Two racers are set on their marks. The winner will cement themselves as the dominant force in the world of in-person and online sports gambling. Standing on one side are the federal and state governments of the United States, who look to maximize the taxes and minimize the consumer risks of the activity. Standing opposed are the Sportsbook companies, who look to use the ambiguous regulations to expand their businesses as much as possible, and try to coax regulators to their side.
Once the proverbial gun was fired on May 14, 2018, the day that the sports gambling ban known as the Professional and Amateur Sports Protection Act of 1992 (PASPA) was overturned, a convoluted years-long battle of shifting alliances began. The subsequent race for dominance over the gambling industry would not only place the sports leagues themselves in uncharted territory, but also place the consumers of this dangerous vice at risk. The further the competition goes, the more players are involved. We watch the match unfold even today.
But just like any race, the preparation for this grand competition spans decades, and gambling firms have been waiting for this exact opportunity for an eternity.
A Long Time Coming
Sports and gambling have always been intertwined, but in America, the opinion of the vice has been markedly negative, with legality being an exception not the norm. The public further soured on it following a series of gambling scandals, culminating in the infamous 1919 “Black Sox” scandal, where the MLB’s Chicago White Sox intentionally lost the World Series in a betting scheme. As a result, instead of going to the now-standard sportsbooks of today, gamblers of the distant past were relegated to sketchy bookies and organized crime rings.
But there was one place in the US, a literal oasis in the desert, where sports gamblers from all over could go to get their fix: Las Vegas. Even as the U.S. government cracked down on gambling throughout the 20th century through taxation, regulation, and eventually reinforcing the ban through PASPA, Las Vegas remained unopposed as the premier spot for people looking for their betting fix. Legal sports betting during this period was almost entirely done through casinos and at casinos in Las Vegas.
The catalyst for legalisation would come through a most unlikely source: fantasy sports.
Fans felt more connected to the game than ever through this interactive game, and bettors took notice. The result of this union created “daily fantasy sports,” s a system where fans could build their own fictional team of real sports players and win a pot of money based on their performance.
Many of the biggest sportsbooks, such as Underdog Fantasy, DraftKings, and FanDuel, started off as daily fantasy sports apps, which you can still see in their names. This system created the exact legal ambiguity needed to both expand this system and challenge the legal precedent.
The gambit began with New Jersey. Atlantic City had always wanted in on the lucrative sports betting pie and daily fantasy sports gave the opportunity to dive head first into a highly rewarding legal battle. New Jersey announced in 2011 that sports wagering would be legalised, and once this law was struck down by district and appellate courts, they argued back that the federal government’s restriction on what states could legalize sports betting was a violation of the Tenth Amendment. The battle lasted years, making its way to the Supreme Court, wherePASPA was finally deemed unconstitutional in 2018. From there,states other than Nevada were allowed to legalize sports betting.
The box of gambling riches was opened, with both regulators and gambling companies racing in to take their fill.
The Race Begins
The first clash between the regulators and the sportsbooks occurred over the leagues themselves, who were initially hesitant to support legalization. Concerns over athletic integrity dominated discussions, as gambling could bring a levy of issues surrounding players possibly being involved in bets. As a result of this, these leagues stressed the importance of proper regulation in order to ensure ethical competition.
But would these leagues fully embrace gambling, or would they attempt to keep their distance? At first, sports leagues maintained a high level of caution, however they also acknowledged the massive amount of money that could be made both for the leagues and for the players. Even when some leagues such as the NBA began to partner with gambling firms shortly after the decision, they expressed some level of hesitance.
But, money has a way of talking. Massive profit margins were too enticing to simply ignore, with hesitance turning into a full embrace. The 2025 NHL Finals played a gambling ad around every 20 seconds and while the NBA Finals saw far less, they shared a significant amount at about 53 ads per game. That is, it is clear that these leagues understand the profitability and potential for fan engagement stemming from gambling.
The next leg occurred in the state governments. Some states with a notable part of their economy based around gambling, such as New Jersey, Delaware, and Pennsylvania, were the first to fully legalize the practice. For them, the box had already been opened, and their level of gambling regulations were acceptable.
Other states such as New York and Oregon began discussions around legalizing gambling as soon as PASPA was overturned, but remained cautious around the practice. Finally, there are the adamant states who remain steadfast in their opposition, such as Utah and California, the latter of which was rejected by the citizens through a ballot measure.
In-person gambling has been the primary way of wagering for all of human history, but with the invention of the internet, the age of online gambling has come swiftly. This new way of gambling is the golden ticket for any casino that wants to expand their operations, as now every single person with a smart phone can have a casino in their pocket. This, of all things, spooked lawmakers the most, as the possibility for addiction was now greater than ever.
New York, which was initially all-in on sports betting in 2013 by passing the Upstate New York Gaming Economic Development Act of 2013, which would legalize it as soon as it was possible, was suddenly very hesitant to take their share of the riches. Even when sports wagering was eventually allowed in 2019, online bets were left out as lawmakers cited concerns over anti-gambling language within the state’s constitution. Many of these states eventually gave in and legalized online wagering, however not all of the states who have legalized in-person betting have also legalized online methods, with nine of the thirty-nine opting to ban it. Even in states where it is legal, there are often a levy of restrictions, with some of these states having only a few, or in some cases one, legal sportsbook that you can bet with.
