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Sports Gambling

chapter 8
SPORTS GAMBLING

Wagering on sporting events is one of the oldest and most popular forms of gambling in the world. The ancient Romans gambled on chariot races, animal fights, and contests between gladiators. The Romans brought sports and gambling to Britain, where they have flourished for hundreds of years. Cockfighting, bear- and bullbaiting, wrestling, and footraces were popular sporting events for gambling throughout Europe during the sixteenth and seventeenth centuries. Horse races and boxing matches became popular spectator and betting sports during the eighteenth century. During the nineteenth and twentieth centuries, sporting events became more team-oriented and organized as rugby, soccer, and cricket grew in popularity.

Many early colonists in America brought their love of sports and gambling with them. Horse racing, in particular, became a part of American culture. However, the morals of the late eighteenth and early nineteenth centuries squelched popular support for legalized sports gambling. By 1910 almost all forms of gambling were illegal in the United States. This did not stop people from gambling on sports, however. The practice continued to flourish, and horse racing, in particular, managed to maintain some legal respectability as a betting sport.

Nevada legalized gambling again in 1931 and permitted sports wagering for a couple of decades. The influence of organized crime and sports gambling scandals led to a crackdown during the 1950s. Legal sports gambling did not return to Nevada until 1975, when it was tightly licensed and regulated.

Today sports gambling in the United States can be broken down into three primary categories. The first is pari-mutuel betting on horse and greyhound races and jai alai games. This form of gambling is legal in forty-three states. Although once quite popular, pari-mutuel betting has suffered a decline in recent years. The second form of sports gambling, permitted only in Nevada, is legal betting using a bookmaker. The third and most widespread form of sports gambling is illegal betting.

SOCIAL ATTITUDES TOWARD SPORTS GAMBLING

The popularity of sports gambling is attributed to several factors—a growing acceptance of gambling in general, intense media coverage of sporting events, and emerging technologies that make wagering easier. Sporting events are increasingly broadcast through an array of media sources. There are entire television networks dedicated solely to sports. Americans can pick up a wide variety of sporting events from around the world via local and cable television stations, satellite services, and even the Internet. Cellular phone users can have the latest scores sent right to their wireless phones. Sports bars and restaurants are also popular. These establishments feature multiple television sets tuned into various sporting events.

In December 2003 the Gallup Organization conducted its annual lifestyle poll. Participants were asked if they had participated within the previous twelve months in various forms of gambling. As shown in Figure 2.1 in Chapter 2, nearly half of those asked (49%) had purchased a state lottery ticket, while 30% had visited a casino, 15% had played bingo for money, and 14% had played video poker. The percentages for sports gambling were much lower. Only 10% had bet on a professional sporting event, and 6% had bet on college sports. Another 4% said they had bet on a horse race, and 2% had bet on a boxing match. Table 8.1 shows trends over time reported by Gallup for these sports gambling activities. In 2003 participation was historically low in every category.

The most recent national poll conducted to determine American attitudes about gambling was performed during April and May 1999 by the Gallup Organization. The poll was conducted among 1,523 adults (aged eighteen and up) and 501 teenagers (aged thirteen to seventeen). At that time, 64% of the adults and 52% of the teenagers approved of legalized gambling in general. The participants were asked several questions about their participation in and attitudes about sports gambling. It is not clear how much of the adult

TABLE 8.1

Participation in sports gambling within the previous 12 months, March 2004
*Less than 0.5%
source: Jeffrey M. Jones, "Gambling Activity in the United States," in Gambling a Common Activity for Americans, The Gallup Organization, March 24, 2004, http://www.gallup.com/content/default.aspx?ci=11098 (accessed September 26, 2004). Copyright © 2004 by The Gallup Organization. Reproduced by permission of The Gallup Organization.
Bet on a professional sports event such as baseball, basketball, or football
Yes
%
No
%
No opinion
%
2003 Dec 11–141090*
1999 Apr 30–May 231387
1996 Jun 27–301090
1992 Nov 20–221288
1990 Feb 15–182179
1989 Apr 4–92278
Bet on a college sports event such as basketball or football
Yes
%
No
%
No opinion
%
2003 Dec 11–14694*
1999 Apr 30–May 23991
1996 Jun 27–30793
1992 Nov 20–22694
1990 Feb 15–181189
1989 Apr 4–91486
Bet on a boxing match
Yes
%
No
%
No opinion
%
2003 Dec 11–14298*
1996 Jun 27–30397*
1992 Nov 20–22694
1990 Feb 15–18595
1989 Apr 4–9892
Participated in an office pool on the World Series, Superbowl, or other game
Yes
%
No
%
No opinion
%
2003 Dec 11–141585*
1999 Apr 30–May 232575
1996 Jun 27–302377
1992 Nov 20–222278

gambling discussed in the poll is legal and how much is illegal. However, most (if not all) gambling conducted by the teenaged respondents must be illegal because they are younger than eighteen, the lowest legal gambling age in most states for any type of sports gambling.

