SCOTUS Launches New Economy with
Legalized Sports Betting
Decision Raises More Questions Than It Answers

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To say this is just the beginning would be cliché, but what SCOTUS has wrought with its decision will
have lasting consequences that go far beyond sports betting.
SCOTUS Launches New Economy with Legalized Sports Betting
Decision Raises More Questions Than It Answers
The bookies in Las Vegas give the Golden State Warriors the best odds to win the NBA Finals this year. At 5/8 odds, if
you were to bet $100 on the Warriors – winners of last year’s NBA championship – to win the NBA Finals, then you
would win $162.50. But if you were to bet that same $100 on the Cleveland Cavaliers – runners-up in last year’s NBA
Finals – to win the whole thing this year, you would win $900.00.
You needn’t be a seasoned gambler to see what’s at work here: these numbers are designed to entice basketball
fans to level the betting playing field and wager evenly on both sides of a game.
Since 1992, the betting playing field has been anything but level.
Signed into law by President George H.W. Bush, the Professional and Amateur Sports Protection Act (PASPA) banned
states outside of Nevada, Delaware, and Oregon from regulating (and taxing) sports betting.
In other words, if you wanted to gamble legally on a sport you had to do so in one of those three states. For a state
like Nevada, this was great business. The state took in $4.5 billion in bets in 2016, and earned $219.1 million from
taxes.
It’s easy to see why other states would want in on this action. According to the American Gaming Association (AGA),
at least $150 billion a year is gambled on sports in the U.S. and 97% of that amount is bet outside of Nevada,
Delaware, or Oregon. And if other states could regulate and tax sports betting, they might not face revenue
shortfalls.
Fortunately for those states, the U.S. Supreme Court agrees. In a 6-3 decision in the case Murphy vs. National
Collegiate Athletic Association, SCOTUS ruled that because Congress exceeded its constitutional authority when it
passed PAPSA. In essence, Congress tried to prohibit state legislatures from repealing their existing statues that
outlawed sports betting. Under a line of Supreme Court precedent known as the anti-commandeering doctrine,
federal efforts to coerce states into enforcing federal law are unconstitutional violations of the Tenth Amendment
SEVEN “FUTURES” WE’RE PLACING BETS ON:
1) A complete re-contextualization of how we
consume sports.
Anthony Downs wrote in An Economic Theory of
Democracy that there were only four types of
information: production information, consumption
information, entertainment information, and political
information.
• Production information helps you make smarter
business decisions. If you’re a stockbroker, The Wall
Street Journal is production information for you.
• Consumption information makes you a better
consumer. If you’re going to a movie this weekend,
Rotten Tomatoes is consumption information for
you.
• Entertainment information is self-explanatory –
anything you consume primarily to be entertained,
whether high culture (a great novel) or low (a
Kardashian).

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• Political information is anything that makes you a more
informed voter.
Why does this matter? Because an awful lot of sports
journalism is about to move from entertainment information
– stuff you read because you enjoy it – to production
information – stuff you read because you think it’ll help you
make money.
2. Information = POWER.
Most traditional and local outlets can’t take advantage of
this shift, but for national outlets this means everything.
Want to subsidize information gathering that also
benefits a wider audience? Convince readers to pay top
dollar for information that has real value and measurable
results.
Still, sports media has a long and complicated history
with gambling. Traditionally, outlets were reluctant to
air, or placed outright bans on, commentary directly
referencing the lines. As The Ringer’s Bryan Curtis notes,
“After the new century dawned, writers and
broadcasters started talking gambling more freely.”
So, even if sports betting becomes legal, will “big” media
companies be comfortable participating? Or, more
specifically, just how close to this can they get? Recall
that in 2015, Disney’s ESPN was set to invest directly in
Draft Kings, but the deal fell apart at the last minute, and
the suggestion was that Disney’s top executives weren’t
comfortable aligning Disney’s brand with betting. Will
that change now?
The fact is, it’ll be hard for many of the big media to pass
up the revenue. Spend by online bookies – on average
they spend over 25% of their total revenues on
marketing – will be the next big driver of growth in
sports sponsorship. And will these new investors crowd
out traditional sponsorship deals with beer, automotive,
and CPG brands?
3. Separating the Haves from the Have-Nots.
For major pro sports, there’s just too much free
information out there – much of it produced by the
leagues themselves – for a paid product to demand
more than a niche audience. But there have been some
successes: fantasy sites, both those that offer league
infrastructure and those that promise inside dirt on who
to sit or start. Most fantasy leagues aren’t big-money
endeavors, but players really want to win – and people
are willing to pay for things that help them win.
Add legal sports betting to the existing (and thriving)
fantasy infrastructure and the entire ecosystem of paid
sports information is about to get a big boost. And
because this is producer information, its exclusivity is a
big part of its usefulness. If everyone knows a player’s
injury is acting up and he can’t get perform at 100%, the
information isn’t valuable anymore.
Imagine, then, a premium tier upon a premium tier upon
another premium tier … and on and on.
4. An explosion of new investments and new products.
Legal sports betting will lead to a rush in new apps and
services. Fantasy sites like Yahoo Sports, DraftKings and
FanDuel will lead the way. Media companies like ESPN,
Fox Sports and Turner Sports will also play a major role.
And there will be new startups who move into this space
offering direct betting services or new content built
around betting.
We’ll also see tech giants take the plunge, much like
Google did when it streamlined the flying experience
with Google Flights.
The point is, we’re entering a new frontier for content
around sports betting, including news, analysis, and data
analytics. And for sports teams, this means more money
for them. A surge in sports betting would almost
certainly drive a surge in sports viewing. As Dallas
Mavericks owner Mark Cuban told CNBC: “I think
everyone that owns a top four professional sports team
saw the value of their team double.”

