HISTORY57 - Sports Betting in the United States

Today’s constant solicitation (and saturation TV marketing) of sports betting seems so at odds with my experience over my lifetime.  What happened to so dramatically change the betting environment?  

I decided to try to find out - first by researching and understanding the long-time evolution of sports betting, and second, by documenting what’s happened recently to turn this world upside down.  So, this blog will cover the history of sports betting in the United States.

 

 

After a short introduction, I’ll briefly cover (for perspective and background) the evolution of sports betting in the Western World from ancient times.  Next, I’ll focus on the United States and talk about sports betting developments in three time periods, the 18^th and 19^th centuries, the 20^th century, and the 21^st century.  Finally, I’ll speculate on the future of sports betting.

My principal sources include “History of Sports Betting in the USA,” legalsports betting.com; “A History of Sports Betting in the United States:  Gambling Laws and Outlaws,” sportshandle.com; “Sports Betting History - From Ancient Greece to Modern Times,” signatureatwestneck.com; “Sports and Gambling,” encyclopedia.com; “The History of Sports Betting in the USA,” sports.borgataonline.com; “The Sports Gambling Gold Rush is Absolutely Off the Charts,” bloomberg.com; “Sports Betting Partnership Tracker,” sporthandle.com; “Timeline of Major Sport Betting Scandals,” bettingusa.com; “The Future of the Sports Betting Industry In The World,” androidheadlines.com; and numerous other online sources.

Introduction

Sports betting is the activity of predicting sports results and placing a wager on the outcome.

People everywhere have been placing bets for thousands of years.  The thrill of having a stake in the event, and the unknowable possibilities, offer not only huge potential profits, but also an exhilarating feeling that can be enormously addictive.

Today, worldwide, the vast majority of sports bets are placed on soccer, American football, basketball, baseball, hockey, track cycling, auto racing, mixed martial arts, and boxing - at both the amateur and professional levels. Sports betting also extends to non-human contests such as horse racing, greyhound racing, and illegal underground cockfighting.

There have been a number of sports betting scandals, affecting the integrity of sports events through various acts, including point shaving (players affecting the score by missing shots), spot-fixing (a player action is fixed), bad calls from officials at key moments, and overall match fixing.  Examples include major league baseball’s 1919 World Series, and the illegal gambling of former baseball player Pete Rose and former NBA referee Tim Donaghy.

The U.S. has experienced a long tug-of-war between restrictive laws, and people who wanted to enjoy sports betting.  As recently as 1992, Congress passed legislation banning all sports betting.  But now, once again, the pendulum has swung back in favor of legalized sports betting, because the American appetite for it remains as voracious as ever, and attitudes have shifted in favor of letting U.S. states establish their own gaming legislation - without the federal government’s intervention.

Evolution of Sports Betting from Ancient Times

Sports betting may have begun with the Olympic Games, first held in Greece in the summer of 776 BC.  There is archaeological evidence that wagering occurred during some of the ancient Olympic Games events, and this is believed to be the earliest record of sports betting.

From there, betting on sports spread like wildfire to Rome, where it became a legal activity, and then slowly around the globe.  In ancient Rome, the wealthy class wagered on chariot races, animal fights, and gladiator battles. The Romans spread their penchant for gambling across the breadth of their empire, including Britain.

Wealthy Romans bet on chariot races.

 

There is agreement among most historians that gambling was generally frowned upon during the Middle Ages in Europe (approx. AD 476-1500).  The spread of Christianity, and superstition, cast a cloud on wagering.  Even though the negative perspective is regularly mentioned, this did not stop people from betting.  There was a huge wealth gap during this time, and betting, including sports betting, was a difficult prospect for poor people, so it was usually a pastime for wealthier individuals.  It was also against the law during certain regimes, e.g., King Richard I banned gambling to anyone below the rank of knight.

In the 16^th and 17^th centuries, people throughout Europe enjoyed sports betting on cockfights, wrestling, and footraces. 

In the 18^th century, horse racing and boxing rose to prominence in Europe as spectator sports on which the public enjoyed gambling.

