How can states & sports leagues profit from increased gambling?

Feb 13, 2024

The U.S. Sports betting industry is in its sixth year of regulated operation outside of Nevada, and the gross revenue from operators have already generated over $25 billion, per Legal Sports Report. Sports betting in the United States has made its way into 38 states and Washington D.C.

States and sports leagues are two entities that reap the benefits of increased gambling, but while also incurring significant risks. This article will investigate how both can profit from an increase in gambling while also needing to provide proper resources and funding for the social cost of increased gambling addiction rates.

States

Taxes

States profit from increased gambling by collecting tax revenue from multiple streams of legalized gambling. These forms of gambling include state lotteries, casinos, sports betting, parimutuel wagering (horse racing) and video poker.

State governments impose a tax on gambling operators, collecting a percentage of revenue from gambling operators after winnings are paid out to customers. This also includes online/mobile platforms of gambling, such as the prevalent form of sports betting. Many states also charge gambling operators multi-million-dollar licensing fees to be active there. 

In addition to increases in direct tax revenue, sports betting and other gambling forms creates jobs in states that have legalized it. It is estimated that the legal sports betting industry could create more than 100,000 jobs in the United States, per Oxford Economics. Early estimates indicated that legalized sports betting could generate billions in economic output each year in the country.  

Social Impact - Gambling Addiction

There has been a major uptick in the number of Americans struggling with gambling addiction. States have a dilemma of trying to maximize gambling tax revenues while limiting problem gambling behaviors and gambling addiction.

Many states will use some of the gambling-related tax revenue to offset the negative outcomes of increased gambling. The tax revenue not only helps to fund gambling addiction programs but it also contributes to funding education, healthcare and other infrastructure.

It is becoming increasingly clear that states must increasingly provide proactive Responsible Gaming educational resources and treatment funding for those with gambling addictions. This is becoming more of a priority for them as the market in their state matures and problem gambling issues increase.

However, Keith Whyte, the head of the National Council on Problem Gambling, is concerned that a state-by-state approach to treating gambling addiction is outdated and needs to be considered on a national basis.

Sports Leagues

Partnerships

Sports leagues and teams are also cashing in with increased gambling, especially sports betting. 

Sponsorships with sports betting companies are becoming a significant source of revenue for the NFL, NBA, MLB, and NHL.

Here are some notable partnerships between the “Big Four” American sports leagues and sportsbooks

  • NFL: FanDuel, DraftKings, BetMGM, Caesars Sportsbook

  • NBA: FanDuel, DraftKings, BetMGM

  • MLB: FanDuel, DraftKings, BetMGM, 

  • NHL: FanDuel, ESPN Bet, BetMGM 

Advertising

If you have watched live TV recently, you have constantly seen advertisements for sports betting companies. Pro sports leagues also receive ad revenue from sportsbooks like market leaders FanDuel and DraftKings.

Marketplace ran a study in January 2024 that found fans spend 20% of every game watching gambling advertisements. Researchers investigated five NHL games and 2 NBA games on live TV between October 25-29 of the 2022 season. 

The top sports leagues have been benefiting from increased legalized gambling through partnerships and ad revenue, but there are significant potential downsides to consider as well.

Risks

As legalized sports betting spreads, so does the amount of risk involved for professional sports. There are concerns with the integrity of the games, mainly the potential of fixing games or point-shaving.

Ten NFL players have been suspended since 2022 for betting on NFL or other pro sports games. Players potentially have to deal with gambling addictions themselves, which does not bode well for all parties involved, from both optics and integrity perspectives.

An ESPN article from July 2023 stated that the NCAA had found 175 infractions of their sports betting policy since 2018. Alabama baseball coach Brad Bohannon was fired in May 2023 for suspicious betting activity on his own team. Separately, 41 Iowa and Iowa State athletes were suspended for violating betting policies.

Those worried about the integrity of sports with increased betting have legitimate concerns. Every party seems to be financially benefiting from increasing gambling, but the potential for games being rigged could undermine the entire ecosystem. 

Many legalized betting proponents will admit that the current sports betting landscape is far from perfect, but that it is much better than when it was unregulated and people were betting more illegally. With regulated sportsbooks and integrity oversight services, suspicious betting patterns are flagged much more easily than when bets are placed through illegitimate “bookies” or unregulated offshore sportsbooks. 

Gambling Addiction

Warning Signs

Gambling addiction is on the rise. Here are some warning signs that you or someone you know may have a gambling addiction.

  • Gambling for long periods of time

  • Financial trouble because of gambling

  • Lying about gambling losses

  • Using gambling to escape problems and stress

  • Thinking about gambling all the time

Help and Resources

If you or a loved one is dealing with a potential gambling problem, there are help and resources available. Birches Health has trained specialists to provide personal treatment plans and help treat addiction. A core value of Birches Health is that cost of treatment should not be a barrier to receiving the help you need.

Email hello@bircheshealth.com or call (833) 483-3838 to receive confidential, flexible, and effective gambling addiction treatment.


Resources:

US Sports Betting Revenue & Handle 

Lotteries, Casinos, Sports Betting, and Other Types of State-Sanctioned Gambling | Urban Institute

As concerns over gambling addiction mount, states are set to rake in millions from Super Bowl bets - Route Fifty 

Letter shows NCAA has found 175 sports-betting violations since 2018 - ESPN

Warning Signs - The Maryland Center of Excellence on Problem Gambling 

The Impact of Legalized Sports Betting on the US Economy | News, Sports, Jobs - The Freeman Journal 

Hey, sports fans: You spend up to 20% of every game watching gambling advertising | CBC News 

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