Five years ago this week, New Jersey played a pivotal role in repealing the Professional and Amateur Sports Protection Act (PASPA), paving the way for states to legalize sports gambling. Since then, two-thirds of the states have embraced legal betting, with Vermont and possibly Missouri poised to join the trend.
As we commemorate the five-year anniversary of this milestone, it is worth reflecting on New Jersey’s remarkable progress. Despite the widespread adoption of sports gambling, New Jersey continues to lead the nation in this domain. In March of this year, the state reported $93 million in revenue, making it the third-best month ever for New Jersey. The state has also made significant strides in addressing problem gambling, further solidifying its leading status.
The Repeal of PASPA and its Impact
On May 14, 2018, the Supreme Court made a landmark decision in a case originating from New Jersey. The court ruled in favor of overturning PASPA, a federal law that limited sports betting to only four states that had legalized it by 1991. This ruling reshaped the landscape of sports gambling, leading to collaborations between professional leagues and gambling companies to promote their brands. Sports arenas are now adorned with gaming advertisements; some even feature dedicated betting facilities. Betting odds have become an integral part of sporting events, and daily sports talk shows offer regular gaming advice. In essence, sports gambling has become mainstream in the United States.
Over the past five years, sports betting taxes imposed on operators have generated nearly $3.6 billion in revenue, benefiting both state and local governments ($3 billion) and the federal government ($570 million). The legalization of sports betting at the state level has not only boosted tax revenues but has also provided an additional income stream for land-based casinos and horse tracks.
Since the Supreme Court overturned PASPA, Americans have wagered over $220 billion through legal sports gambling outlets. This figure includes bets placed until the end of March in most states, with sportsbooks retaining $17 billion in winnings during this period. The total amount wagered has significantly increased from $125 billion at the four-year mark. As of January last year, New Jersey alone accounted for $31 billion of that total, the highest among all states.
Challenges in the Post-PASPA Era
Naturally, the nationwide expansion of gambling has not been without challenges. Organizations dedicated to treating compulsive gambling report a substantial increase in calls seeking help since the legalization of sports betting. The National Council on Problem Gambling has seen a 15% rise in calls to its 800-GAMBLER helpline over the past five years, reflecting the rapid expansion of gambling across states.
Several NFL players have faced suspensions for betting on football games, while closer to home, a New York Jets coach was suspended for violating rules against betting on sports other than football. Colleges in other states that partnered with sports leagues were fined for illegally promoting sports betting to underage students, leading to revisions in policies by leagues and gambling companies. Additionally, New Jersey regulators suspended Citrus Bowl bets due to a conflict of interest involving honorary Purdue coach Drew Brees and his association with PointsBet.
The inundation of sports betting advertisements has triggered a backlash, resulting in significant fines for DraftKings and Barstool Sportsbook in Ohio for alleged violations. Consequently, the gambling industry and major professional sports leagues have adopted stricter advertising standards to address the proliferation of gambling ads, particularly those related to sports betting. These measures are intended not only to curb excessive gambling advertising and preempt potential government regulation of such ads.
New Jersey’s Focus on Consumer Protection
According to gambling analytics firm Eilers & Krejcik, two major sportsbook operators, FanDuel and DraftKings, dominate over 70% of the national sports betting market.
In the 12-month period ending in February 2023, FanDuel held just under 46% of the market, while DraftKings had over 25%. Other notable operators include BetMGM, with nearly 12%, and Caesars Entertainment, with 6.7%. No other sportsbook operator holds more than 2.4% of the market, according to this NJ casino guide.
The trend of locating sportsbooks in or near professional sports stadiums is expected to continue, and operators may reduce their promotional spending to manage costs. Additionally, there is an ongoing exploration of online sports betting prospects in California, Texas, and Florida, where legislation is still being discussed or facing legal challenges.
New Jersey pioneered nationwide sports gambling five years ago and remains strong in the industry. In March, New Jersey’s sports betting revenue reached $93 million, marking the third-highest recorded month since legalization. This figure represents a 40% increase from February and falls below only the revenue generated in November 2021 ($114 million) and September 2022 ($97.9 million).
In March, New Jersey sportsbooks retained 9.1% of the bets, resulting in $11.9 million in sports betting taxes. Online bets accounted for more than 95% of the taxed amount. This past March marked the fifth instance in six months where the total sports betting handle in New Jersey surpassed $1 billion, with $1.026 billion wagered during the month.