The 19^th and 20^th centuries brought a new emphasis on team sports, and Europeans began risking their wages on rugby, soccer, and cricket games.

U.S. - 18^th and 19^th Centuries

American colonists in the 18^th century brought their yen for gambling on sports with them to North America.  Horse racing was a particularly popular sport among those inclined toward gambling.

After the Revolutionary War, the American economy fell on hard times.  Gambling was heavily associated with corruption (at the municipal, state, and federal levels), as well as the relative economic downturn that characterized the majority of the 19^th century.

As a result of these negative attitudes and financial concerns, in 1860, the U.S. federal government banned nearly all forms of gambling, including sports betting - except for horse racing, which was legal and regulated at the state level. 

Most Americans didn’t view betting on horse racing the same way they saw conventional gambling or sports betting.  During the 19^th century, however, attending horse races, and betting on the outcomes, were reserved for the elite. 

 

Horse racing was popular and legal in the 19^th century.  1870 engraving.

Thoroughbreds ran the Belmont Stakes for the first time in 1867, the Preakness Stakes followed in 1873, and the first jewel of the Triple Crown, the Kentucky Derby, debuted at Churchill Downs in 1875.  By 1890, there were more than 300 horse-racing tracks built all over the U.S. 

But it was with the establishment of professional baseball in 1876, that traditional sports betting came to the forefront.  The National League was founded in 1876, followed by the American League in 1901.  By 1877, however, the game started being influenced by gambling, as years later, for example, it was discovered that the Louisville Grays were throwing games.  During this time, the general attitude toward sports betting was laxer than throughout any other point in U.S. history, with the activity being viewed purely as a form of entertainment. 

An article from the Washington Post in 1894 stated the following about Cap Anson, then-manager of the Chicago Colts baseball team:

“Uncle Anson has already started making wagers on the position the Chicago Colts will have in the race for the National League pennant next year.  He put up $100 a few days ago that his team would finish higher up in the race than the Pittsburgh Pirates.”

This shows how acceptable betting on sports was at the end of the 19^th century.

U.S. - 20^th Century

As the 20^th century began, sports betting was more popular than ever, even though it had been “technically” illegal since 1860.  However, with no real sports betting laws, and a lack of attention from law enforcement, the activity remained commonplace.  But there was a growing, widespread anti-gambling sentiment in the U.S., resulting in the majority of states banning bookmaking (the activity of taking bets, calculating odds, and paying out winnings).

Horseracing.  The ban on bookmaking was a huge blow to horse racing, as betting was integral to the sport.  There was a dramatic drop off in interest in horseracing, and within a few years there were just 25 tracks remaining in operation.  Things changed in 1908, when parimutuel betting (betting at the track) on the Kentucky Derby was introduced.  Following this, several states introduced legislation to allow parimutuel betting.  Horse racing began to flourish once again.

Baseball.  The Chicago Black Sox baseball scandal brought unfettered sports betting to a halt (and sullied the pastime in the eyes of many more puritanical citizens and lawmakers around the nation).  Eight players on the heavily-favored Chicago White Sox were bribed into intentionally throwing the 1919 World Series against the Cincinnati Reds, in exchange for a bribe of about $10,000 apiece, casting a dark shadow over sports betting that is still felt today.  States began banning various forms of sports gambling by targeting the gaming operators or facilitators and bookies - as opposed to bettors themselves.

In response to the Black Sox Scandal, Major League Baseball installed its first commissioner, Judge Kenesaw Mountain Landis, whose job was to restore the integrity of the game of baseball and public confidence in it.  Landis held the post of MLB commissioner from 1920 until his death in 1944.  He established a template for future sports commissioners.

Regardless of these difficulties, sports betting continued to grow among the general population, with even more sports coming into the fold.  The 1920s are often referred to the “Golden Era” of sports, with collegiate football and basketball becoming popular sports betting options.  During the Great Depression, football pool cards were in high demand due to the perception of quick, easy cash.

