Sep 28, 2025 16:00:00

How did sports betting become legal in the United States?

In the United States, sports betting, or betting on the outcome of sports games or the performance of athletes, became legal in 2018. Financial writer Shreyas Hariharan explains the circumstances that led to the decision to overturn 26 years of federal regulation.

How Did Sports Betting Become Legal in the US?

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In the United States, the Professional and Amateur Sports Protection Act (PASPA) came into effect in 1992, making sports betting illegal in most states. With the exception of a few states where it was legal, legal state-sanctioned betting methods were very limited, such as small-scale sports lotteries.

However, in the 2018 case of Murphy v. National Collegiate Athletic Association , which disputed whether the federal government had the right to control state legislation, PASPA was ruled unconstitutional and states were given the power to legalize sports betting. This effectively legalized sports betting, sparking the largest gambling boom in American history.

According to iGaming Business , a media outlet focusing on the online gambling industry, betting amounts in Nevada increased 2.9% and winnings increased 21.2% in 2018, reaching record highs. Total sports betting amounts are expected to increase from $5 billion (approximately $740 billion) to $150 billion (approximately ¥22 trillion) annually between 2018 and 2025. Other data also shows that 58% of college students have bet on sports, and 50% of men under 50 have an online sports betting account.

Sports betting in the United States is said to have begun in 1979 when author and editor

Daniel Okrent popularized ' Rotisserie League Baseball ,' the most famous form of the game known as 'Fantasy Baseball.' Fantasy baseball involves creating an imaginary baseball team using real baseball players and then recording the fictional team's performance based on the players' performance in actual games. What began as a game played among friends has since spread to include contests and gambling, where the person who picks the best-performing team wins a prize.

In the midst of this, former NBA player and New Jersey Senator Bill Bradley proposed PASPA, believing that gambling undermines the integrity of sports. For this reason, PASPA is sometimes also known as the 'Bradley Act.' Although PASPA passed with a majority vote, its wording as a law was unusual in that it did not explicitly define sports gambling as a federal crime, but rather simply prevented states from legalizing it.

Even after PASPA came into effect, fantasy sports continued to gain popularity and became increasingly commercialized, with companies like FanDuel, founded in 2009, and DraftKings, founded in 2012, running contests every season. However, because FanDuel and DraftKings invested heavily in television advertising, in which people shared stories of winning big money, claiming that they had 'turned a few hundred yen into millions of yen,' the authorities ordered the suspension of fantasy sports contests in 2015, citing them as sports gambling.

In response to increased enforcement, FanDuel and DraftKings hired Jeremy Kudon, a partner at a New York law firm. Kudon argued before state legislatures that fantasy sports are a game of skill, based on predictions and ideas, not a game of chance like slot machines. He worked with economists to prove this, showing that 'skilled fantasy sports players are better at building teams than general managers in real sports.' Kudon's lobbying efforts led to fantasy sports being legalized in smaller legislatures, like Kansas, and he expanded his reach from there.

Another figure who similarly sought to legalize sports betting was New Jersey Governor Chris Christie. Illegal gambling remained rampant in New Jersey even after the enactment of PASPA, and senators held a referendum on whether to legalize sports betting. Nearly one million residents voted, with two-thirds voting in favor. Christie, who originally called for a ban on sports betting, announced a policy change following the results of the referendum, and in 2012 signed the 'Sports Betting Bill' which allowed sports betting in New Jersey.

In response to the sports gambling bill, the NFL (American football), NBA (basketball), NHL (hockey), MLB (baseball), and NCAA (National Collegiate Athletic Association) filed a lawsuit against the state of New Jersey, claiming that the bill violated PASPA. The renowned constitutional lawyer Theodore Olson represented New Jersey, arguing that PASPA, which requires states to regulate sports gambling rather than ban individuals, 'is an overreach of Congress by forcing states to impose a ban,' and began campaigning to repeal PASPA.

Olson repeatedly lost, and Christie failed to legalize sports betting despite spending a great deal of public money. It wasn't until 2017 that the Supreme Court finally agreed to hear New Jersey's lawsuit. Olson argued that Congress overstepped its authority with PASPA, but the justices disagreed, stating that states are not required to enforce the ban. However, Christie's 2014 amendment to the 2012 sports betting bill merely repealed the previous ban, without legalizing sports betting. However, PASPA also regulated this law, Olson argued, meaning Congress is dictating what state legislatures should and shouldn't do.

As a result, the Supreme Court ruled PASPA unconstitutional in May 2018, lifting the 26-year-old federal ban on sports betting. As of the time of writing, sports betting is legal in 38 states.