Only 9% of adults said they had bet on a horse or dog race during the previous year. Surprisingly, 5% of the teenagers had also done so. When asked about college sporting events, 9% of adults and 18% of teenagers admitted having bet on them. The percentages were somewhat higher for professional sports: 13% of adults and 27% of teenagers had placed wagers during the previous year. One-quarter of adults and 15% of teenagers had bet on a major sporting event, such as the Super Bowl or World Series, through an office pool. A large majority of adults (68%) and teenagers (67%) indicated that they believed "legalized betting on sporting events leads to cheating or fixing games."

A slight majority of adults (53%) and teenagers (55%) thought that off-track betting on horse races should be legalized as a means of raising state revenues. The legalization of gambling on professional sporting events for the same purpose was approved by 41% of adults and 60% of teenagers.

PARI-MUTUEL GAMBLING

"Pari-mutuel" is a French term meaning "mutual stake." In pari-mutuel betting, all wagers on a particular event or race are combined together into a pool that is split between the winning bettors and the management. The larger the pool, the bigger the payoff. In pari-mutuel gambling, patrons bet against each other, not against the house. The principles of the pari-mutuel system were developed in France during the late nineteenth century by Pierre Oller.

The pari-mutuel system has been used on horse races in the United States since around 1875, but it did not really catch on until the 1920s and 1930s, when an automatic odds calculator called a totalizator came into use. The totalizator was a machine that took money, printed betting tickets, and continuously calculated odds based on betting volume.

Prior to this time, horse betting was conducted mostly by bookmakers who were notoriously corrupt. In 1933 California, Michigan, Ohio, and New Hampshire legalized pari-mutuel gambling on horse racing as a means of regulating the industry and gaining some revenue. Dozens of states followed suit over the next decade. Pari-mutuel gambling was also adopted for greyhound racing and matches of jai alai (a game similar to handball). Table 8.2 lists the states that currently allow pari-mutuel gambling in some form. A handful of these states permit pari-mutuel gambling by law, but do not have facilities or systems in place to conduct it. For example, pari-mutuel gambling on horses is permitted in Shelby County, Tennessee, but the state does not have a racing commission. Therefore, no parimutuel gambling takes place in Tennessee.

In pari-mutuel gambling the entire amount wagered is called the betting pool, the gross wager, or the handle. The system ensures that event managers receive a share of the betting pool, regardless of who wins a particular race or match. The management's share is called the takeout. The takeout percentage is set by state law and is usually around 20%.

Another important term is "breakage," which refers to the odd cents not paid out to winning bettors because payoffs are rounded. In other words, a winning ticket is not paid down to the penny. The payout on a $2 bet is typically rounded off in $.20 increments. The cents left over are the breakage. Although breakage amounts to only pennies per bet, it adds up quickly with high betting volume. For example, California horse racetracks accumulated more

TABLE 8.2

Pari-mutuel gambling, 2004
Horse racing Greyhound racing Jai Alai Additional features
source: Created by Kim Masters Evans for Thomson Gale, 2004
AlabamaX
ArizonaXX
ArkansasXX
CaliforniaX
ColoradoXX
ConnecticutXX
DelawareXSlot machines
FloridaXXXCard rooms
IdahoX
IllinoisX
IndianaX
IowaXXSlot machines
KansasXX
KentuckyX
LouisianaXSlot machines
MaineX
MarylandX
MassachusettsXX
MichiganX
MinnesotaXCard rooms
MissouriX
MontanaX
NebraskaX
NevadaX
New MexicoXSlot machines
New HampshireXX
New JerseyX
New YorkXSlot machines
North DakotaX
OhioX
OklahomaX
OregonXX
PennsylvaniaX
Rhode IslandXXSlot machines & video lottery terminals
South DakotaX
TennesseeX
TexasXX
VermontX
VirginiaX
WashingtonX
West VirginiaXXSlot machines
WisconsinX
WyomingX

than $10 million in breakage in fiscal year 2003. The funds were split between the state, the track operators, and the horse owners. The disposition of breakage is handled differently by each state. Takeout and breakage are subtracted from the betting pool before payouts are made.

