As America prepares for the country’s biggest unofficially official holiday of the year, better known as the Super Bowl, many very hard hitting questions are making the rounds online and on social media. Some examples are: What color will the Gatorade poured over the winning coach be? Will “Left Shark” make an appearance on stage during the Super Bowl Halftime Show? How many times will the word ‘dab’ be said by CBS Super Bowl broadcast duo Jim Nantz and Phil Simms during the game? Or my personal favorite, will the winning team score more points than the percentage of votes Donald Trump receives in the New Hampshire primary?
Not only are these questions of the utmost importance, but Americans apparently find it quite fun to make arbitrary and potentially nonsensical arguments in an attempt to convince their friends why it’s obvious that the Gatorade will be blue or why there is a distinct possibility Left Shark makes its appearance to the chagrin of Coldplay and the delight of millions of dedicated Left Shark supporters. You might ask how I can confidently claim that a large amount of people delight in discussing what I’ll admit to being very silly questions; this is an Economics blog after all so where is my empirical evidence? Look no further than the $115 million wagered on the Super Bowl last year in Las Vegas, a portion of which came from people betting on these types of questions,[1] known as proposition bets, or prop bets, which are bets made on the occurrence or non-occurrence of an event during a game or political function, such as the NBA Finals or the State of the Union Address.
$115 million is an impressive sum of money, yet this is only a very small part of the story, 2.5% of it in fact. It is estimated that the amount of money wagered in Vegas on the Super Bowl in 2015 was only one fortieth[2] of all the money bet on the Big Game throughout the U.S. on the biggest sports betting day of the year. It is well-known that Nevada is the only state in the Union where gambling is legal, so how is it possible that Vegas accounted for such a small fraction of total wagers?[3] Welcome to the world of illegal sports gambling, a burgeoning S380 billion industry[4] fueled by growing consumer desire to add a dimension of risk and intrigue to sports viewing. Online sports gambling, illegal because it is not done in Vegas, is growing in popularity throughout the U.S. as it simultaneously becomes less taboo in popular culture and in media, despite the vehement disapproval of sports leagues such as the MLB and NCAA (yes I just called it a sports league) which claim that betting diminishes the integrity of sports by increasing the possibility of game fixing and undermining the “purity of the game.” Many Americans align with this line of thinking, while others resist the legalization of sports gambling on even more ethical grounds, claiming that gambling in general is wrong and therefore we should prevent it from expanding. Yet, like I mentioned, a growing majority of Americans is pro-legalization (we like to legalize stuff these days) so it is important to consider the debate from an economic perspective as well as a social one.
My argument is that economically, there is actually very little debate to be had. Last year U.S. sports betting grabbed headlines when new NBA commissioner Adam Silver came out in support of the legalization of sports gambling.[5] His argument was and still is simple: why decree sports gambling illegal if the federal government is powerless to stop it and leagues and states stand to profit billions of dollars from its legalization and regulation. Had gambling been legal this year, estimates show the NFL could have generated $12.4 billion in revenue[6] by taking a cut out of the hundreds of billions made by online betting sites. States too, could get a piece of the pie. Last year Nevada generated over $7 billion in tax revenue from all legal forms of gambling.[7]Not only does the money benefit Nevada but it does not cost taxpayers anything. This type of money is available to states if only they legalize betting and could be put to very good use by states in desperate need for education and public service funding. Though legalization would inevitably put some sites out of business, this would help regulate transactions and prevent scamming and theft which is an all too common occurrence in the current online betting scene.[8] Under supervision and regulation, only upstanding and reliable sites would be allowed to operate, cutting back on the millions of consumer dollars lost to online fraud.
Being that the economic incentives are strong, the only question is whether the perceived unethical nature of betting should prevent the United States from opening the door to easy money. To that, I admittedly have no great answer, for it’s a personal one. However, my appeal would be to consider the stock market, which in many essential ways is like sports betting. Both are markets where people earn and lose money based on the performance of a separate entity, in one case a firm and in the other a sports team or player. In both cases people invest or wager money based on information that is publicly and freely accessible and both markets operate by begetting money with money. If we have accepted the stock market why would it not be time to accept sports gambling as well? Ultimately, I pointed to Adam Silver’s argument because it encapsulates mine and many other people’s arguments on the topic. Fundamentally, it should be asked why we should not legalize a harmless activity that goes on despite its illegality when, if regulated, could provide an enormous economic boost. After all it’s all about dollars and sense, and hoping for blue Gatorade baths.
[1] By the way those who bet on blue Gatorade last year woke up with a little extra cash in their pockets the following Monday
[2] http://www.boydsbets.com/super-bowl-how-much-bet/ http://abcnews.go.com/GMA/ESPNSports/story?id=1458859
[3] Gambling laws are much more complicated in reality. There are certain cities where gambling is legal in states outside of Nevada, however Nevada is the only state where it is legal everywhere. For a full review of gambling laws in the United States visit americangaming.org/research.
[4] http://www.inc.com/slate/jordan-weissmann-is-illegal-sports-betting-a-400-billion-industry.html
[5] http://www.inc.com/slate/jordan-weissmann-is-illegal-sports-betting-a-400-billion-industry.html
[6] http://www.ibtimes.com/legalized-sports-gambling-americans-bet-95-billion-nfl-college-football-season-mostly-2089606
[7] http://www.gettoknowgaming.org/by-the-book#&state=US-NV
[8] http://www.usnews.com/debate-club/should-sports-betting-be-legal/sports-betting-already-happens-government-might-as-well-regulate-it