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5. Congress isn’t done yet. Both sides of the gaming
debate on Capitol Hill have reacted to the Supreme
Court’s decision. Senator Orrin Hatch (R-UT), one of the
original authors of PAPSA, stated that "At stake here is
the very integrity of sports. That’s why I plan to
introduce legislation in the coming weeks to help
protect honesty and principle in the athletic arena.”
Justice Alito’s opinion concedes that Congress has the
power to regulate sports betting directly, only that
Congress cannot prohibit states from repealing their
own bans on betting. Senator Hatch held back the
details of his proposal, but it may be a hard sell in the
current political environment.
Meanwhile, Representative Frank Pallone (D-NJ) was
well-prepared for the Supreme Court’s decision. Pallone
had circulated a legislative discussion draft of the
Gaming Accountability and Modernization Enhancement
(GAME) Act, which would remove federal obstacles to
legalized gambling in states that have implemented
basic consumer protections, including mechanisms for
age and location verification; safeguards to protect
privacy and data security of players; and recourse
mechanisms for consumers. Congressman Pallone’s
legislation is unlikely to gain traction in a Republican-
controlled Congress, meaning some voters are going to
have to “bet the House” on a Democratic wave in
November’s midterm elections.
6. State Legislatures Just Got a Lot More Important.
By weakening the power of the federal government to
commandeer state laws, a whole host of state-level
initiatives just received constitutional cover. For
example, supporters of so-called “sanctuary cities” –
cities that refuse to cooperate with federal immigration
officials to enforce immigration laws – have cited the
Tenth Amendment in recent challenges to the federal
government’s efforts to implement conditions on grants
for state and local law enforcement. States have also
made Tenth Amendment constitutional challenges to the
federal government’s recent efforts to enforce federal
marijuana laws in states that have legalized the drug for
either recreational or medical use. State governments,
once hailed by Justice Louise Brandeis as “laboratories of
democracy,” have received new constitutional authority
to continue their experiments.
7. A New Argument in Favor of Paying Players.
The Murphy decision might be only the beginning of the
NCAA’s woes. One of the NCAA’s key arguments against
compensating college athletes is that money would
threaten the integrity of the games. With the rise of
sports wagering, that threat will only increase. Paying
players fairly is a common-sense deterrent to bookies
seeking scouting reports or tempting players to shave
points. And revenue from sports betting could bankroll
players without cutting into the revenue schools already
receive from television and licensing deals. A 2011
Business Insider article estimated that equitable
payment of college athletes under a federal work-study
program would cost approximately $200 million per
year. Such a sum could be raised by adding a 25 cent vig
for every $100 wagered on professional and college
football every year – wagers that were illegal under
PAPSA.
Joshua Gardner
Vice President &
North American Lead,
Global Energy Practice
Wyeth Ruthven
Vice President
We’ve witnessed a sea change in the
world of sports and gambling – the
launch of a new economy built on vice,
not unlike the end of prohibition or the
legalization of marijuana. We have a
sense for what it means for businesses;
we don’t yet know what it will mean for
society and culture.