What’s the market impact of PASPA’s fall?

Whenever there is a significant change in the U.S., the impact is across the globe. The same applies to the gambling industry — a growing area worth hundreds of billions worldwide. This year marks a significant milestone in the area, with the Supreme Court of the U.S. (SCOTUS) striking down 26-year-old legislation that prohibited most states from legalizing sports gambling. The change opens many possibilities not only for gamblers of all kinds (including poker) but also, for all the stakeholders involved in the sports wagering industry.


There has been a lot of misunderstanding regarding the fall of the Professional and Amateur Sports Protection Act (PASPA) — the 1992 legislation that the Supreme Court struck down two months ago. Here’s the gist of what this means and does not mean for the gambling industry in the U.S.

What PASPA’s Fall Means

Enacted in the 90s, PASPA prohibited states from allowing sports betting to protect professional and amateur sports leagues from outside intervention. The logic was that if sports betting is illegal, there will be fewer attempts by third parties to influence the results, for example, by bribing players to lose on purpose or fake an injury. The other goal of PASPA was to keep the population from getting addicted to gambling.

The Act did allow Nevada to keep its sports betting practices if it only happened on the state’s territory. Also, Oregon, Delaware, and Montana could keep their sports lotteries. New Jersey could’ve taken advantage of a one-year window that permitted states with established gambling traditions to legalize sports betting but failed to do so. Ironically, it was The Garden State who recently challenged PASPA, taking the case to the Supreme Court and winning it.

What PASPA’s Fall Doesn’t Mean

In May, the SCOTUS ruled that PASPA violates the Tenth Amendment because it transfers to the federal government rights reserved for the states. According to most justices, if Congress failed to regulate gambling, the right to do so belongs to the states.

People wrongly assumed that this means the Supreme Court legalized sports betting. However, in reviewing the case, the justices weren’t concerned with sports betting, but rather with who — the federal government or the states — had the authority to make it legal.

The fall of PASPA does not mean that from now on every U.S. citizen can open their browser and place a bet online. For this to happen, states need to legalize sports betting within their borders and pass regulatory policies. Second, those operators who are granted licenses need to build and release the necessary infrastructure. Right now, the tendency is to focus on brick-and-mortar betting locations, though online platforms are in the works.

Contrary to popular belief, PASPA’s fall doesn’t mean anything for poker, at least not directly. Online poker is regulated by the states and is currently legal only in Nevada, New Jersey, Delaware, and Pennsylvania. However, it is expected that as more states legalize sports betting, they will do so with online poker as well.

Online gambling, be it sports, poker, etc., has steadily increased for over a decade.

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Market Implications

Understandably, PASPA’s fall sent everybody who’s connected to the gambling world into a frenzy. And for years, casinos, hotels and online gambling operators have been eager to offer sports betting. So, what does that mean for the markets?

Market Environment 10 Days Post-PASPA

Following SCOTUS’ decision in May, the stocks of many companies related to the U.S. gambling industry shot up. A study by the University of Louisville analyzed eleven companies, ten of which showed statistically significant and positive cumulative abnormal returns ten days post-PASPA’s fall. Three of the companies showed a two-digit return: the Irish Paddy Power Betfair PLC (PDYPY) with 22.85 percent, the English William Hill PLC (WIMHY) with 13 percent and the American Scientific Games Corporation (SGMS) with 10.34 percent. Other major players, such as the MGM Resorts International (MGM), Las Vegas Sands Corp. (LVS) and Caesars Entertainment Corp. (CZR) showed more modest increases of 0.54 percent, 2.06 percent and 5.38 percent, respectively.

Oxford’s Study

A year before the final decision on PASPA, Oxford Economics also conducted a study outlining the possible outcomes concerning the liberalization of the sports betting market in the U.S. The study considered the economic impact of three possible options: betting availability at casinos, casinos and retail, and casinos, retail and online. The study expects that sports betting will contribute $22.4 billion to the U.S. GDP. Another prediction is that the wagering industry will contribute $11 million in a combined labor income and employment impact of 216, 000 jobs. With such possibilities, it’s likely that sports gambling in the U.S. will only grow, and more states will get looser with their restrictions. These positive predictions will impact the whole gambling industry, including foreign entities that are significant providers of gambling platforms.

There are hopes that after building their sports betting regulations, states will do the same for online poker.

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Poker Might Be Next

Though poker and PASPA were unrelated, the fall of the Act has raised hopes of liberalization for the card game. It’s ironic that the country that invented poker provides such a limited opportunity for play. Online poker has been steadily getting traction for some time now, yet only four states allow it. The SCOTUS decision on sports betting raised hopes among poker fans and online casino operators of a domino effect. Once the states open the gambling industry to their citizens, it’s logical that the same will happen to a game that is already mostly viewed as a skill-based sport.

Besides, the casinos that aspire to offer online sports betting have already established partnerships with providers of the software for online gaming, some of which are the biggest online poker operators in the world. With such strong actors at play, it’s likely that there will be another push for easing the leash, only this time, aimed at poker.

PASPA might’ve been a U.S. law, but the Supreme Court’s decision has an impact over the whole industry. Still, not much is certain yet. Most of sports gambling’s future is in the hands of the states, but there have been calls for Congress to step in and enforce the federal regulation. Whether this will happen or not is not yet clear. What is certain, however, is that sports gambling is a lucrative area involving influential stakeholders who are set to catch up on what they’ve missed during PASPA’s times.

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What’s the market impact of PASPA’s fall?
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