The Economic Impact of Legalizing Sports Betting in the US

The United States Supreme Court overturned the Professional and Amateur Sports Protection Act (PAPSA) in May 2018, paving the way for legalized sports betting. Since then, more than thirty different states have legalized sports betting, setting their own regulations to allow people to bet legally both online and in person. 

Naturally, the new regulations have meant the growth of a whole new industry across the US. As more states introduce laws to regulate sports betting, the number of people placing bets on sports across the country is increasing significantly. The sports betting industry was worth more than $83 billion in 2022 and is currently growing at a CAGR of 10.2%. There have been many significant impacts of legalizing betting across several states. Sports betting in Massachusetts has helped generate increased tax revenue and create jobs. 

Why Was Sports Betting Legalized in the US?

PAPSA was enacted in 1992 to make sports betting illegal, helping to protect professional and college sports from match-fixing scandals. At the time, there were concerns about the integrity of sports, as well as the increased growth of problem gambling. Sports are a huge part of American culture, and Congress enacted the law after public hearings from the Senate Judiciary Subcommittee on Patents, Copyrights and Trademarks, as well as input from the NBA Commissioner at the time.

The law was introduced federally, meaning it would affect all states. However, some states with existing sports betting pools and lotteries, such as Nevada, Montana, Oregon, and Delaware, were exempt. While it seemed to be effective at first, it coincided with the rise of online betting. Soon, millions of Americans were betting at offshore sites, meaning tax revenue was leaving the country. 

States such as New Jersey saw that there was potential to form a legal and regulated sports betting market, helping Americans bet safely and ensuring that tax revenue could be collected. The Supreme Court accepted the case in 2017 and ruled PASPA unconstitutional a year later. Shortly after, New Jersey and several other US states legalized sports betting. 

Economic Impacts of Legal Sports Betting

The most significant impact of legal sports betting is that it’s helped to generate additional tax revenue. Licensed and regulated sportsbooks must pay a set percentage of all profits to the local state government, and this has helped to reduce state budget deficits considerably. In 2021, US sportsbooks generated more than $5.6 billion, equating to more than $700 million in tax revenue. 

Not only does the legal sports betting industry help to generate increased taxes, but it has also created jobs and boosted GDP. The industry is predicted to have added around 22.4 billion to the US GDP, while also creating more than 200,000 jobs. While betting industry jobs were before concentrated in small areas of the country, the industry is now growing across the country, creating lots of new opportunities. 

As well as benefiting the gambling industry in the US, legal sports betting is boosting sports revenues too. Initially, many sports leagues were opposed to the idea of legal betting, but the four major leagues have seen a $4 billion increase in revenue from sponsorships, media rights, and ticket sales. 

The Future of US Sports Betting

There are undoubtedly a lot of positives to take from the legalization of sports betting in the US. However, despite the increased tax revenue, creation of new jobs, and the boost in sports popularity, legalized gambling can come with some downsides. With greater accessibility to gambling, there has been a steady rise in the cases of problem gambling. 

If sports betting is to continue to thrive in the US and create a positive impact, it’s important that regulations include provisions to help encourage responsible gambling. As it is, many states dedicate a percentage of tax revenue gained from gambling towards helping support charities involved in helping those with gambling addictions.

With more states looking likely to legalize sports betting over the next few years and with technology making betting more accessible than ever, it’s a great time to be a sports fan. However, those in charge of creating regulations need to ensure that the right steps are taken to protect bettors and the integrity of sports.

Huynh Nguyen

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