Tucked behind a cloud of smoke, crowds of people surrounded craps, poker, and roulette tables hoping to get lucky. It was 1931 and the state of Nevada has just legalized gambling. In a post-Great Depression United States, trepidation toward legalized gambling seemed warranted. However, as funds desperately needed to be raised for the Hoover Dam Project as part of the New Deal, legislation was put in place that reversed the ban on “against the house” gambling.
While gambling real money on games like blackjack, roulette, and craps quickly gained popularity, sports betting still largely remained in the shadows. Several reasons explain why attitudes on gambling, especially sports gambling, weren’t favorable during the 1920’s and 30’s. Most notably, the 1919 World Series. Eight Chicago White Sox players were involved in an illegal gambling scheme, which resulted in “throwing,” or losing the series on purpose to fulfill bribes from gamblers.
Although technically legal in 1931, horse racing and sports bets were primarily taken care of by illegal bookies. These individuals operated out of “turf clubs” – small establishments where sports gambling was deemed semi-legal, but it mostly just unregulated. Over time, the owners of these clubs began turning million-dollar-per-week profits. This success resulted in a sense of urgency for lawmakers who wanted to tighten regulations. Additionally, casinos and larger-scale operations saw an opportunity to cash in.
Uncle Sam Gets Involved
In 1949, 18 years after gambling was officially legalized in Nevada, the first government-sanctioned sportsbook opened its doors for locals and those visiting Las Vegas. This groundbreaking push was led by groups of bookmakers, those who had been running their own sports betting operations, and eventually the state acquiesced to their demands. That same year, legal bets were placed for the first times on horse racing. The turf clubs were now legal, but strictly operated separate from casinos. In fact, they had agreements to stay out of the casinos so long as the casinos stayed out of the sports gambling business. Although informal, this mutually agreed upon separation was highly regarded as crucial to the success of each entity, and lasted for decades when the two powers would finally converge.
Just as bookmakers and casino owners were celebrating their newfound legality and large profits, the federal government decided it was time to get involved. In 1951, congress passed a federal excise tax on all sportsbooks in Las Vegas. Sportsbooks were now required to pay a 10% tax to stay in operation. This would prove to be a major event in gambling history. Legal sportsbooks could no longer compete with underground operations that had no such tax to consider when running their businesses. This led to the involvement of organized crime groups who now had a reason to try their hand at a gambling operation.
By the mid-1950s, sports gambling was dominated by black market bookies and the majority of legal sportsbooks had closed their doors. Gambling on sports was growing exponentially in popularity and mobs all over the country were more than willing to fulfill the need for a place to wager on races and games.
In an effort to curb illegal gambling, as well as several other crime operations run by the mob, then-President JFK introduced the Wire Act of 1961. This made it illegal to use phones or telegrams to pass information regarding sports betting, debts to be paid, or anything related to crime in general.
The Sports Gambling Comeback
Following a decade-plus of several pieces of legislation similar to the Wire Act in 1961, the government decided to ease taxes on legal operations. The hope was to re-incentivize sportsbooks to go back into business, which would reduce the need for illegal bookmakers. In 1974, Congress reduced the 10% tax on sports betting profits to 2%. Nevada Senator Howard Cannon deserves the credit for the move, and he was rewarded by the results. Legal sportsbooks began to make a strong comeback. Senator Cannon had won the support of lawmakers by suggesting that a 2% tax would actually make more revenue for the state because of the increased volume of legal sportsbooks – he turned out to be right.
While sportsbooks began popping up all over Las Vegas following the lower tax, a new partnership was happening in 1975. Frank Rosenthal, who ran Stardust Casino, convinced lawmakers to let sportsbooks into casinos. Not long after, nearly all casinos had sportsbooks. The turf clubs that dominated the sports betting landscape decades prior were now a distant memory.
The good fortune continued for legal sportsbooks and casinos. In 1984, Congress continued to reduce the tax on profits – this time from 2% to 0.5%.
Around this time, gambling on sports began to lose its stigma as a degenerate activity, and acceptance grew among sports enthusiasts, lawmakers included.
Of all the pieces of legislation that governed legalized sports gambling, perhaps the most important for those visiting Las Vegas, and enjoy sports betting in general, came in 1992. The Professional and Amateur Sports Protection Act (PASPA) prohibited states from offering bets on professional or amateur sports. Gambling on sports was now illegal…except in Nevada. The state was exempt from the new regulations. Lawmakers said they were “grandfathered” out of the new legislation and sportsbooks in Las Vegas could still take on bets in any sport they chose to offer.
The impact of PASPA was felt across the globe. Sports betting was now restricted outside of Nevada, but it began to grow exponentially online. In 1996 the first bets were placed digitally. This was a move that would change gambling forever. All over the world, online sportsbooks took up shop in countries where gambling was unregulated.
Nearly 26 years after the passing of PASPA, the issue of gambling was once again at the forefront of the legal system. In May 2018, the Supreme Court reversed PASPA on the ground that it violated the 10th Amendment. There was no longer a ban on federal sports gambling and the issue would now be left up to the states to regulate on their own. In June of 2018, less than a month after PASPA was repealed, New Jersey Governor Phil Murphy placed a legal sports bet at Monmouth Park racetrack.
As of June 2019, seven states now have legal, regulated sports betting and several more states are on their way to legalization. While future generations might not associate sports gambling with Las Vegas in a way previous generations always will, the impact of Nevada as a case study in gambling won’t be forgotten. From shady turf clubs, to casinos, to a billion-dollar national industry, legalized sports betting has come a long way in the past 100 years.