After Prohibition: The Changing Legal Landscape of Sports Betting

Sports betting is legal in many parts of the United States, but the rules depend on where you live. After the U.S. Supreme Court’s decision in Murphy v. NCAA, states gained the authority to decide whether to legalize and regulate sports wagering. Since then, many states have passed laws allowing sports betting, creating a complex legal landscape that varies from one jurisdiction to another.

The expansion of sports betting has changed the way states approach gambling, business regulation, and public revenue. While legalization has generated significant economic activity, it has also created a complicated network of rules involving operators, technology providers, sports organizations, and consumers. Knowing how these laws work is essential for anyone involved in the industry.

For legal help, use the Super Lawyers directory to find a qualified gaming attorney familiar with gaming and regulatory matters.

Is Sports Betting Legal in the United States?

Sports betting is legal in many parts of the country. However, the rules vary significantly from state to state. After the Supreme Court’s 2018 decision in Murphy v. NCAA, there is no longer a blanket federal prohibition against sports betting. Instead, individual states now decide whether to legalize sports gambling and create their own rules for regulating the industry.

“The one area that has seemed to allow off-site betting is horse racing,” says California gaming attorney Stephen Warren Solomon. “Each track makes deals with internet providers and the state, and there is even a television station that allows betting on horses as well.”

According to the American Gaming Association, legal sports betting has expanded since the Supreme Court’s decision, with many states adopting legal wagering.  Many states now allow wagering on professional and collegiate sporting events.

States have taken different approaches, though. Some permit online and mobile betting. Others limit wagering to retail sportsbooks or certain gaming facilities. Some continue to prohibit sports betting altogether.

U.S. states that have passed sports betting laws since Murphy include New Jersey, Pennsylvania, New York, Illinois, Michigan, Ohio, Massachusetts, Maryland, and North Carolina. However, the legal landscape continues to change, so sports bettors must understand the rules that apply in their location.

Whether a wager is legal depends on several factors, including where the person placing the bet is located and whether the sportsbook or operator is properly licensed under state law.

What Did the Supreme Court Decide in Murphy v. NCAA?

To understand the impact of Murphy v. NCAA, it helps to look at the law that came before it. In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA), which generally prevented states from authorizing sports betting.

PASPA created a federal ban on state-approved sports wagering, with limited exceptions. Nevada was one of the few states permitted to continue certain sports betting operations, including wagering offered through licensed casinos.

New Jersey also sought permission to have sports betting at casinos and racetracks within the state. The NCAA and professional sports organizations opposed the motion. They argued that New Jersey couldn’t go around PASPA restrictions. The dispute made its way through the legal system and was eventually heard by the Supreme Court.

The Court ultimately ruled in 2018 that PASPA was unconstitutional. The justices determined that the federal government could not force states to enforce a federal policy by requiring them to keep sports betting prohibited. The Court found that this violated principles of federalism protected by the Constitution.

Although the ruling was a major turning point, the Supreme Court did not legalize sports betting across the country. The decision removed the federal ban and gave states, including New Jersey and others, the authority to decide whether to permit and regulate sports wagering.

How Do States Regulate Sports Betting?

Sports betting laws are created at the state level, which means every jurisdiction can take a different approach to regulating the industry. After choosing to legalize sports wagering, states establish rules that determine who can operate sportsbooks, how bets can be placed, and what protections must be in place for gamblers.

Solomon explains that state laws can be restrictive, despite sports betting being legal. “There are federal laws that prohibit a lot and state laws that prohibit a lot, so it’s a massive web of difficult regulations to pass through in order to run a gaming business of any kind.”

Many states regulate sportsbook operators through licensing requirements that apply to gaming companies, technology providers, and vendors involved in sports betting operations. These requirements help states monitor businesses and ensure operators follow applicable regulations before accepting wagers.

Sports Betting and Consumer Protection Laws

States also focus heavily on protecting consumers. Rules may require sportsbooks to verify a customer’s age, confirm their location, secure account information, and prevent fraudulent activity. Responsible gambling requirements may include self-exclusion programs, spending limits, and public education campaigns designed to help gamblers make informed decisions.

Advertising restrictions can also play a significant role in state regulation. States may limit how sportsbooks advertise promotional offers, require clear marketing disclosures, and restrict certain advertisements directed toward minors.

While states such as New York, Pennsylvania, Illinois, Florida, and Mississippi allow different forms of sports betting, their individual requirements show why the industry remains a complex network of state-specific rules.

Where Does Sports Betting Revenue Go?

Each state decides how to allocate sports betting revenue. Many states direct a portion of sports betting tax revenue into general funds that support public programs, government operations, and infrastructure projects. This funding may help states pay for services or address budget needs, depending on how lawmakers structure their allocation plans.

Solomon explains that many states use gambling revenues to supplement infrastructure maintenance. “Some will go to regulation, but most of it will go to filling potholes and making sure their bridges and buildings don’t fall down.”

Education is another common area where states direct sports betting revenue. Some jurisdictions dedicate funds toward schools, educational programs, or scholarship opportunities. These allocations allow states to use revenue from the gaming industry to support broader public initiatives.

Some states use sports betting revenue to warn citizens about the dangers of gambling. That revenue could fund gambling addiction treatment centers or prevention programs. The goal is to help the public make more informed decisions or get help if they have a problem.

Some states use the revenue to regulate the industry. Licensing agencies, enforcement efforts, and oversight programs all cost money to operate.

What Legal Issues Can Arise from Sports Betting?

Gaming regulations are one of the biggest areas of concern. Operators may face licensing disputes, regulatory compliance issues, and enforcement actions if they fail to meet state requirements. Because online sports wagering depends heavily on state approval, companies must carefully monitor changing regulations and maintain compliance throughout their operations.

Business agreements can also create legal challenges. Sportsbook partnerships, sponsorship agreements, and technology contracts often require careful negotiation to address issues such as revenue sharing, intellectual property rights, and regulatory obligations.

Consumer protection is another important consideration. Sports betting companies may face disputes involving advertising claims, account issues, or payment problems. In addition, online sportsbooks must address data and privacy concerns, including the collection of user information, cybersecurity obligations, and location verification technology.

Why Sports Betting Businesses Need Legal Guidance

The growth of legal sports betting has created opportunities for companies across the gaming, technology, and entertainment industries. However, businesses entering this space must comply with a wide range of rules involving gaming law, regulatory compliance, business formation, contracts, technology law, and government regulations.

For companies looking to form partnerships with professional sports leagues, legal challenges extend beyond gambling and sports betting laws. They also need to have strong contracts that comply with sports betting and contract law. Relationships involving the NFL, NBA, NHL, and MLB may require detailed agreements. They will cover more than just sponsorships and branding rights. This new generation of partnership agreements will need to address data use authority and regulatory obligations.

Companies such as FanDuel and DraftKings have become well-known names in the sports betting market, but businesses of all sizes must carefully consider their legal responsibilities before expanding operations. Because each state creates its own regulatory framework, working with an attorney can help companies understand the requirements that apply to their specific business model and locations of operation.

Talk to a Lawyer

The legalization of sports betting has created new opportunities for businesses, states, and consumers, but it has also introduced new legal challenges. Because sports betting regulations can be complicated and vary by state, working with a knowledgeable attorney can help you make informed decisions and address potential legal risks.

Use the Super Lawyers directory to find a gaming attorney with experience handling gaming, regulatory, and business law matters.