Voters in Maryland, South Dakota and Louisiana approved measures to legalize sports betting in some form, setting those states up to join 22 others and the District of Columbia. Though those three and three others must still get operations up and running, bets could soon be placed legally in a majority of states just over two years after the U.S. Supreme Court in Murphy v. NCAA
opened the door for such activity.The state-by-state approach to legalization has created challenges for betting operators, limiting a potential national market. That has fueled calls for either a federalized approach or some form of model legislation that states can opt into. Experts say something like that could be possible under President-elect Joe Biden, but likely isn't imminent.
"I certainly think that you are going to continue to see the proliferation of legalization as time goes forward," said Irwin Kishner, co-chair of the sports law group at Herrick Feinstein LLP. "Obviously some of the states were ready and just waiting for the curtain to be drawn."
Biden did not make sports betting legalization or regulation an issue during the campaign, and it is not clear whether he would support a federal measure. He has, however, reportedly expressed disagreement with the Trump administration's broader interpretation of the Wire Act, signaling a more industry-friendly approach.
In the absence of federal action, states would be left to continue to navigate what Kishner described as "polycentric issues." Chief among them: whether to allow online and mobile betting, where bettors throughout a state can place bets using a computer or a mobile app without having to set foot inside a casino or go to a betting site.
While some states like New Jersey and Pennsylvania have opened the door for mobile and online sports betting, others like New York have only authorized it in brick-and-mortar casinos. And in New Mexico and Oregon, sports betting is offered only at Native American-owned casinos.
Meanwhile, D.C. allows for betting kiosks at sports venues, with one parlor opening up at the Capital One Arena, home to the Washington Capitals and Washington Wizards.
In other states like Rhode Island, sports betting is run by the state lottery. Tennessee is unique in that it is the first state to allow mobile and online sports betting on its own without any attachment to existing gambling infrastructure.
This patchwork of state regulations is creating headaches for operators and making the growth of the industry painfully slow, experts say.
"All these companies would like to have a national framework rather than dealing with different regulatory frameworks in multiple states and in many cases having to have some sort of brick and mortar operation," said Dennis Gutwald, a Las Vegas-based gambling industry attorney with McDonald Carano LLP.
"It would be much easier to have a national framework and be based out of one place, but certainly that is not how the law is evolving currently," Gutwald said. "It is happening on a state-by-state basis, and that makes expansion painfully slow for these companies."
He said even without a federal sports betting law, changes could be made to the Wire Act to allow betting operations to extend across state lines between states where they are legal. Federal lawmakers may have some appetite for such changes, at least to the extent states are allowed to reach so-called compacts — agreements to tie their betting industries together. Some have already done this with other forms of online gambling.
"I think that a compacting process that brought everyone on board or under the same regulatory regime, or same understanding at least — it may not be the same exact requirements in every state but at least have certain defined parameters for entry — that would facilitate nationwide betting," Gutwald said.
The U.S. Department of Justice under the Trump administration took an expansive view of the Wire Act, interpreting some of its restrictions that the Obama administration had found only applied to sports betting as applying to other forms of interstate gambling.
Such a position did not change the restrictions on interstate sports betting, but the change in interpretation has raised concerns for gaming operators. Legal challenges to that reinterpretation currently sit before the First Circuit.
Biden has reportedly suggested that he does not support the Trump administration's view. According to the website CDC Gaming Reports Inc., the Biden campaign issued a statement in December that he "doesn't support adding unnecessary restrictions to the gaming industry as the Trump administration has done."
A Biden campaign spokesperson did not respond to multiple requests from Law360 for comment.
Experts say the First Circuit's forthcoming ruling in the Wire Act case could determine whether it is even possible to go back to the Obama administration's interpretation, or whether the Wire Act could be further limited by the incoming Biden administration without congressional intervention.
Creating more uncertainty, one of the First Circuit judges who heard oral arguments in the Wire Act case died last month, meaning there may not be a final ruling until well after the January inauguration.
Speaking at a panel on the future of sports betting Tuesday, gambling law attorney John K. Maloney said allowing betting across lines between states where it is legal should be viewed as a win-win for both the betting industry and lawmakers who want to increase tax revenue.
"Open this up," Maloney said during the panel, part of a virtual conference sponsored by the International Masters of Gaming Law. "What that does is it creates a tremendous amount of liquidity in this marketplace. People want to bet; let's think about the consumer. But I think it also allows a lot more opportunity for those operators in Europe and for people who are being kept out of this industry now. So I think there is upside all around."
The American Gaming Association, a trade association for the gambling industry that has lobbied for the legalization of sports betting, said it plans to continue to work with federal lawmakers to improve the economic and legal outlook for sports betting on a national level.
In a statement to Law360, the AGA said they "look forward to continuing to work with members on both sides of the aisle to address overly burdensome and unnecessary regulations and taxes, as well as reducing illegal gambling operations that continue to pose a risk to the American public and the economic success of our industry."
For the foreseeable future, at least, it appears sports betting legalization will continue on a state-by-state basis as evidenced by the recent measures in Maryland, South Dakota and Louisiana. Though there are hurdles, the industry is growing.
"I was only surprised you did not see more state referendums" in the last election, Kishner said.
--Editing by Philip Shea.
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