Playing Defense with Sports Betting: Is it Too Late to Regulate?
Can lawmakers preserve the integrity of the game?
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The Justice Department offered a glimmer of hope that it is still doing some of the things it used to do before being tasked to prosecute Trump’s enemies and help ICE with their immigration enforcement – namely, investigating and prosecuting complex financial crimes. On October 23, FBI Director Kash Patel announced an indictment against two NBA players, Damon Jones and Terry Rozier, along with four other defendants, for their participation in what Patel characterized as the “insider trading saga of the NBA.” The charges bring up a question that has plagued the sport for more than three decades: Does allowing sports gambling irreparably harm the integrity of the game? The answer is…yes – though it might be possible to curb some of its most harmful effects.
The scheme at issue in the indictment involved the placing of “proposition,” or “prop,” bets on individual players’ performances. People who want to place prop bets on an individual player gamble against a “betting line” set by oddsmakers on the expected outcome of a player’s performance for various things: In basketball, this could include points, rebounds, assists, minutes played, and three pointers. Specifically, bettors either bet that the player will be “over” the betting line or “under” it. Among the public information the NBA provides at multiple points on a game day is an “injury report” listing the likelihood of each player participating in that day’s game. The indictment alleges that the NBA player defendants secretly agreed to remove themselves from games due to an “injury,” but late enough (including after the game had started) that it would not be reflected in the NBA’s injury report. Sharing this insider information with their co-conspirators, these players and their co-conspirators placed “under” bets that were guaranteed to win, and then shared the proceeds.
The corruption of sports as a result of illegal gambling isn’t new. In fact, following other high-profile sports betting scandals like the one involving Cincinnati Reds manager Pete Rose in 1989, Congress passed the Professional and Amateur Sports Protection Act of 1992 (PASPA) – sponsored by former NBA-player-turned-congressman Bill Bradley – which prohibited states from legalizing sports gambling (with the exception of Oregon, Montana, Nevada and Delaware, which already had sports lotteries or pools and were “grandfathered” in). At the time, the commissioners of four major sports leagues (the NFL, MLB, NHL and NBA) and the NCAA were strongly supportive of the law; it was actually the NCAA that tried to have the law enforced against the state of New Jersey, which had repealed its sports gambling prohibitions, in 2014. That case found its way to the Supreme Court in 2018, where it was struck down because PASPA violated the “anti-commandeering” rule of the Tenth Amendment, which prohibits Congress from compelling states to enact or enforce a federal regulatory program. Since then, sports wagers have gone from $5 billion in 2018 to $150 billion in 2024, with betting companies like FanDuel and DraftKings taking tens of thousands of bets per minute during big games.
The latest NBA scandal has renewed calls for sports betting to be better regulated. Should it be? Can it be? I’m not a professional sports fan, nor a gambler, so I don’t have a dog in this fight (pun intended), so I’ll offer a clinical analysis of the problem. When I teach my policy classes at Yale, I ask students to look at a few different things to assess both a current policy and how they might change it. The first is, what values are you trying to maximize? Second, what incentives are currently created, and what costs do they impose? Finally, is there an alignment between the incentives and costs, and the values you’re trying to maximize? If not, the challenge is to tweak the former to be more in line with the latter.
So let’s turn to the first question: What are the values we want to maximize? The paramount one, it seems, is to protect the integrity of sports. That was the main driving force behind PASPA; in his partial dissent, Justice Breyer quotes the congressional record to observe that Congress feared that widespread sports gambling would “threate[n] to change the nature of sporting events from wholesome entertainment for all ages to devices for gambling.” Thirty-three years later, the public shares that view: a Pew Research poll found that 43% of adults in the U.S. believe sports betting is bad for society and sports (that poll was published in early October, before the most recent charges). Historically, sports leagues have also largely been against legalizing gambling, which isn’t surprising: People’s desire to watch their favorite teams is inextricably tied to their faith in the fairness of the games themselves.
Some competing values might be reducing underground and offshore betting and providing states with a source of revenue, both of which are furthered by legalization. And then there is the interest in allowing adults the freedom to gamble – though it’s worth noting the same Pew Research study notes that only 22% of U.S. adults say they placed a sports bet this year, likely a much smaller subset of those who are sports fans.
