The Professional And Amateur Sports Protection Act
The Professional and Amateur Sports Protection Act of 1992 (PASPA) followed 1961’s Interstate Wire Act as the next big American anti-gambling law at the federal level. PASPA was initially conceived by New Jersey senator Bill Bradley (D), who saw it as an opportunity to establish for his state – and its lagging Atlantic City casino district – an east coast monopoly on sports betting in the United States.
Framed as a way to protect the “integrity” of professional and amateur sports, athletes, and leagues, PASPA simply made it illegal for individual states to offer sports wagering in their casinos or other gambling facilities. Obviously, Nevada was exempted from PASPA, because the government perhaps believed that Las Vegas sports betting was incorruptible while other states’ wagering products couldn’t be. Of course, that makes no sense, and it is illogical that something like the Professional and Amateur Sports Protection Act would not be needed in Vegas but was simultaneously critically important to implement elsewhere lest the 1919 Black Sox make an unlikely reappearance. Why should anyone be exempt from “integrity”?
At any rate, the above is irrelevant, because the Professional and Amateur Sports Protection Act had (and has) nothing to do with protecting sports and everything to do with protecting the monopolized nature of sports betting. Only, in endlessly amusing, blundering government fashion, it didn’t work.
See, Bradley was trying to establish a system of legal sports betting in New Jersey while simultaneously trying to outlaw it everywhere else (sans NV). By doing this, his hope was to push the struggling Atlantic City into massive profitability, as it would suddenly become the only state east of the Mississippi to have legal sports betting on hand. The thought was that many millions of Americans in the eastern US would rather drive or fly a comparatively cheap, short distance to wager on their favorite sporting events in Atlantic City rather than Sin City.
PASPA Exemptions
It is important to know that the PASPA exemptions didn’t only apply to New Jersey, as that would have been too obvious even for something as patently brazen as this whole thing was to begin with. Instead, PASPA simply held that any state that had offered at least 10 consecutive years of sports betting at the time of the law’s passage could apply for an automatic exemption from PASPA within one year after the bill went into effect.
In 1992, five states – Nevada, New Jersey, Oregon, Delaware, and Montana – qualified for an exemption under these rules. Of course, there was a catch: the states exempted would be grandfathered in, and only whatever specific type of sports betting they offered at that time would remain legal for them to practice in the future. In Oregon’s, Delaware’s, and Montana’s cases, this amounted to little more than backroom lottery programs and bar-room sports wagers. These states could not open robust, Vegas-style sportsbooks. But New Jersey could. Which was the whole point, remember.
Unfortunately, New Jersey is, after all, New Jersey, and political infighting and personal vendettas in the state legislature apparently superseded the need to bolster their casino industry, so the state let the year-long exemption period elapse without passing their own state-level sports betting laws. Atlantic City has been financially forlorn ever since, and New Jersey lawmakers have similarly been fighting PASPA for nearly three decades now.
PASPA’s Effect On New York Sports Betting Sites
The Professional and Amateur Sports Protection Act has had a number of terrible economic consequences for just about every state in America, including Nevada. However, outside of NJ, PASPA’s effect on the New York sports betting sites in operation before and after its passage has been particularly staggering.
For one thing, just as Las Vegas’ main client body comes from California, Atlantic City’s main customer base come from New York. With sports betting off the table, those NY residents would now not be spending and winning money (legitimately) close to home. Further, the street-level bookies and private bookmakers in NY suddenly found themselves in complete violation of the law, causing them – and their remaining clientele – to go further underground. All of that culminated in the simple fact that, to date, PASPA has caused tens of billions of dollars to be lost from NY’s state economy, and it has arguably led to over a trillion dollars of lost taxable income for America in total.
The Professional and Amateur Sports Protection Act did nothing to stop sports betting or create meaningful a meaningful Las Vegas/Atlantic City sports betting monopoly tandem. Instead, it merely made practitioners of the world’s most popular, enduring pastime send their money overseas. This PASPA “loophole” is Exhibit A in why the misguided law was a disaster from the start.
New York Sports Betting PASPA Loophole
Thanks to the so-called Professional and Amateur Sports Protection Act loophole, NY residents have able to continue to wager on sports with impunity for the last 2-3 decades. The New York sports betting PASPA loophole is simply this: The law, as written, does not make it illegal for any NY resident (or resident of any other US state) to place a sports bet of any kind or amount. In fact, nowhere in the text of PASPA is the bettor or gambler limited or even referenced in any way.
Instead, PASPA simply made (and makes) it illegal for private individuals or commercial/state enterprises to accept sports bets for profit on US soil. This, of course, led to the most obvious sports betting loophole (or sports betting workaround) imaginable: the advent and wide acceptance of offshore sportsbooks.
Thanks to the Professional and Amateur Sports Protection Act of 1992, a number of US companies moved overseas or opened up shop from scratch in foreign countries where they are fully regulated and allowed to offer sports bets under their home nations’ domestic laws. Thus, particularly with the easy data communication models of the then-burgeoning Internet, legal online sportsbooks and Internet betting shops were born, and New Yorkers – along with Americans everywhere – could wager freely without fear of legal prosecution.
Financial Consequences Of PASPA In New York
The financial consequences of PASPA, hinted at above, are actually even more serious and pressing than they might otherwise seem. Broken down, PASPA has been a cataclysmic national economic policy. Consider: It is estimated that Americans spend around $400 billion on sports betting each year, with only 3% of that figure going through legal Nevada-area casinos. The rest goes through the domestic black market or to offshore sportsbooks.
If you assume that NY residents account for 5% of the national handle (a conservative estimate), that means that New Yorkers spend around $20 billion on sports betting annually. That’s a large but not unreasonable number. Now, over the 25-plus years PASPA has been in effect (and admittedly not accounting for either inflation or increased wagering participation), that extrapolates to $500 billion of otherwise taxable expenditure being sent overseas from NY addresses over the last generation. That said, most of that money does make it back to New York bettors in the forms of winnings.
However, the average house take for a professional sportsbook is between 7% and 9%. Taking the low end, a 7% vigorish, leaves the New York government with this reality: The Professional and Amateur Sports Protection Act has cost betting sites in New York – and by extension the local New York economy – some $35 billion since the law went into effect, or nearly $1.4 billion each and every year of its existence. Fortunately, PASPA probably won’t stick around much longer, as its constitutionality is currently being challenged in the US Supreme Court, where it is expected to be overturned.
