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How the Sports Betting Ruling Will Impact State Budgets

The Supreme Court outlawed a federal ban on sports betting on Monday, and some states are poised to capitalize.

A crowd watch sports while making bets at Caesars Palace in Las Vegas.
The U.S. Supreme Court’s reversal on Monday of a federal law banning sports betting in most states is expected to boost revenues for gaming companies and -- at least for now -- a handful of states.

Connecticut, Mississippi, New York, Pennsylvania and West Virginia stand ready to benefit because they recently legalized sports betting in anticipation of a favorable ruling in the case Christie v. NCAA, which challenged the 1992 Professional and Amateur Sports Protection Act banning states from authorizing or licensing sports betting.

“They do have an advantage because they have already gone through whatever legal process it is they have to go through,” says Marcy Block, senior director at Fitch Ratings. “That’s really the first hurdle.”

With a majority of legislatures adjourned for the year, most states will have to wait until next year to act unless a special session is called. (Four states -- Delaware, Montana, Nevada and Oregon -- met a 1991 deadline to approve sports betting before the federal ban went into effect.) 

The case was brought by former New Jersey Gov. Chris Christie, who argued that the federal ban violates states’ 10th Amendment right to govern themselves. On Monday, the court agreed in a 6-3 opinion. In striking down the 1992 law, the justices said the legalization of sports gambling was an important policy choice. “[B]ut the choice is not ours to make,” Justice Samuel Alito wrote. “Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own.”

Scores of state and local government organizations supported overturning the ban. In a statement Monday, the National Conference of State Legislatures called the case a “landmark ruling” that “provides states another tool with which they can continue to craft smart, tailored policies during a time of congressional gridlock in Washington.”

The additional money sports gambling could bring is attractive given that most states are seeing constrained revenue growth. Other legal forms of betting -- such as casino gambling and betting on horse races -- are already a $28 billion industry in the United States. Adding sports betting could boost that by as much as $41.2 billion, which the American Gaming Association found would net state and local governments about $3.4 billion in taxes.

But that total revenue estimate pales in comparison to the $2 trillion states spent collectively last year.

Nevada provides a good case study. A recent Moody’s Investors Service report noted that sports betting in Nevada accounted for just 2 percent of statewide gambling revenue. “What I’ve heard from corporate analysts in Nevada,” says Fitch’s Block, “is it’s a very small piece of the pie in terms of activity.”

Rhode Island, which has yet to legalize sports betting, has already estimated that it would bring in $23.5 million -- less than 1 percent of its $9.38 billion budget.

The five states that have legalized it over the past year still have several administrative or statutory decisions to make. Connecticut, for instance, hasn’t worked out where exactly in the state sports betting will be allowed. “There’s still a lot of movement and indecision,” says Block.

Liz Farmer, a former Governing staff writer covering fiscal policy, helps lead the Pew Charitable Trusts’ state fiscal health project’s Fiscal 50 online resource.
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