Why Kentucky Should Legalize Sports Gambling

There was no joy in Vegas this week…nor in the Bada Bing back rooms of the American underworld.  An unholy monopoly shared by Nevada and organized crime was blown to smithereens Monday, when the U.S. Supreme Court ruled that all states could now legalize and regulate sports gambling.

The ruling also provides an unprecedented — and extremely timely — opportunity for the Commonwealth of Kentucky to help fix its urgent financial mess.

If we don’t blow it, of course… like we usually do.

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Although my personal poison is poker, sports gambling is deeply ingrained into my genetic makeup.  As I elaborated here, my great-grandfather, A. Morgan Frumberg, served as counsel to several of the gamblers charged in the infamous Black Sox Scandal, where mobsters paid Chicago White Sox players to fix the 1919 World Series.  This was early pro sport’s nadir, with baseball saved only by Babe Ruth’s cult of personality and a new anti-gambling regime imposed by the sport’s first Commissioner, Kenesaw Mountain Landis.

In the succeeding decades, athletic leagues, policymakers, and law enforcement targeted sports wagering with special contempt and zero tolerance — with the axe usually falling on the athletes themselves. The iconic Adolph Rupp UK teams of the 1940s were rocked by a point-shaving scandal that shattered the careers of the young players involved.  In the late 1970s, another point-shaving conspiracy — this one orchestrated by Goodfellas‘ Henry Hill — destroyed the lives of Boston College cagers caught up in the controversy.  And, of course, Pete Rose became illegal betting’s poster boy when he was banned for life from baseball for betting on his own team.

In the meantime, wagering on athletics has exploded into one of the nation’s leading economic engines.  On top of the legitimate sports books in Nevada, illegal sports gaming exceeds an estimated $400 billion a year.  More recently, fantasy sports — which Congress exempted from legislative bans on online wagering — have proliferated:  What began as a collection of friend and family affairs has become professionalized and exceedingly monetized via same-day and one-week online leagues.

Reflecting the spirit of the times, many leading Big Sport figures have seen the light (and the Benjamins). In 2014, newly-minted NBA Commissioner Adam Silver published an op-ed in the New York Times calling for the legalization of sports gambling, writing that “Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.” More telling, the modern successor to Mountain Landis, MLB Commissioner Rob Manfred, has been bullish lately on the idea of forever forgiving the game’s Original Sin, arguing that gambling could re-inject life into the fading sport: “There is this buzz out there in terms of people feeling that there may be an opportunity here for additional legalized sports betting.”

The truth is that there’s little downside to legalization.  As my great-grandpa’s contemporaries can attest, prohibition not only doesn’t work; it backfires.  It doesn’t take more than a couple episodes of The Sopranos to understand how gambling’s illegality forces it into the shadows, denying proper public protection, and empowering and enriching the underworld, as thugs administer “justice” through usurious loans and violent collections. As those of us who played on-line poker in the early days can testify, cheating is rampant when the game is unlawful; and there’s little resource for gamblers who find themselves the victim of fraudulent arrangements. Just as our policymakers often treat sex with a public farce of Victorian morality that shields a private culture of consensual, sometimes flawed, human behavior, the hypocritical treatment of gambling creates a serious public policy problem where none would otherwise exist.

Oh, yeah, and there’s a whole lot of money that can be directed from the pockets of mobsters to essential public needs, like education, infrastructure, and health care.

Boy, could Kentucky use the cash!  This past session of the General Assembly serves as Exhibit A.  Legislators arrived with a bi-partisan consensus that our broken pension systems and antiquated tax structures needed serious overhauls.  But intra-party squabbling and historically passionate protests resulted in only cosmetic changes, while proposals that could provide desperately needed infusions of revenue — marijuana legalization, casino gaming — received only token consideration.  It’s no wonder that just this past Friday, Standard and Poors downgraded Kentucky’s issuer credit rating, due in part to “increased budgetary strain from rising costs associated with pension obligations.” A lower credit rating means that the state must borrow money at higher interest rates, meaning larger debt payments…meaning the vicious cycle accelerates.

Sports gaming is no panacea, but the many millions, if not billions, of tax dollars it could generate could provide the Bluegrass State a significant economic shot in the arm.

The good news is that there appears to be a political path.  Most of the arguments against casino gaming — increased crime pockets, preying on the poor and elderly — don’t apply to merely taking sports wagering away from the mob and regulating it.  It’s thus no wonder that the Commonwealth’s most powerful casino opponent, Governor Matt Bevin, has expressed openness to sports gaming proposals.

Further, there’s growing bi-partisan support in Frankfort.  State Rep. Jason Nemes, a rising young GOP star, plans to introduce legislation soon. “Government should not be in the business of telling people how to spend their entertainment dollars,” Nemes argues.  “We have a need for revenues in Kentucky to fund critical needs for our citizens, like education.”  Nemes’ bill would include wagering on pro sports, and exclude youth and high school sports.  Before any bill is introduced, he’s consulting with constituents and stakeholders about whether to involve college athletics as well.

Unlike casinos, legalization won’t require legislative supermajorities or a ballot initiative. Kentucky’s foremost constitutional law expert (and my law partner), Sheryl Snyder, believes that the issue can be resolved by a simple law, not a constitutional amendment:  “The Kentucky Constitution does not prohibit gambling; it prohibits lotteries, with the exception of course of the Kentucky Lottery,” explains Snyder.  “A lottery is a game of pure chance, while sports gambling, or gambling on horse races, requires some skill.  So while you need to pass a constitutional amendment for pure games of chance like roulette or craps, a simple law could legalize sports gaming or poker.”

As Rep. Nemes argues, “It’s time to seize the moment.” Indeed, Kentucky must act quickly, instead of falling behind its neighbors as we’ve seen with casinos, watching our gambling dollars pay for Ohio schools, Indiana roads and West Virginia health care.  By acting conscientiously, we can also develop a national model by helping build in protections that have been proposed by thoughtful proponents:

• The use of new geo-blocking and age-verification technology to ensure that sports wagering is conducted only in places where it is legal, and not by minors;
• The development of strict licensing procedures and the monitoring of especially big and unusual betting practices in order to protect the integrity of gambling operations and crack down on cheating;
• Meaningful educational programs that foster responsible gambling, complimented by protocol that can identify problem gamblers and prevent them from incurring further debt; and
• Working with professional and college sports leagues to develop rules that shield athletes and referees from improper involvement.

I readily admit that thousands of lives every year are ruined by compulsive gambling and its collateral damage.   But that’s precisely why sports gambling should be legalized and regulated.  Sunlight is always the best disinfectant; only when we take it out of the shadows and monitor it closely can we protect those who are at risk.

The time is now.  The states that are the first movers will reap the biggest rewards.  Urge your legislators to support sports gaming today.