History of Sports Betting in the United States
The history of sports betting in the United States is long and complicated. While other countries have embraced regulated and legal sports betting for decades, the United States has historically put laws and regulations in place to hinder sports betting throughout most parts of the country.
Fortunately, the tides are turning as regulated and safe sports betting is finally being legalized in Tennessee and other states around the country. But it was a long road to get to this point, starting all the way back in the 1800s with pari-mutuel betting on horse racing.
Horse racing becomes popular in the 19th century
Horse racing has a rich history in the United States and is recognized as one of the oldest forms of sports gambling in the country. While some forms of horse racing date all the way back to the 1600s, formal parimutuel betting on organized thoroughbred horse racing began in the late 1860s.
The Belmont Stakes were run for the first time in 1867 in the Bronx, New York. The Preakness Stakes followed in 1873 and the Triple Crown was formed when the Kentucky Derby had its inaugural race in 1875. The Triple Crown is still run to this day and is one of the most time-honored traditions in all of sports.
Even as other forms of sports betting were eventually outlawed, parimutuel betting on horse racing has remained legal in most states around the country. The Interstate Horse Racing Act of 1978 even allowed for race tracks to broadcast races and accept bets on races outside of the state in which the bettor was located.
The 1919 Black Sox Scandal shines negative light on sports betting
Other forms of sports betting also rose to popularity in the late 1800s and early 1900s. Illegal boxing matches were popularized in cities like Boston and New York in the late 1800s before becoming a more legitimate sport the following century. College football’s first game was played in 1869 and colleges around the nation started founding football teams as the 19th century came to a close. Where there were sports, there were people betting on sports.
But the first professional sport to take hold in the United States was baseball. The National League was founded in 1876 in New York, 25 years prior to the formation of the American League that was founded in Wisconsin in 1901. The two leagues merged in 1903 to become Major League Baseball, giving birth to “America’s pastime.” The first World Series was played that same year.
In 1919, the infamous “Black Sox Scandal” took place. The Chicago White Sox were heavily favored in a best-of-nine World Series matchup against the Cincinnati Reds. The White Sox were accused of accepting money from a mob-led gambling syndicate to throw the series, which they eventually lost in eight games. While the eight players allegedly involved were acquitted in court, they were all permanently banned from baseball.
This incident played a huge role in casting sports betting in a negative light. Before this scandal, the legality or illegality of sports betting wasn’t really enforced or heavily discussed. But when players throwing games for gamblers tarnished America’s favorite game, a precedent was set that sports betting could ruin the integrity of the sporting events themselves.
Las Vegas emerges as sports betting capital
Some states put laws into place to ban sports betting and other forms of gambling. Others continued to follow federal guidelines with sports betting technically being illegal but the law rarely being enforced. Nevada, on the other hand, became the first state to actively embrace sports betting by legalizing it in 1949.
Other forms of gambling had been legalized in Nevada in 1931, and the Las Vegas Strip was booming with organized crime figures like Bugsy Siegel investing in gaming resorts like the Flamingo that opened in 1946, and the Desert Inn that opened in 1951. The addition of sports betting made sense for the rapidly growing gambling paradise in the desert.
While other states like Delaware, Montana, and Oregon would eventually go on to legalize watered down versions of sports betting pick pools and sports lotteries, Nevada remained the only state that you could legally place a sports bet in for nearly 70 years.
The US government cracks down on sports betting with the Federal Wire Act
But while sports betting was only legal in Nevada, the industry was alive and well around the country due to organized crime providing bookmaking, especially in major cities. In 1961, then-U.S. Attorney General Robert F. Kennedy and the United States Congress passed the Federal Wire Act in the hopes that it would give the federal government more ammo to take down organized crime with. The law states:
“Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined not more than $10,000 or imprisoned not more than two years, or both.”
This law’s original intention was to crack down on organized crime rings that were large enough and had the technology to accept sports bets across state lines. Down the road, it would also be cited as the original law that made interstate and international sports gambling online illegal in the United States.
