The 1992 U. S. Professional and Amateur Sports Protection Act prohibited sports betting in all but four states that already permitted the practice—Delaware, Montana, Nevada, and Oregon.  Today, the U.S. Supreme Court heard arguments from New Jersey to overturn the law and enable states to institute sports betting.  The challenge proffered is that the 1992 law is unconstitutional and infringes on states’ rights.

MLB, the NCAA, the NBA, the NFL, and the NHL are opposing New Jersey’s efforts and have sued to prevent New Jersey from proceeding with sports betting.  By contrast, eighteen state attorney generals and three governors are supporting New Jersey and five states have already passed legislation legalizing sports betting and another six or so states are considering taking the same step.

If the Supreme Court in June 2018 strikes down the 1992 law, racetracks in states permitting sports betting should benefit in that they will likely be sports-betting sites.  However, the effect on pari-mutuel wagering on horse racing in the aggregate is problematic.

An argument can be made that illegal sports betting is already rampant, with bets being made via bookies, offshore websites, and office pools, so that legalizing the activity will only bring it into the open and produce tax revenues for states.  However, legalization may greatly increase the dollar amount of sports betting as new players decide to participate.

If sports betting is legalized in more states, the question for horse racing is to what extent its current players, overall, will treat horse-race betting and sports betting as substitute products.  If they are treated as substitutes, pari-mutuel wagering will almost surely be eroded.  On the other hand, sports betting could bring new customers to racetracks, and that could lead to additional pari-mutuel players.

If I had to guess, without sufficient empirical evidence, I would speculate that pari-mutuel wagering will not be advantaged by legalized sports betting, primarily because most people who know a lot about the intricacies of betting against a line do not know much about the esoteria of handicapping horse races.  Yet horse handicappers can easily understand how to wager against a betting line.  Moreover, the house cut of sports bets is considerably less than the takeout on horse wagers.

The most proactive step that horse racing can take is to begin to develop horse-racing bets that emulate to a large degree betting on, say, an NFL game.  Whether that is feasible or not is an open question.

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