Bradley C Bower/AP
Delaware Gov. Jack Markell 

Delaware to Legalize Form of Sports Betting

May 13, 2009 05:00 PM
by Denis Cummings
Delaware will soon become the only state east of the Mississippi to offer sports betting after the state Senate passed a bill Tuesday to legalize a sports betting lottery.

Delaware Legislature Passes Sports Betting Bill

The Delaware Senate on Tuesday voted 17-2 in favor of a bill to legalize sport betting in the state. The bill, proposed by Gov. Jack Markell, will allow the state’s three racetrack/casinos to offer a lottery based on the results of sporting events. Markell is expected to sign the bill into law later this week, and he hopes that it can be put into effect by the start of the NFL season in the fall.

The bill passed a week after a similar bill failed in the state House of Representatives due in large part to the casinos’ objection. The revised bill decreased the state’s cut of slot revenues and removed a clause that allowed the creation of three new casinos.

According to the bill’s proponents, the state—which faces a budget deficit of more than $600 million this year—will receive $52 million from betting in the first year it is allowed, down from an estimated $55 million in the original bill, The Associated Press reports. “This will generate critical revenue to help fund our core commitments,” commented Markell.

Delaware will become just the third state, after Nevada and Montana, to allow a form of sports betting. Those three states plus Oregon, which abandoned its sports lottery game in 2006, are the only four states allowed by the federal government to legalize sports gambling, having been granted exemptions under the 1992 Professional and Amateur Sports Protection Act.

Currently, PAPSA only allows for Delaware to offer parlay bets, which are a combination of at least two bets. The Delaware bill includes a provision to allow single-game betting; the state Supreme Court is expected to rule on its legality once the bill is passed, reports ESPN.

If sports betting is successful for Delaware it could have widespread ramifications for the U.S. gambling industry. Other states—particularly neighboring states—would be encouraged to push for the right to legalize it; already, a New Jersey state senator is challenging the constitutionality of PAPSA.

“A state will usually start out with very strict regulations,” said University of Nevada-Reno economics professor Mark W. Nichols to The Baltimore Sun. “Then a nearby state sees its residents traveling to that neighboring state to gamble and that serves as a justification to legalize gambling in that other state.”

Analysis: What will be allowed in Delaware

The Delaware bill will allow sports betting in the form of a lottery based on sporting events. It will not allow true sports betting or bookmaking, which is only allowed in Nevada. It is “simply a form of parlay betting, with games and teams likely already selected by the lottery,” explains the Online Gambling Paper.

Only parlay bets, a combination of at least two bets, are allowed, because “[t]he law has determined that sports betting must be a game of chance, and not skill,” explained Joe Weinert, senior vice president of the Spectrum Gaming group, to gambling site Covers.

Parlay bets, where the odds of winning are at least one in four, would therefore qualify as a game of chance, while a straight bet, where the odds are one in two, would qualify as a game of skill.

Background: Sports betting in the United States

In 1992, Congress passed the Professional and Amateur Sports Protection Act, which forbade states from sponsoring or legalizing wagering on sporting events. It “all but stopped the expansion of legal-land-based sports wagering in the United States,” according to the Global Gaming Business, though four states that allow forms of sports gambling were allowed to continue doing so.

These exemptions were created in order to allow Nevada, which has an economy highly dependent on gambling, to continue allowing sports books, but they also applied to Montana, Oregon and Delaware. Delaware was granted the exemption based on a state lottery game than ran in 1976 that involved picking NFL games against the spread.

New Jersey, home to Atlantic City, was also granted an exemption of sorts; PAPSA allowed states that had legal gambling for the previous 10 years to pass a law legalizing sports gambling within a year. The New Jersey legislature was unable to pass such a law, and thus it is not currently allowed to legalize sports gambling.

Other forms of gambling, most notably slots, have expanded significantly since 1992 and now 37 states have legalized gambling. Pennsylvania and Maryland have each approved slots recently, driving money away from gambling options in Delaware and New Jersey; sports betting could help bring the money back.

“Sports betting can draw people away from the other states,” said Delaware House Speaker Pete Schwartzkopf to USA Today. “And while there is money to be made on sports betting, the real dollars are in the carryover to casinos.”

New Jersey state Sen. Raymond Lesniak believes that legalized betting would raise revenue for the state and benefit Atlantic City. He filed a lawsuit in March against the Justice Department arguing that PAPSA should be overturned because it unconstitutionally discriminates against the 46 states where sports gambling is prohibited.

In a press conference announcing the lawsuit, Lesniak declared, “This federal law deprives the State of New Jersey of over $100 million of yearly revenues, as well as depriving our casinos, racetracks and internet operators of over $500 million of gross income. … PASPA represents a substantial intrusion into States’ rights and restricts the fundamental right of States to raise revenue to fund critical State programs.”

Legalized sports wagering can have economic drawbacks, however. Professional sports leagues and the NCAA are strongly opposed to gambling on sports, and treat states that allow it unfavorably.

Oregon dropped its sports lottery game in 2006 after the NCAA said it wouldn’t allow the state to host tournament games. “The rationale was that the state could realize more economic benefit from hosting NCAA (basketball) tournament games,” said Oregon Lottery spokesman Chuck Baumann to USA Today.

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