Pari-mutuel wagering can be performed in person at the event or, increasingly, at off-track betting (OTB) facilities. The New York legislature approved the first OTB operation in 1970. Some states also allow betting by telephone or Internet when an account is set up prior to bet placement. Many races are broadcast as they occur by televised transmission to in-state and out-of-state locations (including OTB sites). This process, known as simulcasting, allows intertrack wagering (ITW) to take place. In other words, bettors at one racetrack can place bets there on races taking place at another racetrack.

A race book is an establishment (usually a room at a casino) in which ITW takes place on pari-mutuel betting events, such as horse and greyhound races. A race book typically features many television monitors that show races as they occur. Some racetracks also have ITW rooms that they call race books. Race books are included in many Nevada and Atlantic City, New Jersey, casinos, as well as some tribal casinos. Figure 8.1 shows race book wagering statistics for Nevada casinos from 1996 to 2003. Just over $516 million was wagered in Nevada race books during 2003.

According to statistics available at the Web site of industry analyst Christiansen Capital Advisors, LLC (www.cca-i.com), the total gross revenue (handle minus payout) on pari-mutuel gambling in the United States was $3.8 billion in 2003. Most of this amount ($3.4 billion) came from horse racing, followed by greyhound racing ($398 million) and jai alai games ($25 million).

Horse Racing

Horse racing has been a popular sport for thousands of years and was enjoyed by the ancient Greeks and Romans. It was popularized in western Europe when knights returning from the Crusades brought back fast Arabian stallions. These horses were bred with sturdy English mares to produce a new line of horses now known as Thoroughbreds. Thoroughbreds are tall lean horses with long slender legs. They are renowned for their speed and grace while running.

Thoroughbred racing became very popular among the aristocrats and royalty of British society, earning it the nickname the "Sport of Kings." The sport was transplanted to America during colonial times. According to the Jockey Club, Thoroughbred horse racing was taking place on Long Island, New York, as far back as 1665. However, the advent of organized Thoroughbred racing is attributed to Governor Samuel Ogle of Maryland, who staged a race "between pedigreed horses in the English style" in Annapolis, Maryland, in 1745. The Annapolis Jockey Club, which sponsored the race, later became the Maryland Jockey Club. Among its initial members were George Washington and Thomas Jefferson.

Thoroughbred breeding was prominent in Maryland and Virginia up until the Civil War (1861–65), when many operations were moved to Kentucky. Thoroughbred racing had already grown popular throughout the agricultural South at that time. In 1863 the Saratoga racecourse opened in northern New York. It is considered the oldest Thoroughbred flat track in the country. (A flat track is one with no hurdles or other obstacles for a racing horse to jump over.) The Jockey Club, the governing body of Thoroughbred horse racing, was established in 1894.

Horse racing remained popular in the United States until the 1940s, when it was severely curtailed during

FIGURE 8.1

World War II (1939–45). The decades following the war saw a sharp decline in the popularity of horse racing. Three reasons are commonly mentioned:

  • Competition from other entertainment venues and leisure activities, such as theme parks, shopping malls, and television, increased.
  • The horse-racing industry avoided television coverage of races during the 1960s for fear it would keep people away from the tracks. (This is now seen as a failure to take advantage of a major marketing tool.)
  • Competition for gambling dollars from state lotteries and casinos came into being as those venues were legalized.

Despite the decline in attendance, the amount of money gambled on horse races has actually increased over the past decade. As shown in Figure 8.2, the parimutuel handle from thoroughbred horse racing was $15.2 billion in 2003, up from $9.4 billion in 1990. Just over 87% of the amount bet during 2003 was at OTB facilities. The OTB percentage has increased dramatically since 1996. Analysts believe that attendance at live racing will continue to decline in popularity as there are more and more OTB opportunities, including the Internet.

the racetracks and the races. There are about ninety Thoroughbred racetracks around the country. Some racetracks are only open seasonally, while those in warm climates are open year-round. Racetracks vary in size and in ownership; some are government owned and some are owned by private and public companies. Fortune magazine reported in October 2001 that most of the betting business associated with Thoroughbred horse racing in

FIGURE 8.2

the United States is controlled by a relatively small group of players. Two publicly traded companies, Churchill Downs and Magna Entertainment, account for approximately 50% of the business, while another 22% is attributed to the New York Racing Association and the New York City Off-Track Betting Corporation (NYCOTB). The New York Racing Association is a not-for-profit group that controls the Belmont, Saratoga, and Aqueduct racetracks. Analysts predict that the industry will continue to undergo consolidation, with corporations taking over most of the business. In May 2004 the chairman of Magna Entertainment announced at a shareholders' meeting that the company hopes to purchase Churchill Downs, Inc., before the end of the decade.