Las Vegas.  In 1949, seeking to invigorate its tourism industry, the state of Nevada legalized sports betting.   The post-World War II boom in America gave Nevada an economic opening for a market that elsewhere was illegal.  Las Vegas became the sports betting capital of the world, and is singlehandedly responsible for making sports betting so popular in America and the rest of the world.  (Las Vegas Strip investors around this time included infamous mobster Benjamin “Bugsy” Siegel, who helped finance the Flamingo Hotel & Casino and other early properties.)

Congressional Action.  At the beginning of the 1950s, however, the Nevada gambling world came under the scrutiny of Congress for its ties to organized crime.  Senator Estes Kefauver initiated hearings to investigate the matter.  These nationally televised hearings drew attention to a culture of corruption and gangland activity that had settled in Las Vegas.  The hearings resulted in the imposition of a 10% federal excise tax on sports betting in 1951. This tax effectively strangled casino-based sports bookmaking in Nevada.

The Kefauver hearings into organized crime’s involvement in Nevada gambling resulted in a 10% excise tax on sports betting in 1951.

 

Outside of Nevada, in the 1960s, organized crime dominated the gambling and sports wagering markets.  Seeking to dismantle organized crime’s grip on sports wagering, then-U.S. Attorney General Robert F. Kennedy worked with Congress to enact various pieces of legislation aimed at giving the federal government a collection of laws with some teeth.  Among the bills passed for this purpose in the 1960s and 1970s, the best-known is The Federal Wire Act (1961), which made it illegal for illicitly run U.S.-based sports gambling businesses to utilize any form of wire communications to send or accept betting information and wagers across state lines or to foreign U.S.-owned territories.  The law, for the most part, was a success over the next 40 years or so.

The Federal Wire Act of 1961 banned the use of the increasingly advanced U.S. communications infrastructure for placing sports bets across state lines.

 

Nevada - particularly Las Vegas – began to be viewed as among the only legitimate places to bet on sports in the US.  Still, betting on sports was not big business in Nevada until the 1970s.  It was during this time that congress lowered the 10% tax on sports bets that bookmakers were required to pay.  Within a few years, more states moved toward legalizing sports betting.  In 1976, Delaware began their sports lottery, and the Oregon Sports Action parlay game came in 1989.  The Montana Lottery was created by voter referendum in 1986, with limited sports pools and fantasy sports betting options.

As more states started to consider legalizing sports betting, the more concerned the U.S. congress grew. This prompted the government to find a legal means to stop the proliferation of sports betting across America.  To achieve this, lawmakers wrote and enacted the Professional and Amateur Sports Protection Act (PASPA) of 1992.  PASPA banned all sports betting in the United States, except for in the four states that had already established legal sports betting operations, of which Nevada was the only one with real single-game wagering. 

 

The Professional and Amateur Sports Protection Act of 1992 banned all sports betting in the U.S.

Betting Scandals.  Major sports betting scandals in the U.S. in the 20^th century include: 

1950-1951:  College basketball NCAA and NIT Tournament:  Point shaving; involved CCNY, New York University, Manhattan College, Bradley University, the University of Kentucky, and the University of Toledo.

1961:  College basketball during season: Point shaving; involved 37 players from 22 schools, including UCONN, UNC, and NC State.

1963:  NFL:  Stars Paul Hornung and Alex Karras of the Green Bay Packers were caught betting on sports.

1978-1979:  College basketball:  Boston College players conspired with mobsters to fix nine games.

1985:  College basketball:  three players on the Tulane team, including star “Hot Rod” Williams, committed sports bribery stemming from point shaving in several games.

1989:  Major League Baseball:  Star player and manager Pete Rose gambled on baseball games while he played for and managed the Cincinnati Reds; the charges of wrongdoing included claims that he bet on his own team. 

1994:  College basketball:  Two players on the Arizona State team conspired to fix four games.

1995:  College basketball:  Two players on the Northwestern team took money to shave points in three games.

U.S. - 21^st Century

In the 21^st century, sports betting in the U.S. underwent dramatic changes.  Even though it was technically illegal, sports bettors were able to bet on every sport imaginable, from football and basketball to tennis and golf and more.  The advent of the Internet changed how sports fans could wager, making betting on sports much more accessible via online betting.  Then, in 2006, the U.S. Congress passed a law to stop expansion of online betting.  Only 12 years later, in 2018, the U.S. Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act, thereby legalizing sports betting.  This was followed by an almost unbelievably rapid explosion of sports betting across the U.S.  that continues today.   

