Court Overrules PASPA

New Jersey, behind the efforts of their then governor Doug Christie, engaged in a long battle with the United States government over a states right to allow gambling. On May 14th of this year (2018), the United States Supreme Court announced a decision ruling that PASPA violated the 10th Amendment of the Constitution and was thus overruled due to being unconstitutional. Specifically they addressed specific provisions of the act that prohibited state authorization and licensing of sports gambling schemes.

State Legalization of Sports Betting

New Jersey was quick to act after PASPA was overruled by the Supreme Court, with their State Assembly and Congress quickly passing a bill to legalize wagers on sporting events. However, they weren’t the first to take a legal sports bet as Delaware was able to get their legislation through quicker due to having a law already in place if there was a favorable Supreme Court decision. In addition to these two states, Mississippi, New York, Pennsylvania, and West Virginia have been quick to move with legislation. Other states, including the mammoth market that is California, either have prior legislative efforts in place or are examining their options.

Individual State Legalization and Legislation of Sports Betting

Delaware – they are unique in that all sports wagers must be placed at one of three casinos. The state has expressed interest, however, in expanding to online and mobile betting and retail locations that can accept sports bets.
Mississippi – In 2017, they passed a law repealing the prohibition of sports betting to allow for state regulation. This legislation still needs to occur. When regulation is put in place, it is expected that sports betting will be limited to the state casinos. As far as online sports wagers are concerned, as it is now it might be allowed on location at one of the casinos, but there is always the possibility legislators will put in the possibility for mobile and online betting to be expanded.
New Jersey – players must be 21 years of age, sports books are taxed at 8.5% gross gaming revenue, online wagering at 13%. There can be no wagers on collegiate events that take place inside the state or on events including New Jersey colleges.
New York – passed a referendum in 2013 that authorized sports betting at commercial casinos contingent on a change in federal law (the PASPA overruling is that change). Lawmakers are still examining legislation and regulation and there is no set timeline on when sports betting will take place in the state. The referendum also appears to prohibit Internet and mobile wagering, so this is an area they will have to revisit.
Pennsylvania – had passed a law in 2017 in anticipation of PASPA being overruled. Wagers are not currently being taken in the state, but that is expected to change soon and their law permits wagering by any system/method, including in person, on the Internet, and via mobile devices. Properties that have a slot machine license are eligible to apply for a sports wagering certificate, but the $10 million licensing fee and tax rate may preclude some of the properties.
Rhode Island – via their state budget process, sports betting was approved recently. They are anticipating to accept wagers sometime early fall. It appears that it will be limited to the two casinos in the state. Currently there is no online or mobile wagers allowed, but that is expected to be revisited in the future.
West Virginia – had passed a law in March of 2017 in anticipation of the PASPA Supreme Court case. While wagers can not yet be taken, that should change in the near future. The law allows for sports betting at one of the state’s five current gambling facilities and on mobile devices.
Other States – numerous other states are looking at possible legislation to make sports betting legal. These include California, Connecticut, Illinois, Ohio, Missouri, Michigan, Maryland, Louisiana, Kentucky, Kansas, Iowa, and Indiana.

Impact on Online Sports Betting

The current marketplace for online sports wagers in the United States lies with websites that have offshore centers of operations. There are problems with inconsistency and reliability with a large number of these types of sites, however (although sites like Bovada have been reliable and consistent for some time now). There are often problems with financial transactions and there is no legal protection if issues arise. The overruling of PASPA and state-led regulation should change this dramatically.

Since the passing of PASPA, there have been multiple partnerships between technology providers and land-based casinos and horse tracks in hopes of being able to quickly transition into providing an online and mobile betting environment. Among those are DFS giants FanDuel and DraftKings. FanDuel is already in operation at the Meadowlands in New Jersey and was recently acquired by sports betting giant Paddy Power (who also recently acquired DRAFT). DraftKings has been similarly aggressive inking deals with the Del Lago Resort in New York and the Resorts Casino in Atlantic City. It would not be surprising to continue to see these types of deals continue as the two DFS giants try and get a foothold in the online sports betting marketplace.

Online Sports Betting Frequently Asked Questions

When will online sports betting be possible in the United States? In my state?

It’ll depend on a state-by-state basis as there will need to be legislation passed by each state to allow for regulation of sports betting, especially online versions that are not within the control of land-based casinos that are strictly monitored by gambling regulators. In some states like New Jersey, it could be sooner rather than later and it wouldn’t be surprising if it were available in some of the states that have recently passed legislation after the recent Supreme Court ruling on PASPA to allow people to wager online. In fact, under existing law New Jersey casinos are authorized to offer a game they run in their casino online as long as they possess an iGaming license. Properties like Borgata, Golden Nugget, Tropicana, and various Caesars casinos, already have this license.

Will there be apps I can make bets with on my mobile device?

A natural progression will be the ability to make bets on smartphones, tablets, and any other mobile devices. With DraftKings and FanDuel getting heavily involved in the mix, this is an even more likely event to take place once the legislation has passed and regulations are in place. You can already make bets via mobile devices in Las Vegas as huge operations like MGM have released apps in the past few years that have this functionality (as long as you are located in Nevada).

Who will be eligible to place an online sports bet?

It will depend on state regulations, but generally speaking you’ll need to be at least 21 years of age and physically located in the state where you are making the wager.

How will an online sportsbook know that I am physically located in the state where I am making a bet?

Online sportsbooks have the capability to use sophisticated software called geolocation that can track a player’s location, These features are embedded into mobile devices like the Android and iPhone. Personal computer users might have to install a plugin to their browser or give permissions to the website to identify the player’s physical location.

What type of bets will be I able to make online?

You should be able to make all the same type of bets you would be able to make in a land-based sports book, although there might be restrictions on betting on collegiate events (for example, New Jersey already has some limitations in place on betting on collegiate events taking place within state borders or by state colleges). Among the types of bets you should be able to place are money line, point spread, over/under totals, parlays, teasers, futures, and prop bets.

About the Author

thehazyone
Aaron Hendrix (thehazyone)

Aaron Hendrix is a former professional poker player who made the transition from season long fantasy sports to DFS in October of 2014. He used to cover poker tournaments for a living until stepping into his current role at RotoGrinders. He can be found on Twitter at @aaronhendrix