Now, let’s look at the incentives currently in place. The nature of sports gambling has changed over time. At one time, bookmakers mainly offered two kinds of bets. One was on the outcome of the game itself, usually based on the final point spread between the teams. Another was an over/under bet on the betting line of the total points scored by both teams. Neither of these is immune from corruption, but it requires a lot of coordination: To truly influence a final outcome or total points, team members would likely have to convince multiple teammates to throw their own games. In some cases, a corrupt referee could influence these outcomes, as Tim Donaghy did in the “point shaving” scandal in 2007. But these possibilities also have higher potential costs: Getting multiple players on board increases the probability of being found out. And even corrupt referees who make consistently bad calls risk being scrutinized more closely. In short, cheating wasn’t impossible, but it involved significant effort and a relatively high risk of being caught.
Prop bets change this calculus significantly. Since these bets are only about individual performance, each player has complete control over influencing the outcome. It’s also harder to police: Whereas a group of athletes consistently underperforming or a ref making bad calls are potentially observable and might draw attention, it’s harder to second-guess a player’s claim that he is injured or can’t play. On top of that, the temptation created by the huge amounts of money that can be made in the legalized betting market might be hard for players to resist – greed is one helluva drug, even for athletes already making millions of dollars (or perhaps especially for athletes already making millions of dollars).
Meanwhile, the cost of detecting foul play (pun intended) is mostly shifted to the betting companies to monitor unusual betting activity, much like the SEC might flag unusual volumes of trades. That is made easier with modern technology and big data tools – it’s likely that the betting companies are the ones that put actions described in this indictment on the FBI’s radar in the first place – but it can only happen after the damage is done, when the cost to sports fans, and bettors who didn’t cheat, really can’t be compensated. Some commentators have also noted that the companies that provide “integrity monitoring” for the betting companies have an incentive not to identify too many instances of cheating, lest the industry become more regulated, thereby putting them out of business. In short, this is not a great alignment of incentives and costs with the value of preserving sports integrity.
At this point, it’s simply unrealistic to ban sports betting wholesale. It’s not only out of the federal government’s hands, given the 2018 Supreme Court decision, but the cat’s out of the bag (only 11 states currently prohibit sports betting). But while Congress may not be able to tell states what to do, it undoubtedly can regulate what sports betting companies do. On this front, it could restrict prop bets, which would more closely realign players’ incentives with the values of fair play while still allowing people to gamble on a number of other aspects of games, companies to make money, and states to generate revenue. The question now is whether the current state of sports betting is too popular, and too lucrative, for any regulation to come to fruition.
Asha Asha Asha. You keep doing this. I’m calling you the Shoei Ohtani of Journalism. Every time you write something. The next thing is better. It’s clear you’ve done your research. And somebody like yourself who is not an expert in this field it’s amazing how you break it down. Step by step. You walk us through. Thank you brilliant bravo. This article should be nominated for some type of award.
I’ve been screaming for the NBA to preserve integrity in your sport and protect your trillion dollar brand. The commissioner Adam Silver should ban and outlaw Prop bets all together.
You make that case clear. This isn’t the traditional fun Super Bowl prop bet of how long will the artist sing the national anthem. Or what Color will the winning teams Gatorade be. Or what team will score the touchdown first. Or what player will score the touchdown first.
A player can control how many assists he gets in a game. Or say hey coach my hammy is feeling a little tight. Let me get on the bike. With load management it’s so easy.
What Terry Rozier did put the whole league at risk. Cause now everything is looked at. And you have to look at everything. A coach can control when he pulls a player. So the prop bets in my opinion gotta go. What’s worth more a few million or a trillion. Get it out the sport.
You are so spot on. This is what brilliant journalism is all about. !!!!!!!!
Asha hits a home run with her closing challenge, "The question now is whether the current state of sports betting is too popular, and too lucrative, for any regulation to come to fruition."
... I wonder how much time do average Americans spend watching, "fantasy leaguing", and betting on sports compared to the time we spend making ourselves "informed, citizens"?