Online Betting.  In the early 2000s, online sportsbooks (places where people could bet) began appearing all over the U.S. market and became the norm for betting on sports.  No matter where bettors were located, they could find Vegas-style sports betting action from the comfort of their home.

To get around the Professional and Amateur Sports Protection Act that prohibited sports gambling with the U.S, all of the online sports betting sites were based offshore, in locations like Costa Rica and Panama, where remote gaming was legal.  These sites were licensed and regulated to accept U.S. players even without being physically located in the States.  As they operated outside of U.S. jurisdiction, they were free to post odds, accept wagers, and send payouts to America residents.

More Congressional Action.  Just as the spread of sports betting signaled the U.S. government to step in and stop expansion in 1992, the widespread increase of online betting caused the Congress to take action again.

In 2006, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was passed to regulate online gambling by severely restricting popular payment methods, such as credit cards, checks, and wire transfers.  The UIGEA caused many online sports betting sites to leave the U.S. market.  Still, there were plenty of sports betting sites that safely served U.S. sports bettors.

Meanwhile, in 2014, NBA commissioner Adam Silver penned an op-ed in the New York Times signaling a turning tide from within the sports leagues.  Silver stated that despite legal restrictions, sports betting remained widespread, but underground, unregulated.  He also acknowledged that most Americans approved of sports betting.   (How many of us, for instance, participated in office football pools?) Silver wrote: “The laws on sports betting should be changed.  Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.”

Supreme Court Action.  The U.S. Supreme Court on May 14, 2018, in a 6-3 decision, struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992 - on 10^th Amendment (states’ rights) constitutional grounds.  Writing for the majority, Justice Samuel Alito wrote: “The legalization of sports gambling requires an important policy choice, but the choice is not ours [the federal government] to make.”

In 2018, the U.S. Supreme Court, overturned the Professional and Amateur Sports Protection (PASPA) Act of 1992, thereby legalizing sports betting under state control.

 

Sports Betting Explosion.  After the U.S. Supreme Court struck down the PASPA Act in 2018, the sports betting industry was quickly accepted into mainstream culture.  Sports betting now is legal in some 30 states, and 18 states allow sports betting online - and the list is growing.

Online mobile wagering - placing bets on a remote device such as a computer, tablet, or smart phone - has become the preferred method (over casinos for instance) of sports gamblers.  In states where sports betting is popular, mobile has quickly overtaken on-site sports betting.

Betting lines now roll across TV screens during sports broadcasts.  Professional teams and leagues have established direct partnerships with gambling companies.  Media and entertainment companies - including such family-friendly giants as the Walt Disney Co. - have pursued similar partnerships, or opened the door to them.

For 2022, 19.0 million people are expected to participate in sports betting.  That's 7.9% of adult U.S. internet users, and a 31.0% increase over 2021. 

The market (total revenue) for sports gambling companies is large and growing rapidly.  The figure below shows the achieved market for 2020 and 2021, and Grand View Research’s forecast each year to 2030, when the market is forecast to be about $26 billion.  Also shown in the figure is the approximate market split for the major betting sports.

Forecast of the U.S. Sports Betting Market (source Grand View Research).

Goldman Sachs Group Inc. recently predicted that online market could reach $39 billion in annual revenue by 2033.

Marketing Partnerships.  All of the major sports leagues, and many individual teams, have “official betting partners,” with sportsbooks like BetMGM, Betway, Caesars, DraftKings, FanDuel, PointsBet, Unibet, WynnBET, and many others.

TV networks, such as ESPN, FOX, and NBC, also have partnerships with these sportsbooks and run commercials for them.  Indeed, sports betting marketing dominates television broadcasts.  Seemingly every other commercial is for a sports-betting app, and pregame and halftime programming is given over to promos for sport betting services.  Many networks, including ESPN, now have daily shows devoted entirely to betting, and sports report programs highlight betting odds alongside game scores and stats.  What had recently been illegal in most of the country is now an otherwise unremarkable facet of American professional sports.

