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The 5 Biggest Winners (And One Loser) In The Supreme Court Sports Gambling Decision

This article is more than 5 years old.

The success of a gambling enterprise is predicated on one simple principle — there will be more losers than winners. But yesterday’s Supreme Court decision striking down a 1992 federal law that effectively banned state-sponsored sports gambling in most states will create far more winners than losers.

The 6-3 ruling striking down the Professional and Amateur Sports Protection Act means that states wanting to offer legal sports betting will soon be able to get a piece of the many billions of dollars wagered on sports each year. New Jersey, which has been fighting for six years to legalize betting on sports, is expected to be the first to allow gambling. And four other states — Pennsylvania, Mississippi, West Virginia and New York — have already passed sports betting laws or legislation to allow for gambling.

In the majority opinion, Justice Samuel Alito outlined both sides of the legalized gambling debate. “Supporters argue that legalization will produce revenue for the states and critically weaken illegal sports betting operations, which are often run by organized crime,” Alito wrote. “Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.”

Of course, Alito left open the possibility that Congress could still take action. “Congress can regulate sports gambling directly,” he noted, “but if it elects not to do so, each state is free to act on its own.”

Assuming that doesn’t happen, however, who stands to gain the most from the Supreme Court ruling? Here are the five biggest winners — and one clear loser.

Casino and Gaming Companies

No group is better positioned to cash in on the Supreme Court’s ruling than the nation’s casino and gaming companies. For more than 25 years, Nevada has been the only state to offer complete sports betting, including wagering on single games. Now the state's sports books, along with casinos elsewhere, have the infrastructure and track record necessary to capitalize on the soon-to-be-exploding market, and following Monday’s Supreme Court decision, they’re celebrating — and preparing.

“We are one of the few people in the industry who have had the experience, almost a decade-long of experience, of running recent sports books in the United States,” says Parikshat Khanna, CEO of CG Technology, one of Nevada’s biggest bookmakers. “So for us, we are totally scalable in that regard, so it’s absolutely great news for us.”

Khanna adds that the company has long been readying for this day and is already in talks with potential partners. CG Technology has its sights set on New Jersey, since it’s expected to be on the forefront of newly legalized sports gambling, but according to Khanna, the sky is the limit: “We are certainly going to make efforts wherever there is the possibility of a market.”

Investors love the news, too. The nation’s casino and gambling stocks were largely up on Monday following news of the ruling. Caesars Entertainment climbed 5.5% to $12.55; Churchill Downs, the home of the Kentucky Derby that's been winning big in recent years, was up 4.9%; and the VanEck Vectors Gaming ETF closed up 2% on a day that the S&P 500 was flat.

Professional Sports Leagues

The nation’s professional leagues have, until recently, firmly opposed legalizing sports betting. Some remain averse — the NFL released a statement on Monday that noted the “potential harms posed by sports betting to the integrity of sporting contests and the public confidence in these events” and called on Congress to provide a regulatory framework for legal sports gambling — but the leagues are among the biggest potential winners, and the NBA appears ready to show just how to cash in on the new reality. Following the Supreme Court decision, billionaire Dallas Mavericks owner Mark Cuban told CNBC, "I think everyone who owns a top-four professional sports team just basically saw the value of their team double." 

In fact, the NBA began cashing in back in 2016 when it partnered with data company Sportradar on a six-year, $250 million partnership that granted the firm the rights to distribute NBA data to offshore gambling operators. An even bigger payday would be the 1% cut of the action the NBA wants on all league wagers. In January, NBA spokesperson Mike Bass justified the share as a so-called “integrity fee,” saying that the league “will need to invest more in compliance and enforcement” and that it’s reasonable for operators to “help compensate for the risk and expense created and the commercial value [the NBA’s] product provides them.”

It may not be that simple. “If you’re talking 1% of the [total bets placed], that’s actually about 20% of the revenue,” says David G. Schwartz, the director of UNLV’s Center for Gaming Research, “That’s a pretty big hit, and I don’t see how you can run that profitably. … So that may be easier said than done.”

But in addition to any direct payoff that leagues stand to take, leagues will still benefit from the increased fan interest gambling encourages, a particularly attractive benefit given the general decline in TV ratings over the last few years.

And that doesn’t even account for the possibility that teams will bring gambling operations in-house. Khanna, of CG Technology, doesn’t expect we’ll see in-stadium betting windows anytime soon, but billionaire Ted Leonsis, who owns the Washington Wizards and Capitals, envisions a future in which fans can partake in friendly wagering from their arena seats: “When someone buys a season ticket, we preload into their e-ticket money for them to buy T-shirts and hats and concessions. You can see one day that we’ll be preloading money, and you’re using it to game and gamble, and maybe the only way you can do that is if you’re gambling in the arena with other season-ticket holders.”

TV Networks and Media Companies

Sports have long been heralded as the last DVR-proof television property, but in the age of cord cutting, even live game broadcasts have begun to feel the pressure. Networks have watched viewership plummet while continuing to shell out billions a year in rights fees. Legalized gambling could very well be the lifeline broadcasters have been waiting for — not only does sports betting make fans literally invested in the outcome of a game, but it also makes more games exciting down to the wire, since a seemingly lopsided contest could still technically be close against the point spread.

“The broadcasters are absolutely huge winners here,” says Bret Werner, president of public relations agency MWW. “In a blowout baseball game in the eighth inning, if I can bet on balls and strikes, or outs, or hits, I may stay tuned in.”

Leonsis puts it in simple terms: Networks will “see better ratings, they’ll see longer engagement, and it will open a whole new category of advertisement.”