The three most prestigious Thoroughbred races in the United States are the Kentucky Derby at the Churchill Downs track in Kentucky, the Preakness Stakes at Pimlico in Maryland, and the Belmont Stakes at Belmont Park in New York. The races are held over a five-week period during May and June of each year. A horse that wins all three races in one year is said to have won the "Triple Crown." Only eleven horses have ever captured the Triple Crown—most recently, a horse named Affirmed in 1978.

According to the Jockey Club, there were 53,503 Thoroughbred horse races in a total of thirty-seven states during 2003. (See Table 8.3.) California hosted the most events, with 5,126 races, followed by West Virginia (4,520), Pennsylvania (3,851), Florida (3,806), and New York (3,704). The total gross purses amounted to just over $1 billion. The gross purse is the amount awarded to the owners of the winning race horses. California racetracks had the highest gross purse of nearly $189 million. New York ($131 million), Florida ($85 million), Kentucky ($80 million), and Illinois ($75 million) complete the top five highest purse states. As shown in Figure 8.3, the number of Thoroughbred races held each year has generally steadily declined since the early 1990s.

non-thoroughbred horse racing. Although Thoroughbred horse racing is the most popular type of horse racing in the United States, other types of horse racing are involved in pari-mutuel wagering, chiefly harness racing and the racing of quarter horses and Arabian horses.

In harness racing, horses trot or pace rather than gallop. They have to be specially trained to run races in this manner. Typically, the horse pulls behind it a two-wheeled cart known as a sulky, carrying a jockey who controls the reins. Sometimes the jockey is seated on the horse rather than in a sulky. Harness racing is performed by a type of horse called a standardbred, which is shorter, more muscled, and longer in body than the Thoroughbred. In 1879 the National Association of Trotting Horse Breeders in America established the official registry for standardbred horses. While Thoroughbred horses were the favorite of high society, standardbred racing became popular among the common folk. Today, there are approximately thirty licensed harness racetracks around the country at which pari-mutuel betting takes place. Harness racing is also conducted at county fairs and exhibitions.

A third type of horse known for racing is the quarter horse, so named because of its high speed over distances

TABLE 8.3

Thoroughbred horse races by state or Canadian province, 2003
State/province Number of races Gross purses*
*Purses include monies not won and returned to state breeder or other funds.
source: Adapted from "2003 Analysis of Races by State or Province," in Fact Book, The Jockey Club, February 6, 2004, http://www.jockeyclub.com/factbook/compare%2003.html (accessed August 23, 2004)
Arizona2,103$14,907,871
Arkansas505$11,482,600
California5,126$188,866,549
Colorado285$2,572,565
Delaware1,271$33,037,425
Florida3,806$85,220,610
Georgia11$345,000
Idaho293$992,559
Illinois3,024$75,014,401
Indiana1,001$11,286,042
Iowa770$14,179,378
Kansas283$2,173,896
Kentucky2,560$80,292,971
Louisiana3,426$58,967,227
Maryland1,964$43,868,600
Massachusetts1,374$15,871,300
Michigan1,054$9,154,094
Minnesota547$8,808,271
Montana145$333,855
Nebraska863$5,246,405
Nevada23$62,850
New Jersey1,194$36,184,164
New Mexico1,376$21,966,206
New York3,704$131,413,851
North Carolina18$277,500
North Dakota77$287,264
Ohio3,262$26,116,132
Oklahoma872$6,720,250
Oregon869$2,985,126
Pennsylvania3,851$45,735,528
South Carolina24$590,000
Tennessee7$290,000
Texas2,031$29,644,944
Virginia348$8,410,300
Washington880$8,294,700
West Virginia4,520$73,826,390
Wyoming36$70,025
Total 53,503 $1,055,496,849
Canada
Alberta1,236$14,830,244
British Columbia744$12,055,226
Manitoba589$5,984,183
Ontario2,667$116,858,252
Saskatchewan262$662,025
Total 5,498 $150,389,930

of less than a quarter of a mile. They were originally bred by American colonists to be both hardworking and athletic. There are nearly forty quarter horse racetracks around the country.

