By: Meredith Garrity
Massachusetts is no stranger to a winning reputation when it comes to professional sports, home to winning franchises such as the New England Patriots, the Boston Celtics, the Red Sox, and the Boston Bruins. In recent years, the state has also become host to several online sportsbooks, upholding the multi-billion-dollar industry of online sports betting. An online sportsbook accepts sports bets online by allowing individuals to create and fund betting accounts either on a computer or a mobile device. However, many are concerned about the impact an absent federal framework, overseeing this industry, may have on consumers and their well-being. With the introduction of the Supporting Affordability and Fairness with Every Bet Act (“SAFE Bet Act”), lawmakers are beginning to address the mounting issues that have arose from this market.
Although not legal until 1931, sports betting has been lively throughout the U.S. long before our current market, finding its roots in horse racing. In 1949, Nevada became the first state to legalize sports betting, authorizing bets on all professional sports. Not long after, the government began imposing a 10% tax on players’ total betting revenue, leading to the rise of illegal gambling operations, controlled by prominent crime families. To combat this growing, unregulated industry, Congress passed the Wire Act in 1961 (28 U.S.C. § 1084) which prohibited the use of wire communications to bet or pay winnings related to sports bets across state lines. The next sweeping round of regulation came in 1992, when Congress passed the Professional and Amateur Sports Protection Act (“PAPSA”), which prevented states from “sponsoring, operating, advertising, promoting, licensing, authorizing by law… a lottery, sweepstakes, or other betting, gambling, or wagering scheme” based on amateur or professional athlete participation. (28 U.S.C. § 3702). The act also prohibited individuals from engaging in those same activities, effectively ending the ability of most states from legalizing sports betting.
However, in 2018, PAPSA came to a screeching halt in the wake of Murphy v. National Collegiate Athletic Association, wherein the Supreme Court declared the act unconstitutional. The issue arose in 2011, when New Jersey citizens voted to approve an amendment to the state constitution that allowed the legislature to authorize sports betting. In 2012, the legislature enacted a law authorizing sports betting, however it was not warmly received, as major professional sports leagues and the National Collegiate Athletic Association (“NCAA”) immediately filed action in federal court against then New Jersey governor, Chris Christie, and other state officials representing New Jersey.
The NCAA stated that the state law violated PAPSA and therefore should be enjoined, to which New Jersey argued that PAPSA was unconstitutional. New Jersey claimed that PAPSA conflicted with the anti-commandeering principles of the 10th amendment, which prohibits a federal statute from compelling state officers to enforce federal law. Through statutory interpretation and a reliance on 10th amendment case law, the Supreme Court held that PAPSA was unconstitutional. The Court found that provision was a “direct command to the States”, which was in conflict with the anti-commandeering doctrine. This holding left states on their own to legalize and regulate sports betting.
In the aftermath of Murphy, 38 states, including the District of Columbia have legalized some form of sports betting, with 29 of those states legalizing online or mobile bets. This market exploded into a roughly $10 billion industry in 2023, with expansion on the horizon this coming year. However, it is important to note that while Murphy significantly diminished the federal government’s regulation of sports betting, the Wire Act remains intact. Therefore, while the federal government still has the ability to govern online sports betting, every state that has legalized it can only regulate their state’s legislation within their own borders. This has raised questions of how states can oversee this digital and extremely public industry, calling into question whether the federal government should make sweeping reforms.
This rapidly expanding market has created concerns regarding how differing state regulations coupled with a lack of federal oversight impacts consumers. As the mobile sports betting industry is openly accessible in this digital age, a rise of problematic gambling behavior and data privacy concerns, has left many asking the federal government to step in. After Murphy, several states have seen an increased number of those suffering from gambling disorders, however, the federal government has not contributed any federal funding to addressing this serious framework. While some states, like New Jersey, have implemented a framework that addresses gambling problems, other states, such as Mississippi do not spend any money in combating this issue.
Consumers are also susceptible to significant risks that an online forum poses, as many digital sportsbooks require users to upload personal identifying and financial information. To verify your age and financial details, online sportsbooks require you to provide valid identification, such as a passport or driver’s license, as well as a proof of address. Further, users will need to provide sensitive financial information in order to make bets online, implicating data privacy concerns. There is a notable lack of comprehensive federal legislation that addresses data privacy protection within this market, leaving consumers in the hands of the online sports titans to regulate and protect extremely sensitive information.
Concerned with the growing impacts consumers face after Murphy, lawmakers have introduced the SAFE Bet Act to establish a regulatory framework of online sports betting. Under the legislation, the U.S. Justice Department will require states to go through an application process, reviewed by the U.S. Attorney General, granting approvals for three year period, or alternatively, rejecting the application.
The SAFE Bet Act looks to address the growing number of those suffering from problematic gambling behaviors, by instituting regulations on sports betting advertisements, restricting the ability of consumers to bet without limits, and prohibiting the use of AI to track consumer behavior and habits. Consumers will ultimately be better protected by this framework, as the regulations look to establish a uniform approach to overseeing this market.
While online sports betting has certainly created a lucrative and rapidly expanding industry, consumers continue to face growing issues of problematic gambling behavior, and data privacy protection concerns, leaving many in a vulnerable position. Due to the increasingly accessible nature the online sports industry offers, regulation may be challenging at a national level, albeit necessary to protect consumers. Looking towards the future, the SAFE Bet Act provides a promising development in addressing the various issues that the current sports betting market exhibits, promoting a safer platform for sport betters.
Student Bio: Meredith Garrity is a second-year law student at Suffolk University Law School. She is a staff member for the Journal of High Technology Law. Meredith received a Bachelor of Arts degree in Economics and Politics from Ithaca College in 2023.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
