Gambling’s Spread

Four years ago, betting on live sports was illegal in most of the United States. Now, fans watching games or attending them at stadiums are barraged with advertisements encouraging them to bet on matchups, not just watch as spectators.

This transformation in sports betting started nearly a decade ago, at first with the explosion of wagering on fantasy sports. Then in 2018, the Supreme Court cleared the way for states to legalize wagers on live games. Today, 31 states and Washington, D.C., permit sports gambling either online or in person, and five more states have passed laws that will allow such betting in the future. Professional sports in the U.S. now are part of a multibillion-dollar corporate gambling enterprise.

This shift represents the largest expansion of gambling in United States history. Several of my Times colleagues and I spent months investigating how the industry expanded, and today I want to highlight some of our findings.

Unmet promises

Once sports betting was more broadly legalized, casinos teamed up with sports betting platforms like FanDuel and DraftKings, along with the major professional sports teams, to go state by state to push lawmakers to embrace it. Part of their tool kit for persuasion? Millions of dollars in contributions from the sports betting companies and their allies to those lawmakers’ campaigns for office.

We found that gambling industry representatives had told legislators they could expect to see significant tax benefits from sports betting. In many states, that windfall has fallen short.

Take Michigan, home to the Detroit Tigers, Lions, Red Wings and Pistons professional teams, along with another two dozen college athletics N.C.A.A. programs — in short, a whole lot of sports to bet on. Online sports betting started in that state in January 2021, and the American Gaming Association predicted that state legislators could expect to see more than $40 million a year in tax revenues. What has Michigan collected in the last year? Just $21 million in state and local taxes, according to the Michigan Gaming Control Board.

The gambling industry also pressed states to keep tax rates low on sports betting, warning that if the states pushed rates too high, sports fans would turn to the black market to place bets on unregulated sites. Those warnings were misplaced. Some states, including New York and New Hampshire, ignored the industry’s advice and installed the highest tax rates on betting. They have seen bets placed at a higher rate per capita than many low-tax states. New York has seen so much betting — even with a high tax rate of 51 percent — that the state has collected an extraordinary $546 million in taxes in the first 10 months of this year. That amount is half of all the state tax revenues on sports betting nationwide.

Little oversight

Many of the states also allowed the gambling industry to give out hundreds of millions of dollars’ worth of tax-free bets to gamblers, essentially marketing the industry. The promotions are intended to entice new customers to form a new habit: placing wagers on games. It is the modern-day equivalent of the free bus ride to Atlantic City casinos with a roll of quarters thrown in for the slots. Arizona sports betting operators alone gave out $205 million in free bets. But for states, the result was large shortfalls in expected tax revenues in places like Michigan and Virginia. Some, Virginia included, moved to curtail the tax-free bets.

The promotions were one example of how regulators were outmatched in trying to oversee the industry as it grew so rapidly. Rule enforcement was scattershot, punishments were light or rare, and regulators often looked to the gambling industry to police itself.

One casino company, Penn Entertainment, teamed up with David Portnoy, the founder of Barstool Sports, who has a history of misogynistic and racist behavior, turning him into a public spokesman for sports betting.

University involvement

To market their expansion of sports betting, gambling sites reached unusual agreements with at least eight universities, including Michigan State, the University of Colorado at Boulder and Louisiana State University. The schools became partners with the companies in exchange for millions of dollars in payments. These deals generated questions about whether promoting gambling on campus — especially to people who are at an age when they are vulnerable to developing gambling disorders — fits the mission of higher education.

More to come

At least $161 billion in wagers have been placed since sports betting was broadly legalized in the United States. This explosion of gambling is just the start. Betting companies have made clear that the ultimate goal is to bring so-called iGaming to states across the nation, where customers can use their mobile phones to play blackjack, poker and other casino-style games.

The Times investigation

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