The result of this was lucrative, both for states and gambling companies. For the gaming companies, revenue from sports betting reached four billion dollars in 2021 and never looked back, reaching a whopping seventeen billion in 2025, over four times higher than four years ago. States have also gotten their slice as well, with their sports betting tax revenue reaching 451 million dollars in the second half 2021, and also skyrocketing over four times in the first half of 2025 to a cushy 1.9 billion dollars. It seems now that states and sportsbooks have gotten their share of the riches, both parties can be satisfied.
But wedged in between this match, caught as collateral and used to further both parties’ means, are the consumers. What are the side effects of this lucrative business and where is it heading?
Foreseen Consequences
Gambling, despite its profitability, is infamous for being incredibly addicting. One of the main reasons why gambling in the US hit so many legislative snags for countless years has surrounded concerns over public health.
Ever since sports gambling has been legalized, there has been a large increase in people seeking help for a gambling addiction. New Jersey, New York, and Pennsylvania, all of which took the plunge into the world of sports betting, have seen gambling help searches increase by 34 percent, 37 percent, and 50 percent respectively. Overall, when online sportsbooks become available, help seeking searches soared 61 percent. For lawmakers this is a major issue, but for casinos, this is a boon to their profits.
Critics of online sports gambling point to particularly invasive advertising, with emphasis on its fixation on youth and young adults. Many gambling advertising is done over social media sites such as Tik Tok and Instagram, and prominently features celebrities who are popular amongst young adults. Over half of 18 to 34 year olds say that the amount of gambling ads they have seen could be qualified as excessive, and a little under half say that their desire to place bets is influenced by these ads. If you’re a lawmaker, the words “youth”, “gambling”, and “advertise” most certainly raise a lot of alarms.
Ambiguity Leads to Opportunity
The rise of online gambling has also seen various prediction markets, or places where you can guess whether certain events will happen, attempt to take their share. These markets began to take off during the 2024 presidential election, and have since heavily expanded into sports, with 80 percent of the money traded on these platforms going towards sports betting. Unlike traditional gambling sites, prediction markets such as Kalshi and Polymarket submerge themselves in a mire of legal ambiguity, claiming that their markets are financial derivatives, such as a stock option, rather than gambling.
In August of 2026, the state and federal government launched a two pronged offensive against these platforms, beginning in the gambling-prevalent Nevada, who wanted to bring these markets in line with gambling platforms’ regulatory practices. Kalshi was not pleased with this and sued, eventually bringing the case all the way up to the appellate level.
Unfortunately for Kalshi, the Ninth Circuit Court of Appeals ruled in favor of Nevada, saying that states can now regulate these markets like gambling. This stands in stark contrast to another decision from the Third Circuit, which contradicts their decision. Even though regulators may have scored a massive victory here, this battle will almost certainly be decided in the Supreme Court sometime in the future.
The second battle unfolded around the controversial “mention markets,” which is where users could predict whether or not certain phrases would be said during a live broadcast, often during sporting events. Earlier this year, President Donald Trump’s teleprompter was revealed to be using reaction markets to profit, as the employee had inside information around what words would be said. That was just enough for the Commodity Futures Trading Commission to launch a review, turning the usual hands off federal government on full alert.
In response to this, Kalshi closed all “mention markets” from their site, a preventative measure to protect them from a brewing storm. This battle over these unpredictable prediction markets is expected to continue, as the longer these are out, the more regulated they will become.
The Dust Settles?
Although predicting the future of sport betting is impossible, it seems regulators may soon gain the upper hand for the first time since legalisation. Scandals continue to rock the gambling industry, chief among them coming from the athletes themselves.
Players from many different major sports leagues have been caught manipulating their stats for financial gain, with six coming from the NBA, two from the MLB, and a whopping thirty-nine from collegiate basketball. On top of this, there have also been a levy of different exploitative practices that these casinos employ, which have recently come to light. Some sites use extensive AI algorithms to target the most likely losers, and bombard them with promotions and offers. As a result, there have been a series of new lawsuits directed at FanDuel and DraftKings over their addictive app designs.
Despite the potential for an incoming storm, there is a possibility that the sportsbooks have already won. Sports gambling is more popular than ever, with around twenty-two percent of all Americans having an active online sports betting account, half of them being men aged 18-49. Creating and enforcing regulations may give State and federal governments more sources of income, but many regulators may be unsatisfied with the rise in addictions caused by this surge in gambling. It is clear that despite the massive rise in profits, governments are still attempting to increase regulations.
Lawmakers from all across the US have decided to open the proverbial Pandora’s box when it comes to gambling, and we are just now experiencing a lot of the negative effects through increases in problem gambling. Still, the revenue from this decision is vast, and the answer to who won the race in the end may not ever be determined.
