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The House Always Wins – Billionaires Cash In On Sports Betting

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If you’re like many people, then you are a fan of professional or college sports. For many of us, sports are an important outlet to express city or school pride, a welcome diversion from the grinding demands of the workplace, and they help us feel a sense of belonging to something greater than ourselves. Sports can also reflect the broader struggles in society, like in the fight for trans rights or when NBA players went on strike in 2020 in support of Black Lives Matter. 

But for the billionaires, sports are also big business. The sale of tickets, concessions, apparel, and TV licensing rights nets billions in profits for each of the major sports franchises. Colleges build entire reputations on the backs of their unpaid, “amateur” players. What’s more, these super-rich owners often make working people foot the bill for their lavish stadiums filled with luxury suites for the rich. And in many ways, a billionaire hasn’t truly become mega-rich until they own a sports team.

By the 2010’s the sports barons had wrapped their tentacles around every aspect of their “product,” except for gambling. While the time-honored tradition of a friendly little bet on a ballgame or the office Super Bowl squares pool went on, gambling was impossible to scale up to a billion dollar business because it was technically illegal. So when Big Tech, Uber-style “disrupter” money came looking to break into digital sportsbooks, the big leagues wanted to play ball.

Supreme Court Bursts The Dam

For decades, betting on sports events was heavily regulated, and in most places illegal. Many states had outright constitutional bans. What little legal betting was permitted had strict regulations and limited betting to specific locations and hours of the day. To cap it off, a federal law called the Professional and Amateur Sports Protection Act (PASPA) almost completely prohibited the expansion of sports betting.

But in 2018, in a little-known case called Murphy v. National Collegiate Athletic Association, the Supreme Court struck down PASPA using the same reactionary “states’ rights” argument that they would later use to gut abortion rights. 

Almost overnight, online sportsbooks became a multi-billion dollar industry. Driven by the gaming industry, the sports leagues, and politicians eager to please big money donors, state after state began throwing open the doors for rapidly expanding sportsbook empires. And it’s been both Republican and Democratic politicians leading the charge. In fact, three of the largest and most influential states in gaming policy, Nevada, New Jersey, and New York, are so-called “Blue States,” led by Democrats.

Barely two years into this wild west gambling environment, the 2020 COVID pandemic supercharged the pace of sports gambling’s expansion. The lockdowns created a perfect storm of market conditions, with lawmakers seeking new means to generate tax revenue and “punters” (this is the disrespectful term used by the gaming industry to refer to people like us who might use their product) looking for something to occupy their free time at home.

How Do Sportsbooks Make Money?

In September 2023, 73.5 million Americans said they planned to bet on the NFL this season, a new record, and an almost 60% increase from last year. By the end of 2023, 33 states had legalized online sportsbooks. In that time, the industry handled over $250 billion in bets, more than three times what California pays for public education in one year. Already the industry is expecting to break the $1 trillion dollar mark, almost certainly before 2030. And this is before sportsbooks become legal in the enormous markets of California, Texas, and Florida.

On average, individual bettors only win back $90 of every $100 bet. After promotions and taxes ($4.1 billion), the industry has so far kept $15.9 billion dollars for expenses and profit. With 21st century technology and algorithms, it is possible for the sportsbooks to mathematically ensure that enough “punters” will lose so that the house comes up on top. The bookies are in total control of the numbers, intentionally and unfailingly setting the odds and payouts to ensure they turn a profit. The industry is the only player in the game that always wins.

Recognizing a chance to make easy money when they see it, Wall Street and venture capital quickly entered the market, investing heavily in major market players like Draft Kings, Fanduel, and others. Using their economies of scale and an inescapable carpet bombing campaign of advertising, these big businesses have cornered the market fast. It’s the merciless banks and money-managers who stand to win from the gaming industry, not football fans sitting on their couch trying to cash in on an impossible parlay. 

The quick consolidation of the sportsbooks and immense flow of cash into gaming generally has seen the industry snake its tentacles out into the sports business directly. None other than the Shelden Adelson family – arch Republican donors, enemies of labor, and owners of the enormous Las Vegas Sands gaming empire – have contracted with fellow billionaire Mark Cuban to buy a majority interest in the Dallas Mavericks. Can people really trust a game when the same people who control the numbers also control the sport?

Why Is This A Problem?

The sportsbook industry says that this explosive growth and profit is harmless fun, and enables sports fans to join in with the competition by putting some skin in the game. But the reality is more complicated and much darker. For starters, sportsbooks are an inherently rigged game. There is a lot of truth to the old saying, “The house always wins”. The entire business model produces more losers who lose more money than the cash the smaller number of winners walk away with. The gambling industry wouldn’t be profitable otherwise. 

There are enormous public health concerns involved with sports gambling. The National Council for Problem Gambling estimates that the risk of gambling addiction increased by 30% between 2018 and 2021, a rise directly tied to legal sports gaming. There’s also evidence that strongly suggests sportsbooks, by virtue of being common and more socially acceptable, are much more likely to entice problem gambling than more traditional gambling in far-away, windowless casinos. 

Some argue that it is better to have sports gambling “above board” where it is more visible, and legal to eliminate the more destructive elements of the game. But this position completely ignores how legalization combined with big money has vastly and exponentially expanded sports gambling. While BetMGM might not have goons ready to break your legs over unpaid debts, there are plenty of banks to repossess your car and landlords to evict you. And virtually everyone can access the games from the phones in their pockets.

Like with the expensive boondoggles of public money for private sports stadiums, the sportsbook industry argues that gaming raises tax revenue and increases economic activity. But this has quickly been exposed as a lie. New Jersey was the first state to legalize sports gambling, literally the moment the Supreme Court issued their ruling. A report released just this month showed that the billions of dollars placed in sports bets decreased economic activity by about $180 million and that the $380 million in tax revenue might offset the increased social costs in healthcare, welfare, homelessness, and criminal justice linked to the industry.

What Can We Do?

Sports are genuinely enjoyed by a huge cross-section of working people today. For many, a friendly bet or an office bracket on a game’s outcome or a player’s performance is a way to deepen their enjoyment. However, by definition, a “friendly bet” is not exploitative – no true friend would take your rent or grocery money over a ballgame bet.

For starters, we can end the practice of initial promotional discounts gaming companies offer to new customers. The propaganda-like ad campaigns should be banned, like we do with other harmful products such as tobacco. Going further, problem gambling is a compulsive activity, and can be disrupted by putting some transactional friction into place. We should institute limits on the number of daily wagers to tamp down on compulsive gambling, require a “cool-down” period between placing and confirming bets, and limit wager amounts. 

To protect the integrity of both the actual sports and the betting games, there should be no cross-ownership of franchises and sportsbooks. Both industries should be heavily taxed, with that money going directly to mental health, addiction, and other social programs addressing the social problems associated with problem gambling.

Finally, the sports teams and the books should be taken into public ownership, both to ensure the integrity of the sports and to democratically determine whether to keep organized sports betting at all. No billionaire should profit at our expense, simply for enjoying friendly competition and the sense of belonging to a team.

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