The recent U.S. Supreme Court decision in Murphy et al v. NCAA removes the last federal legal barrier to gambling on sports events. The decision hinged on a technical legal issue of which sections of the existing federal law were severable, and the broader, constitutional issue of states’ rights. The result effectively opened the gates and left the regulation decisions on gambling to be settled state by state.
Legal gambling on sports is a large and growing industry, and so is its illegal element. One of the attractive aspects of this decision for politicians and governments is that it will, theoretically at least, bring to the surface the illicit sports gambling market and allow it to be taxed. The size of the illegal portion is unknown, though, and while it is believed to be quite large, the wildly different estimates of its dimensions — from $15-400 billion — do not inspire confidence that we know much about it.
The legal soundness of the court’s decision does not insulate it from being unfortunate. Gambling is surrounded by a gravitational field that attracts, along with huge numbers of ordinary people, a subculture that ranges from riff-raff, petty criminals and con men to fully developed organized crime.
There is no better example of the destructive power of gambling on sports than what happened to competitive rowing. America’s colonies, villages, towns, and cities sprung up in her ports and along her rivers. Rowing was an integral part of our lives then, and being of a competitive nature, rowing skills were valued, and rowing races were popular events. Naturally, another part of our nature followed: gambling.
Competitive rowing survived the decline of rowing as a necessary skill in our lives, but it could not survive gambling and the irrepressible urge of some gamblers to know the outcome of the race ahead of everyone else.
After several well publicized gambling-related cheating incidents, competitive rowing virtually disappeared as a popular sport, surviving principally in the term, “boat race,” which, in horse racing parlance means a fixed race.
Rowing today survives as a collegiate and club sport that is virtually untouched by gambling interests. While there are certainly wagers between individuals, for the rowers themselves there are no draft lotteries, no multi-million-dollar contracts, no professional future for rowers. It is a collegiate sport that helps keep alive the idea of the student athlete.
The Supreme Court decision will almost undoubtedly foster an expansion of organized gambling on collegiate sports — and it may even spread to high school sports if states do not prevent it. And while states are free to regulate, restrict, or even prohibit gambling on sports, state governments will find it difficult to resist joining the scramble for tax revenue.
Gambling, and its alter ego, speculation, are already exerting an erosive influence on our economy, our society and our culture. Speculation by large financial institutions certainly played an important role in plunging us into the Great Recession we are only now emerging from.
What with financial speculation, sports gambling and state-run lotteries, you wouldn’t think that there would be room for another major gambling scheme.
But now comes something called the GDP-linked bond, a federal debt instrument (maybe) with payments to investors that vary up or down as our gross national product fluctuates.
The reason for the idea’s “maybe” status as a debt instrument is that in some respects it resembles a stock share more than a bond. Some advocates of the GDP-linked certificates are attracted by the stock resemblance and would call the new issue a “trill” — short for a trillionth share of the GDP.
Whatever name these instruments are eventually given, they represent a form of speculation, i.e. a futures market for those inclined to gamble on next quarter’s or next year’s GDP. Economists love this idea, of course, because it will make their forecasts worth money. It is not clear how the investor-gamblers will benefit from opening up this new casino.
We already have a problem with the growing disconnect between individual effort, individual decisions and outcomes. A seemingly growing number of people believe that their lives are the result of some sort of probabilities and, often, stacked decks.
There is a certain irony in sports gambling taking the lead in gambling and now in fostering a odds-driven view of life, for sports provides so many examples of individuals, and teams, overcoming odds and obstacles to achieve success.
This attitude is the parent of a litany of individual and social ills and what we don’t need, as a society and as a country, are more opportunities to reinforce the idea that the individual plays no role in his or her destiny. That’s no way to live a life or build a country.
James McCusker is a Bothell economist, educator and consultant.
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