Not only does legalized betting potentially give broadcasters a bigger and more attentive audience, but it may very well usher in a flood of new ad money. “I think it’s going to create a marketing bonanza,” says Werner. “There are many great brands in sports — Nike has apparel, Gatorade does beverages; now we’re going to have a fight to see who the next great sports betting brand will be. So we’re going to see a huge influx of marketing dollars happen real quickly.”

Werner also points back just a few years ago, when daily fantasy sites DraftKings and FanDuel flooded the market with their ubiquitous ads, and says that it’s likely “a microcosm of what we’re going to see in the short term.” One 2016 report suggested that at the peak of the daily fantasy frenzy, DraftKings was spending as much as $24 million a week on national TV ad buys.

New Jersey (and Other States)

New Jersey — which began this fight after residents voted to repeal the state’s prohibition against sports gambling in a nonbinding referendum in November 2011 — is obviously a big winner given its Supreme Court victory, but it’s also the state best prepared for legalized sports wagering.

“New Jersey has definitely fought hard to earn the right to provide these games in its casinos and I think likely will expand that in coming years,” says Josh Schiller, a partner at Boies Schiller Flexner.

Sought for years by former governor Chris Christie, this outcome gives states with legalized sports betting the ability to regulate and, more important, tax a portion of the ten-figure amounts that gamblers wager on games every year. Plus, legal sports betting in New Jersey could make the state a destination for the region’s gambling-inclined, bringing tourism money along as well. According to a May 2017 Oxford Economics report, legalized sports betting is projected to generate $8.4 billion in new tax revenues, create more than 200,000 new jobs and add over $22 billion to the nation’s GDP.

And New Jersey is ready for the gates to open. The Monmouth Park race track plans to start taking sports wagers as soon as Memorial Day, and moribund Atlantic City casinos will not be far behind — Khanna expects that sports books there will be accepting bets before the start of the NFL season. And the Garden State is hardly the only state making a big bet on gambling; New York, West Virginia and Mississippi are but a handful of the nearly two dozen states that have made at least some move toward legalization.

“When one state, like a Rhode Island or Massachusetts … legalizes it, I think you’ll see the neighboring states follow suit,” Schiller says of the pressure for states to keep their residents from crossing the border to spend their money elsewhere. It’s a sentiment echoed more loudly by Irwin Kishner, chairman of Herrick, Feinstein: “This is going to set in motion something of a domino effect of a state-by-state taking advantage of the ability to open sports books. You’re going to see a proliferation of it. … Ultimately, my prediction is that sports gambling is going to be legal in all of the states, and it’s going to be taxed and regulated.”

And don’t bet against Nevada coming out a winner here. Although it might seem that Las Vegas would take a hit from losing its sports betting monopoly, Monday’s ruling may very well be good news for Sin City. For one, there’s relatively little at stake: UNLV’s Schwartz says that “sports betting is about $215 million a year for the whole state of Nevada, so it’s a pretty small thing; it’s about 2% of total gaming revenue.” And Schwartz adds that the online poker boom hardly killed casino poker; Nevada poker revenue tripled.

“I think you might see something similar with sports betting,Schwartz says. As more people are doing it and get more familiar with it, you could see that funnel getting wider.”

You

“People who like to bet should be pretty happy,” says Schwartz. The nation’s serious sports gamblers will be happy with the freedom to leave behind bookies and sketchy offshore gambling sites. But legalized sports betting can also be a boon to the average, casual sports fan. As Kishner notes, betting on sports has hardly been reserved for shadowy gamblers: “It’s a part of American culture, wagering on sports. Whether it’s your office pool or whatever, it’s just done.” And it’s increasingly popular among Americans: Nevada sports books have seen revenue increase by more than 80% over the last decade.

Leonsis sees the big picture, and it’s a good one for consumers: “I think it gives every part of the value chain around sports the opportunity to reimagine its business model. And whenever you have that as an opportunity, you’ll get lots of innovation and lots of investment dollars.”

Plus, even if you have zero interest in laying a wager, Leonsis notes, you still stand to benefit since widespread legalized sports betting means “more taxes paid and more jobs created.”

And the Biggest Loser: Offshore Bookmakers

Monday’s ruling isn’t good news for anyone making a living off the current gambling black market, but while your local bookie may soon see a dip in action, it likely won’t even compare to what’s at stake for offshore bookmakers. Long the haven for those ducking local gambling restrictions, offshore sites have largely relied on Americans for the majority of their business, and they’ve been home to a significant portion of the billions in illegal sports wagers every year.

Costa Rican online bookmaker BetDSI is among the leading offshore bet takers, and spokesperson Scott Cooley acknowledges that the company may soon be in troubled waters: “We are going to be exposed. That’s something that, again, we’re concerned with and we’ve been concerned with. Certainly as more of these local sports books start popping up, the bettors are going to gravitate to those eventually.”

Exposed is quite the understatement: A whopping 97% of BetDSI’s total action is from the United States.

Cooley argues that there will always be a place for offshore bookmakers, given the anonymity they offer, and Schwartz suggests that it remains to be seen just how disastrous the new sports gambling landscape is for those outside the States: “If [legal gambling] is taxed at such a ruinous level that the sports books that are legal can’t really compete … then it might not impact [offshore books] as much.” But BetDSI has also been hedging its position by “acquiring properties and building brands outside the sports betting industry,” Cooley says, and he even floats the idea of licensing the company name to a Stateside operation.

So is there a chance that offshore bookmakers can survive the steep odds they now face with the new sports gambling ruling? Sure. But don't bet on it.

With reporting from Brett Knight and Dan Kleinman.