Will Sports Gambling Be Made Legal? How Daily Fantasy Sports Have Changed The Conversation

Sports gambling has long been considered taboo, with bettors slinking into the shadows to place wagers with illegal bookmakers because of federal rules banning it in most states across the U.S.

But traditional sports gambling, the kind that really only exists in Las Vegas, took a major step toward legality and coming out of the shadows this week after a congressional committee led by New Jersey Rep. Frank Pallone — a vocal supporter of legal sports wagering — revealed it was re-examining sports betting laws with plans to propose new legislation that could ultimately allow the practice nationwide, ESPN reported. As it stands, three laws — the Professional and Amateur Sports Protection Act of 1992 (PASPA), the Federal Wire Act of 1961 and the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) — effectively ban sports gambling on single contests in any state outside Nevada. Oregon, Delaware and Montana also allow very particular types of sports wagering.

There has recently been a renewed interest in Washington when it comes to legalizing sports gambling and it's directly related to the rise of daily fantasy sports, which allows participants to win or lose real money by creating artificial matchups that use stats from real live games. As daily fantasy sports saw tremendous growth last year, many made the point that these types of fantasy sports feel a lot like tradtional sports gambling but were allowed through an exception in the Unlawful Internet Gambling Enforcement Act. A number of states pushed back against daily fantasy, and, in turn, placed regulations on daily fantasy sports that both allowed the gaming and defined it as something outside of sports gambling.

That daily fantasy drama helped create a new push to allow traditional sports gambling and revived a long-discussed question. If some aspects of gambling are regulated and allowed, why ban the others?

Americans spent some $149 billion last year on sports gambling and the vast majority of those dollars went to offshore firms or local bookies. With the rise of daily fantasy sports and the money that has come with it — New York regulated the gaming and now takes a 15 percent tax on revenues, for instance — the discussion has begun to shift toward wondering if it might be a smart choice to do away with the longstanding ban on sports gambling.

International Business Times talked with gambling industry expert Chris Grove, a partner at Narus Advisers and publisher of Legal Sports Report, about the latest news and how he sees the future of sports gambling.

IBT: When you saw the news there’s going to be this legislative push, or at least a re-examination of gambling laws, what was your first takeaway from that?

CG: I wasn’t surprised. This is something that Rep. Pallone has been very vocal about both generally as an issue and then specifically as an issue that might benefit from federal intervention around the time that the daily fantasy sports controversies were really starting to take hold the fall of last year.

IBT: That brings up an interesting distinction: taking this to the national level, rather than pushing on a local level. Does that change anything in your mind? Does that make the push to get legal sports gambling more likely, less likely?

CG: It’s an interesting dynamic. Obviously there’s an argument to made you must have some kind of federal intervention because without a clarification PAPSA or re-imagining of the Wire Act or an adjustment of any number of federal statutes it would appear that regulated sports betting is out of reach for every state except for a handful that were grandfathered in.

Underlying that dynamic is the reality that there is a march of fantasy sports legislation at the state level. We’ve already seen bills passed in 10 states, eight in 2016.

We’ll see that legislative push continue in 2017. I would say conservatively you will see another five or six states get identical bills across the finish line. The upshot of that is you’ll be looking at about 50 percent of the population, maybe a little north of that, that lives in a jurisdiction where fantasy contests – as defined in these bills, and they’re defined universally, the same definition in every bill – that kind of activity conducted online will not be considered gambling in over 50 percent of the United States.

That kind of addressable market and legal certainty will create a class of products that look and feel very much like a traditional sports bet.

The history of gambling expansion in the U.S. is basically a story of very large exceptions pushed through very narrow loopholes. You can look to tribal gambling as an example. In a lot of jurisdictions, gaming tribes were limited to bingo and wanted slot machines. So what did they do? They found a way to create a slot machine out of bingo.

I think that’s a fair analogy for what we might start to see as more and more sports adopt fantasy sports regulations.

IBT: So in your mind, at least in the immediate future, where we’re going to see real change is not necessarily with what we consider traditional sports betting. It’s going to be a thing that gives us a very similar experience but is not technically sports gambling.

CG: I think that’s right, yes.

The thing is, that can happen today in those eight states. A year from now it can happen probably in 13, 15 states total with significant populations like Illinois, Texas.

That’s just the far easier path to bringing sports betting to market than trying to get a bill authorizing the liberalization of sports betting through the U.S. Congress.

IBT: For the longest time, there wasn’t much thought being put toward sports gambling being allowed nationwide. But with daily fantasy sports being regulated and this new push with people saying, "we have daily fantasy sports, why can’t I have traditional sports gambling?" Does that move the timeline? Or do you even have a timeline in your mind for when sports gambling will be legal?

CG: I’m not sure necessarily that daily fantasy sports accelerated the timeline so much as it provided a focal point for a number of parties who were already interested.

Maybe I’m splitting hairs there, but to me, that’s more the dynamic. The interest was already there. Support was already there. It was somewhat siloed and somewhat fragmented.

And sports betting was not necessarily a part of the national conversation. It became a topic of conversation around the Super Bowl and March Madness and other major sporting events. But that’s usually a fleeting attention. Daily fantasy sports brought a more sustained spotlight.

We saw [daily fantasy sports] talked about in the national media from August through January, it was a persistent topic. And sports betting was often mentioned part and parcel.