Striking down a 1992 law that banned sports gambling, the U.S. Supreme Court on Monday paved the way for sports betting to become the next pot: Regulated by the states, with widely varying local laws, and a wide range of companies getting ready for the next gold rush.
The law at the center of Monday’s decision was the Professional and Amateur Sports Protection Act (PASPA) of 1992, which had outlawed sports betting nationwide, with the exception of Nevada and some more limited betting in three other states. New Jersey had sued against the law, arguing that it was unconstitutional.
Six of the nine Supreme Court Justices agreed, writing in their majority decision that there were good reasons both for and against sports betting:
“Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime. Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports. The legalization of sports gambling requires an important policy choice, but the choice is not ours to make.”
Instead, legislators would have to make a decision. And in the absence of new federal legislation, it would be up to the states to do so. “Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution,” the judges wrote. ”PASPA is not.”
With the law struck down, states are expected to move quickly to benefit from the added tax revenue. Eighteen states have already introduced legislation to legalize sports betting, according to the American Gaming Association. Others are likely to follow suit.
The result of these state-wide laws will likely be a patchwork of regulations, similar to the way states currently regulate medical and recreational marijuana. And just like with pot, many in the industry are hoping for big bucks. Estimates about the size of a legal sports gambling market vary widely, ranging from $57 billion to as much as $400 billion per year.
Immediate beneficiaries are likely to include online sports betting companies like Fanduel and Draftkings, with Draftkings CEO Jason Robins telling CNBC Monday that “this is going to be a huge industry.” But a legalization of sports gambling could also benefit countless others, from sports leagues to sports data providers to fantasy football giants like Yahoo.
That is if federal legislators don’t put a stop to sports gambling before it gets off the ground: Senator Orrin Hatch (R-Utah) announced Monday that he would introduce new legislation “to help protect honesty and principle in the athletic arena” in the coming weeks. Hatch had been one of the four authors of the very law that the U.S. Supreme Court struck down on Monday.