Snapshot of TV commercial for sports betting.

 

Types of Bets.  There are many different types of sports bets that are possible to make.  Some of the more common bets are:  betting on particular opponent or team to win, betting on a team’s margin of victory (point spread), betting on the total score to go over or under a certain number, and parley betting, where each of multiple bets must be won.   

Odds.  American odds are based around $100, but how they relate to $100 varies depending on whether the bet is for the favored opponent or not.  For the favorite in a competition, the bet odds will start with a negative number, and they tell you how much you need to bet to win $100.  If the odds are -110, you would need to bet $110 to win $100.  If the odds are -200, you would need to bet $200 to win $100.  Of course, bets don’t have to be that size, but that proportion will scale up or down.  A $10 bet with -200 odds would profit you $5 plus your original $10 bet back.

Odds with a “plus” sign are underdog bets.  Plus odds tell you how much profit you will get on a $100 bet.  A $100 bet with +200 odds nets you $200 profit plus your original $100 bet.  If you bet $20, you would profit $40.

For the rare even money odds, those can be listed as -100, +100 or EV.

Ethical Concerns.  In addition to the common fear that sports betting will naturally lead to cheating, destroying the integrity of sports outcomes, the legalization of sports betting has sparked ethical concerns about the potential negative financial and health effects on bettors, their families, and communities.  

Research suggests that marketing plays a strong role in the normalization of gambling in sports.  This has the potential to increase the risks and subsequent harms associated with these products. 

Sports betting in moderation is harmless.  Unfortunately, once the habit is born, many people can’t stop indulging in it, and it eventually becomes an addiction.  Once the addiction develops, sports betting can become as consuming as a drug.  Addicts will constantly think about betting.  If they run out of money to place bets, they may resort to pressuring friends and relatives for money or even stealing.

Problem gambling is harmful to psychological and physical health.  As with other addictions, the consequences of gambling can lead to feelings of despondency and helplessness.  In some cases, this can lead to attempts at suicide.

According to the National Council on Problem Gambling, the rate of gambling problems among sports bettors is at least twice as high among gamblers in general.  When sports gambling is conducted online, the rate of problems is even higher, with one study indicating that 16% of online sports bettors met criteria for gambling disorder, and another 13% showed some signs of gambling problems.

Because of its harmful consequences to so many, sports gambling addiction has become a significant public health concern.

Betting Scandals.  In addition to the scandals listed below, in 2006, professional hockey was investigated for an illegal sports betting ring (no indictments), and in 2019, tennis was investigated for match fixing (no indictments).

2004-2006:  College basketball and football:  players in both sports rigged games.

2007: NBA basketball:  Referee Tim Donaghy conspired with organized crime to rig games by manipulating the point spread, and providing inside information.

2011:  College basketball:  University of San Diego - point shaving.

2012:  College basketball:  Auburn - point shaving.

2014: College basketball:  UTEP - point shaving.

2019:  NFL:  Arizona Cardinals player bet on games.  Note:  NFL policy prohibits betting on any professional or amateur sporting event.

2022:  NFL:  Atlantic Falcon player bet on games.

 

Future of Sports Betting

The future of sports betting is in-game wagering on events within the game.  Another term for this phenomenon is micro betting.  Next steps forward could include microchips strategically placed in balls, helmets, and jerseys; stadium cameras that track players as they move across the field; and perhaps even athletes’ own biometric data (if such data eventually becomes legal to track during competition).  Sportsbooks, intertwined with real-time statistics for every game, will be able to offer that data to bettors - enabling wagers on things like individual at-bat results, basketball player’s total points or assists, and which team will score a touchdown on their next drive.  The possibilities associated with micro betting seem to be endless.  All that amounts to increased revenue for sportsbooks across the board.  And to more people watching sports.

Advances in diverse mobile technology, paired with inexpensive and reliable internet accessibility will the future of sports betting.

 

Well, I’d better go make today’s bets, before the system get too complicated for me to handle.