The Legal Status of Sports Gambling in America

The gap between what the law says and what regulators choose to enforce–is the battleground where the fate of the entire sports gambling industry will be decided

Yesterday, we published Normalized, Not Legalized: A Response to Matthew Yglesias. Our main thesis was simple: Yglesias was operating under the incorrect assumption that sports gambling is a matter reserved to the states.

If that premise is wrong, then the natural follow-up is: What is the legal status of sports gambling in America? What do the laws actually say?

To his credit, Yglesias doesn’t object to the idea that law, and only law, should dictate what happens with sports gambling:

… I also “don’t believe the courts should consider or care about the policy outcomes of their decisions at all.” They absolutely should not do this. The one and only responsibility of judges is [to] make legal rulings that correctly state the law, based on what the law really and truly is.

On this, we agree. So, what is the law?

A surprisingly large portion of the answer is hiding in a single comment left on Yglesias’s own post by Charles Fain Lehman, a Senior Fellow at the Manhattan Institute and a Senior Editor of City Journal (LinkedIn, The Causal Fallacy - his Substack):

Professional anti-fun guy here. Interstate sports gambling is illegal under the federal wire act. The prediction markets skirt this by selling futures contracts (therefore not gambling). But event contracts in “gaming” are already prohibited under Dodd-Frank’s rules about contracts contrary to the public interest. (See: https://www.law.cornell.edu/uscode/text/7/7a-2)

In other words, the line Matt wants (and which I agree with) already exists in federal law. CFTC just needs to enforce it. And Congress ideally needs to make extra clear what “gaming” meant.

Lehman gets about two-thirds of the way there. Let’s drive it to the finish line.