Notes on Sports Betting

As soon as we heard that the U.S. Supreme Court had struck down a federal law that prohibited states from legalizing sports betting, we began to wonder how much of an opportunity this landmark ruling held out for the payments industry. The results of our curiosity on the matter start on page 28, but here I want to reflect on a few interesting side notes.

First, it’s important to remember that, while gambling on sports may well represent a huge opportunity for processors, financial institutions, mobile-payment providers, and anybody else who wants in on the action, not much of that is going to materialize right away. The activity is legal in only four states (five if you count New Jersey, which just authorized it as we were going to press), and full-scale sports betting—single games, mobile and online access—has been legal only in Nevada.

It will take years for this market to develop. With current legislative activity in mind, Chris Grove of Eilers & Krejcik Gaming predicts 32 states will have legalized it in some form by 2023. The odds are scant that all 50 will ever authorize sports betting.

Second, don’t underestimate the moral dimension of this activity. There’s a reason not all states will exercise the new discretion granted to them by the Supreme Court, and there’s a reason states are tiptoeing into the market. The reason is the same in both cases. Whether or not you subscribe to a moral code that frowns on gambling, plenty of voters still do—and state legislatures have to listen to them, even as they eye the potential tax revenues.

Certainly, guardrails will have to be erected to preserve the integrity of games, professional or amateur. The infamous Black Sox scandal may be a century old now, but the way in which it utterly corrupted a sport—eight baseball players conspired to throw a World Series—remains a harrowing memory.

Third, just how big the market potential is remains shrouded in fog, precisely because so much of it is illicit. Estimates range from a low of $60 billion up to $150 billion. Suffice to say it’s enticing for acquirers and tech vendors.

Finally, I would be remiss if I closed without saying a word of appreciation about George Warfel. For the better part of four years, George has conducted our Payments 3.0 column with wit, panache, and deep inside knowledge. Now, he’s bidding us farewell as he transitions to new ventures. The column in this issue may be his last, but I suspect it’s not the last we will hear from George. Farewell, friend, and all best wishes.

—John Stewart, Editor, john@digitaltransactions.net