Written by Nayan Srinivasan
March 11th 2020. It’s a day that will go down in the history books. It was the day the World Health Organization declared COVID-19 a global pandemic, but for most Americans this wasn’t the point at which they started to understand the gravity of the situation. It was later that night when Adam Silver, the commissioner of the NBA, announced the entire season would be postponed after multiple positive tests, leading to a domino effect of other leagues shutting down.
Sports are some of the most prevalent aspects of American culture. Similarly, doubling down and standing by your word is undoubtedly American. So, unsurprisingly, sports betting would be a massive and demanded industry. However, due to Murphy v. NCAA in 1992, sports betting was outlawed across the country until the ruling was overturned in May 2018. The original rationale was an issue of federalism, as states had contradictory sports betting laws to federal laws. But the movement gained momentum due to a movement opposing the addiction habits created by sports betting. Ever since, the legalization trend has surged across the country with 40 states legalizing or setting in motion legalization of sports betting by the end of 2022 [4].
Not only is there a growing trend of sport betting legalization, but the structure of the entire industry is changing before our eyes. Prior to 2018, the biggest names in gambling were the powerhouses in Las Vegas. Companies like MGM Grand and Caesars dominated the industry and the Las Vegas skyline. But thanks to the emergence of companies like FanDuel and DraftKings, online betting has become the way to go for bettors. Not only because it is a quicker option, but also because it incorporates even more ways to bet on games. These new sportsbooks are leading the way in micro betting which essentially allows betting on a single quarter of a game, a players stat line, or even something as small as the result of one play. By doing this, companies have exponentially increased the things one can bet on. As a result, FanDuel and DraftKings have significantly expanded their consumer base, because the stakes of micro betting are so low that it allows people that wouldn’t have bet before to try it out.
In just over three years, sportsbooks have raked in more than $5.6 billion, yielding over $700 million in tax revenue [6]. It is also projected to add $22.4 billion to the US GDP, over 200,000 jobs, and $11 billion into the pockets of workers. It doesn’t stop there, as Goldman Sachs is projecting the market to grow by 40% annually for the next decade [3]. The impact is also felt by the sports leagues themselves. Since the landmark 2018 ruling, the four major leagues in the United States have witnessed a $4 billion increase in revenue from sponsorships, media rights to broadcast games, merchandising, and ticket sales [1]. Betting has gotten people more in tune with the game, and as a result, sports franchises across the country are profiting off of it.
Perhaps the biggest measure for the future success of this industry is the 2021 NFL season. The NFL is the most successful sports league in the United States and has by far the largest audience. The NFL on its own is projected to receive almost $10 billion in broadcasting deals with the 4 major networks [1]. The reason they are willing to pay that much is because sports betting has expanded their viewership to a whole new level. In fact, a large part of their live broadcast incorporates betting odds and advanced statistics to tailor the experience to the bettors that are watching the game. The NFL is also directly partnering up with sportsbooks, specifically BetMGM, which is predicted to earn them $2.3 billion every year [5].
Despite all the economic positives of the reemergence of the sports betting industry, it also has real, tangible downfalls. A wide variety of research studies finds that gambling addictions occur in 1 to 6 percent of gamblers, but that number doubles when one lives close to a casino or gambling establishment. The unique issue with online betting is that there is no geographical barrier to accessibility, so these addiction rates are significantly higher. Additionally, the population getting addicted is getting younger and younger. Children, who don’t have a sense of risk, caution, or the utility of money, are getting caught in the cycle, and the worst part is that it’s easy to hide from their parents or guardians. With only 10% actually seeking assistance to solve their addiction, this problem does not seem to have an end in sight [2].
There is no doubt that sports betting will continue to thrive and innovate new ways to gamble, but the future of the industry will rely on whether or not it remains legal. While there are many positives that yield economic benefits, it is up for debate whether or not the negative social impacts outweigh them.
References
- Andrews, Ross. “Legal Sports Betting Projected to Boost Revenue for 4 U.S. Major Sports Leagues.” Global Sport Matters, 18 Dec. 2018, https://globalsportmatters.com/business/2018/12/18/legal-sports-betting-projected-to-boost-revenue-for-4-u-s-major-sports-leagues/.
- Benbow, Dana Hunsinger. “’In the Dark, No One Watching, Addicts Are Born’: 2 Years of Indiana Mobile Sports Betting.” The Indianapolis Star, Indianapolis Star, 11 Oct. 2021, https://www.indystar.com/story/sports/2021/10/07/indiana-sports-betting-2-years-after-legalization-addicts-born/5609398001/.
- “Economic Impact of Legalized Sports Betting.” American Gaming Association, 18 June 2020, https://www.americangaming.org/resources/economic-impact-of-legalized-sports-betting/
- Green, Austin. “The Sports Betting Legalization Trend: What Journalists Need to Know.” The Reynolds Center, 28 Oct. 2021, https://businessjournalism.org/2021/09/sports-betting-legalization-journalists-need-to-know/.
- Sergent, Jim. “Six Charts Show Sports Betting’s Digital Explosion with NFL Season about to Kick Off.” USA Today, Gannett Satellite Information Network, 12 Sept. 2021, https://www.usatoday.com/in-depth/graphics/2021/09/09/online-sports-gambling-good-bet-industry-continue-winning-ways/5686836001/.
- “Sports Betting Revenue Tracker – US Betting Revenue & Handle by State.” Legal Sports Report, 30 Nov. 2021, https://www.legalsportsreport.com/sports-betting/revenue/.