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Vanderbilt Journal of Entertainment & Technology Law

First Page

859

Abstract

Sports betting is a form of gambling that does not suffer from the same negative social stigma as casino gambling despite its equally addictive properties and damaging impact on household consumption. While sports betting was previously banned in most of the United States, following the Murphy v. National Collegiate Athletic Association decision, which empowered states to regulate sports betting within their borders, a wave of states that previously banned all forms of sports betting legalized the practice. Unsurprisingly, this rapid legalization of sports betting was accompanied by a flurry of statewide regulations, leading to disparate consumer protection across the states. With limited federal oversight, sports-betting legislation is predominately intrastate. As a result, states have leveraged sports-betting policies to increase state tax revenue and stimulate local economies. These tax benefits prompt states to encourage consumers to engage in risky gambling behavior without understanding the long-term economic effects. This Note examines the intricacies of sports-betting regulations at both the state and federal levels, including state and federal tax law, tribal compact law, and federal consumer protection law. Unlike other forms of gambling, sports betting appeals to a consumer’s sense of familiarity. While traditional gambling games have a level of uncertainty that deters risk-averse consumers, a regular sports fan may overestimate his or her sports knowledge and underestimate the uncertainties of gambling. To resolve this mismatch, this Note proposes a tax policy requiring sportsbooks to withhold a percentage of sports-betting winnings from participants and remit the percentage to the state in which the sportsbook is operating in. By directly reducing expected winnings, this tax structure operates as a behavioral deterrent while preserving state revenue streams. Sporting events are family-friendly fun that attract people from all age groups, but networks like ESPN that broadcast sports-betting content normalize sports betting to young audiences, encouraging rather than deterring nongamblers to participate in sports betting. When entertainment networks integrate sports betting into their broadcasts, sporting events become mutually dependent on sports betting. While implementing a nationwide ban on sports betting may deter a larger portion of the US population, there are alternative methods that would protect consumers and state revenue without incentivizing individuals to engage in illegal sports betting. By taxing all sports-betting winnings, regulators can use taxes to deter sports bettors because the tax directly impacts the reward and lowers the bettors’ expected immediate winnings.

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