Arabian horses are considered the only true purebred horses on the race circuit, as they have not been mixed with other breeds. Arabian horse racing is conducted at about fifteen tracks in the United States.

the betting. The betting pool for a particular horse race depends on how much is wagered by bettors on that race. Each wager affects the odds. The more money bet on a horse, the lower that horse's odds and the potential payoff

FIGURE 8.3

becomes. The payout for winning tickets is determined by the amount of money bet on the winner in relation to that bet on all the other horses in that particular race.

First, the takeout is subtracted from the betting pool. This money goes toward track expenses, taxes, and the purse. Most states also require that a portion of the take-out goes into Breeder Funds to encourage horse breeding and health in the state. For example, Figure 8.4 shows the breakdown of each takeout dollar in California. (Note: In this graphic, "other states' takeout" refers to money used to pay interstate wagering fees to betting facilities outside of California that take bets on California races.) After the takeout and the breakage are subtracted from the betting pool, the remaining money is divided by the number of bettors to determine the payoff, or return, on each wager.

The odds on a particular horse winning first, second, or third place are estimated on the morning of a race and then constantly recalculated by computer during the prerace betting period. The odds are posted on a display called the tote board and on television screens throughout the betting area. The tote board also tallies the total amount paid into each pool. Bettors can wager that a particular horse will win (come in first), place (come in first or second), or show (come in first, second, or third). The payoff for a win is higher than payoffs for place or show, because the latter two pools have to be split more ways. For example, the show pool must be split between all bettors who selected win, place, or show. The approximate payoffs for a $2 winning ticket on horses of various odds are shown in Table 8.4.

Betting on horse racing is considered more a game of skill than a game of chance. Professional racing bettors spend a great deal of time on the observation and study of individual horses and consider previous race experience when they make their picks. This gives them some advantage over bettors who pick a horse based on whim—because they like its name, for example. Although bettors do not play directly against each other, an individual bettor's skill level does affect other bettors. This is because the payout odds in horse racing are adjusted based on the bets of the gamblers.

The Centre for Addiction and Mental Health (CAMH) in Toronto, Canada, publishes an electronic journal on gambling issues called eJournal. In October 2001 the journal analyzed important aspects of playing games of skill in an article titled "The Effect of Skilled Gamblers on the Success of Less-Skilled Gamblers." The article noted that the house edge at the racetrack is at least 17%, and even higher for bets such as exactas, in which the bettor must pick the two top finishing horses in a race in the correct place order to win.

However, previous research has shown that there are some expert bettors who make money on their bets on a consistent basis. Assuming that 10% of bettors achieve a positive return of 1% means that the average among the remaining players has to be around −19%, a substantial loss, to account for that 1% profit. Considering a house edge of 17%, the researchers concluded that a "fair amount of skill" would be required to achieve a return of −10%, and that even very skilled horse bettors could end up losing money. The article's final estimate is that only 1–2% of horse race bettors actually make money.

FIGURE 8.4

horse racing in california. California led the nation in 2003 in terms of the number of races held and the purses paid to winning horses. The state has allowed pari-mutuel gambling on horse races since 1933, when a constitutional amendment was passed by the voters. California has six privately owned racetracks and nine racing fairs. Racing fairs are county and state fairs held at facilities including racetracks so that wagering on horse races can be conducted as one of many fair events. The fairs usually last only a week or two and are conducted at various times throughout the year. In addition to actually attending racetracks or racing fairs, gamblers can bet on horse races at twenty simulcast facilities around the state.

Thirty-Third Annual Report of the California Horse Racing Board: A Summary of Fiscal Year 2002–2003 Racing in California reports that the industry grossed $4.2 billion during 2003, the highest of any state in the country. This represented the seventh straight year that the total handle had increased (from just under $3.5 billion in fiscal year 1997). Figure 8.5 shows the handle amount broken down by on-track, off-track, and out-of-state wagers. Only 18.3% of all wagers occurred at the track during 2003. The vast majority of wagers were placed at off-track locations. Winning bettors received 80.5% of the

TABLE 8.4

Money paid out on a successful $2 pari-mutuel bet
Odds $2 Bet returns Odds $2 Bet returns
source: "How Much Do I Win?," in Winning Techniques, Daily Racing Form, Spring 2004, http://www.drf.com/row/fan_ed/winning-techniques-2004.pdf (accessed September 26, 2004)
1–10$2.203–1$8.00
1–5$2.407–2$9.00
2–5$2.804–1$10.00
1–2$3.009–2$11.00
3–5$3.205–1$12.00
4–5$3.606–1$14.00
1–1$4.007–1$16.00
6–5$4.408–1$18.00
7–5$4.809–1$20.00
3–2$5.0010–1$22.00
8–5$5.2012–1$26.00
2–1$6.0015–1$32.00
5–2$7.0020–1$42.00

betting pool, or $3.4 billion. The state received revenues of $41.4 million.

