The United States of America is one of just nine countries that uses a state system of federation, joined by nations like Australia, Brazil, Germany, and Malaysia. This method of governance means that, in addition to the federal government, each of the country’s 50 states has its own government, makes its own laws, and regulates businesses within its borders.
While most states have very similar laws, there are variances between them. Additionally, long-running legal debates have played out over what powers should be given to lawmakers in Washington DC and those in each state Capitol.
One recent place we have seen this has been in the debate over whether states should be allowed to set their own rules on sports betting and wagering.
Professional and Amateur Sports Protection Act
In 1991, senators began drafting a bill that would forbid wagering on most professional and amateur sports, including all of the United States’ major leagues. By June 1992, Bill 474 was passed in the Senate and by October 1992, it had been given approval in the House. That same month, President George H. W. Bush signed the Professional and Amateur Sports Protection Act (PASPA) into law.
PASPA did include several exceptions, most notably for Nevada, which allowed sportsbooks to continue to operate in Las Vegas. Parimutuel horse and dog racing, sports lotteries in Delaware, Oregon, and Montana, and the niche ball sport of jai alai were also still permitted.
Challenges to PASPA
Almost immediately, legal challenges were mounted by opponents of PASPA, though it would take more than two decades before anything of substance changed. One of the most outspoken challengers to the law was the state of New Jersey.
The eastern state has been a major player in the casino industry since the 1970s when large Las Vegas-style resorts began to be constructed in the tourist town of Atlantic City. There are currently nine land-based casinos operating in the state, including famous names like the Golden Nugget.
In 2013, New Jersey passed legislation that permitted online betting on casino games and poker. Shortly afterward, many of the world’s biggest online poker brands began opening in the state. One of these was PokerStars, which launched its operations in the state in March 2016 and has since expanded to other parts of the country.
At the same time, New Jersey passed other legislation that would permit sports betting. This ultimately led to a long legal challenge that escalated all the way to the Supreme Court of the United States.
The challenge was based around the Tenth Amendment to the United States Constitution, with the court ultimately deciding that PASPA impeded the rights of the states to set their own laws. The court struck down the law in a 6-3 vote, paving the way for New Jersey and other states to allow sports betting.
Since the Supreme Court decision, nearly two dozen states have permitted online wagering of some form or another. Some, like New Jersey, have opted to take a very liberal approach, permitting casino games, poker, and sports betting with an unlimited number of operators; others have chosen to focus on one or two forms of wagering and place restrictions on how many brands can open within their borders.
Interstate wagering is still not permitted as this would fall under the jurisdiction of the federal government, so strict rules are in place to ensure that bets are only placed inside the state where the customer has signed up.
States like Pennsylvania, where online betting companies have been trading for more than a year, have seen revenue records broken month after month. In the second half of 2020, Pennsylvania’s sportsbooks increased their total handle each month from September to December.
The iGaming companies involved in the United States are investing heavily in customer acquisition in the hopes of building a strong market share. This is leading to huge bonuses being offered to new registrants, with some publishing eye-catching incentives of “up to $1,000”.
In September 2020, iGaming brands in Pennsylvania alone spent $12 million on these “promotional credits”.
It’s also created a separate industry in the United States for affiliate sites that review and compare all of the online casinos, poker rooms, and sportsbooks. Cloud hosting services like Amazon Web Services and affordable SEO services have made the barriers to entry for this type of business quite low.
Law changes in the United States have taken sports betting full circle. The passing of PASPA in 1992 meant that sports betting was limited to just a small selection of states. It ultimately created a classic constitutional conundrum for the courts that regularly see debates between states and the federal government.
With the court’s decision, a huge new industry has been born. iGaming companies are seeing massive amounts of growth in the United States as more customers begin placing bets and more states permit them to operate.