Sports betting takes another blow with passing of PASPA
The Federal Wire Act and a few similar laws passed around the same time were the only ones on the books in regards to sports betting for decades. Fears of points-shaving and game-fixing continued to loom over professional sports, and those fears once again reached a fever pitch in 1989 when Pete Rose was banned from baseball for betting on games. While Rose allegedly never bet against his own team as acting manager of the Cincinnati Reds, he did place bets on his team to win.
In 1992, the federal government took action to protect the integrity of professional and collegiate sports when it passed PASPA, the Professional and Amateur Sports Protection Act. The law clearly stated that:
“It shall be unlawful for—
- a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or
- a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.”
The four states that had already legalized sports betting (Nevada, Delaware, Montana, and Oregon) were grandfathered in and allowed to continue to operate as they previously had. But the rest of the country now had a crystal clear law in place forbidding betting on sports.
Offshore sportsbooks come under fire with passing of UIGEA
The decline of organized crime in the United States and these new laws on the books made sports betting difficult to come by outside of Nevada in the 1990’s. That changed when sportsbooks operating outside of the United States started accepting deposits and betting action from sports bettors around the country. The legality of what these offshore books was doing was hazy. While accepting sports bets online was illegal in the United States, it was legal in the countries that most of these sportsbooks were operating in.
The US government attempted to clear things up when it passed the Unlawful Internet Gambling Enforcement Act of 2006, also known as the UIGEA. This law made it expressly illegal for a “person engaged in the business of betting or wagering” to accept funds via credit cards, third-party money transfers, EFT transfers, or by other methods.
Five years later, the world’s three biggest poker websites at the time — PokerStars, Full Tilt, and Absolute Poker/UltimateBet — were suddenly forced to stop serving American players by the US Department of Justice on April 15, 2011, a day now known as “Black Friday.” After that dramatic action, many offshore sportsbooks stopped accepting wagers from American citizens to avoid the potential legal battles that could come with fighting the US government.
Others, however, continue to accept wagers from United States players as the enforcement of laws internationally is an extremely controversial topic. The United States hasn’t made any major moves against these illegal offshore sportsbooks, instead focusing on continuing to enforce these laws against companies operating on American soil.
New Jersey fights PASPA and wins
New Jersey kicked off a nearly decade-long battle against the legality of the Professional and Amateur Sports Protection Act in 2009. Then-governor Chris Christie originally decided not to move forward with a lawsuit that was filed by then-state senator Raymond Lesniak on PASPA being unconstitutional due to the fact that he thought the legal battle couldn’t be won.
But after putting the legalization of sports betting in New Jersey to a vote in 2010 and seeing it pass with flying colors, Christie decided he would start the legal battle to fight for his state’s right to choose for itself whether or not to legalize sports betting. He passed a law to legalize sports betting at licensed locations knowing full well that this law would be struck down at the federal level.
Indeed, the NFL, MLB, NBA, NCAA, and NHL all sued New Jersey for violating PASPA, and the District Court ruled in their favor. But New Jersey appealed the ruling on the claim that PASPA was unconstitutional in its taking the power away from the states to make their own legal decisions on sports betting.
The case would eventually be reviewed by the Supreme Court, which in May 2018 ruled in favor of New Jersey and repealed the Professional and Amateur Sports Protection Act. This paved the way for New Jersey to start offering legalized sports betting, becoming the first state since Nevada to do so.
The future finally looks bright for sports betting
Thanks to New Jersey’s fight and the Supreme Court’s decision, sports betting is finally becoming a legal reality for sports fans around the country. By the summer of 2020, there were 18 states offering legal sports betting with several more poised to follow. Tennessee is among the states about to launch after legalizing sports betting in 2019, having announced it will do so by the end of 2020.
The repeal of PASPA was a clear win-win for both states and sports bettors. States that legalize sports betting can collect taxes on the industry to help boost their economies and players can finally place sports bets without having to worry about the legality or safety of their funds. Some states will adapt more slowly than others, but hopefully the United States is finally on a path towards legalization on the federal level.