With lotteries in 44 states, casinos in 43 states and daily fantasy-sports games available in 41 states, this rush toward new forms of gambling makes sense. State governments have an obvious incentive to legalize more forms of betting to raise revenue in a seemingly painless manner.
Gambling proponents primarily base their support for legalized sports betting on a single argument: Gambling is happening anyway, so states should legalize it and take a cut. ESPN’s Scott Van Pelt and The Washington Post’s George Will, both supporters, note that sports gambling is readily available in Las Vegas, on the Internet or through a local bookie. According to a brief filed with the Supreme Court by the American Gaming Association, Americans illegally bet $150 billion on sports every year, including a combined $15 billion on the Super Bowl and March Madness alone. So why not reap the tax benefits of this illicit vice?
This argument has been effective at sweeping aside concerns from opponents that gambling is a regressive tax with negative social effects. But this common-sense contention is deeply flawed.
In the 1960s and 1970s, gambling proponents made a nearly identical claim as they pushed for state-run lotteries — and they turned out to be wrong. Lottery supporters insisted gambling was happening anyway, so the state may as well keep the income for itself. Yet over time, lotteries attracted millions of new bettors and made gamblers out of those who might never otherwise have placed a wager.
This history of American gambling reveals the stark truth about legalized sports betting: Though proponents may not want to admit it, legalization will greatly increase the number of Americans who bet on sports, as well as how much money Americans bet every year.
In the mid-20th century, illegal gambling was a prevalent part of American life. European immigrants and others bought tickets for a popular Dublin-based lottery called the “Irish Sweepstakes,” and numbers games (three- or four-digit daily lotteries) proliferated in urban working-class communities, especially African American enclaves such as Harlem in New York City and Brownsville in Chicago.
In the 1930s, when the end of Prohibition removed alcohol bootlegging as a source of revenue, mobsters shifted their attention to illegal gambling. Organized-crime figures played a crucial role in erecting legal casinos in Las Vegas and illegal numbers and sports gambling operations nationwide.
By the late 1960s, federal officials estimated illegal lotteries alone garnered as much as $5 billion in sales every year.
Because of the lingering connection between betting and the mob, legalized gambling was a relative rarity outside of Nevada, though some states permitted bingo or pari-mutuel wagering on horse racing (in which payouts are determined by the total amount bet rather than fixed odds determined by the track). Yet opposition to legalization began to fade away in the early 1960s, as polls indicated that approximately half of Americans supported government-operated lotteries.
State-run lotteries appeared to offer a panacea for state governments: They could tap into a substantial new stream of revenue while scoring a blow against organized crime. Many lottery proponents presumed gambling to be inevitable. One Connecticut taxpayer summarized the prevailing wisdom, writing his governor in 1970 that he was “for a state lottery, racetracks, and other similar forms of good income. … Crime and gambling are here now. Better the state should rake in the profits than a bunch of ‘bookies.’”
Unsurprisingly, many of the first states to legalize lotteries — including New York, New Jersey, Illinois and Maryland — were also hotbeds of organized crime and illegal gambling.
However, the government proved to be no match for the mob. States did not initially offer a daily numbers game or sports betting, nor did they extend credit to cash-strapped gamblers. So for the first years of state-run lotteries, gamblers eschewed legal operations, sticking instead with their favorite illegal games. It was not until the 1980s that numbers players, lured by better odds and more reliable payouts, gradually shifted their allegiance from illegal lotteries.
Yet by this point, state lotteries were doing much more than simply trying to siphon revenue away from illegal gambling. Revenue-hungry legislators charged lottery officials with meeting the unrealistic profit expectations that had enticed voters to enact or support lotteries. This assignment prompted an embrace of various innovations designed to entice as many gamblers as possible through a diverse array of lottery games, and states went far beyond marketing these games to illegal gamblers.
With the introduction of scratch tickets in 1974 and lotto (progressive jackpots) in 1978, state lotteries began attracting more people — including those who had been unwilling to gamble illegally. The burgeoning lottery ticket industry facilitated the spread of lotteries across the country through both lobbying and company-sponsored ballot referendums, bringing lotteries into states that had been unburdened by illegal gambling and organized crime. By the 1990s, when Congress passed PASPA, illegal lotteries had effectively disappeared, but state-run games had become an ingrained part of the national commercial landscape.
The result was that, contrary to the initial promises of lottery proponents, state-run lotteries created millions of new bettors. While illegal games had been popular, they were not nearly as widespread as state lotteries, which today entice 25 percent of American adults to buy at least one ticket every week. The number of lottery gamblers may expand further in the coming years as state lottery commissions begin accepting ticket sales over the Internet to make the lottery appealing to a new cohort of young bettors.
The possibility of tax-free income represents an attractive incentive for states to enact new forms of gambling. Yet when legislators examine legalized sports betting, they should not justify their pursuit on the promise that gambling will provide a painless source of revenue siphoned away from bookies or offshore websites. Illegal sports betting may be happening anyway, but legalization will increase the number of Americans desperate for their team to cover the spread, will increase the total amount gambled and will empower profit-hungry corporations interested in bringing gambling to as many people as possible as quickly as possible.
Individuals have the right to choose how to spend their money, and states have the right to raise money how they see fit. But when it comes to gambling, legislators should proceed cautiously, with full awareness that the legalization of sports betting in 2018 will have ramifications for generations of American gamblers.