In August 2001 California governor Gray Davis legalized a new betting method called Advanced Deposit Wagering (ADW), that permits betting over the telephone and Internet. Gamblers must put money into an account prior to making their wagers. The idea was heartily endorsed by the state's horse-racing industry. The manager of California operations for Magna Entertainment said racing would only flourish again "by bringing races to people, not bringing people to the races."

The new system began operating in January 2002. Approximately $4 million per month was bet via ADW soon after its introduction. Although analysts had predicted it would be a windfall for the racing industry, results were modest. During fiscal year 2003 ADW accounted for only 6% of all wagers.

the economic effects of horse racing. The horse-racing industry has a number of economic impacts on society, both within the industry and without. Examination of annual reports from the states' racing commissions shows that the industry accounts for payments in excess of $250 million in state taxes and fees each year. The largest single recipient during 2003 was the state of California, which received $41.4 million. Racetracks pay millions more to local governments.

The industry provides direct income to horse owners, trainers, and jockeys/drivers through purses. Figure 8.6 shows the purses paid out at Thoroughbred racetracks in the fifteen top racing states during 2003. California tracks paid out the highest gross purse for the year ($189 million), and the highest average purse per race ($37,000). The largest portion of a Thoroughbred race purse (typically 60%) goes to the owner of the first-place horse. The owner is responsible for paying the horse's trainer and

FIGURE 8.5

jockey. The owners of the horses finishing second and third typically receive around 20% and 12%, respectively, of a race purse. Harness track purses paid out during 2003 are shown in Figure 8.7. They totaled approximately $300 million. New Jersey was by far the state with the highest gross purse ($68 million), while Delaware had the highest average purse per race ($10,500).

The racing industry also supports a large business in horse breeding. In 1962 Maryland was the first state to establish a program to encourage breeders within the state through direct money payments. The practice spread quickly to other states involved in horse racing.

Figure 8.8 shows a flow chart developed by researchers at the University of Maryland in 1999 as part of a report titled Economic Impact of Horse Racing in Maryland. The report noted that the cash flows—between the wagering public; the racetracks and OTBs; the horse owners, jockeys/drivers, breeders, and trainers; and the regulatory government agencies—are cash transfers that do not create economic impacts. True economic impacts occur outside of the industry from expenditures on goods and services.

In these expenditures, racetrack/OTB operators spend money on land, labor, and other goods and services from various business sectors. Horse owners/breeders/trainers spend money on land, labor, veterinary care, and horse feed and supplies. All of these pump money into the general economy. The report concluded that the Maryland racehorse/racetrack industry was responsible for a total economic impact of nearly $600 million in the state, with roughly two-thirds of this amount attributable to the race-horse industry and one-third to the racetrack industry. The racehorse industry was also credited with creating just over six thousand full-time positions, while the racetrack industry created nearly three thousand positions.

Unlike the casino industry, the horse-racing industry has only a minor impact on tourism. Most racetracks are not typical tourist destinations that attract overnight visitors, who would spend money on lodging, food, and other entertainment. The exceptions are the races held as part of the Triple Crown. These racing events attract visitors from all over the world and bring a significant number of tourist dollars to local businesses.

horse fatalities and injuries. Horse racing does have a price in terms of horse fatalities and injuries. There were 207 racehorse fatalities in California alone between November 2002 and November 2003. Nearly half (102) of the deaths occurred during races. Another eighty-one deaths occurred during training and the remainder during other activities. In addition, 411 racing-related injuries to horses were reported in the state. The New York State Racing and Wagering Board reports that 120 racehorses died in that state during 2003.

The horse racing industry has invested millions of dollars in veterinary research on injuries and illnesses that affect racehorses. The Grayson-Jockey Club Research Foundation is the leading private source of funding for research into horse health issues. The foundation dates back to 1940. For 2004 it allocated $850,888 toward twenty research projects at twelve universities conducting equine research projects. It has contributed more than $11 million since 1983. The foundation receives financial support from donations and from special racing events staged by horse racetracks.

Two horse health issues of major concern are mare reproductive loss syndrome (MRLS) and exercise-induced pulmonary hemorrhage (EIPH). MRLS is a mysterious illness that killed more than five thousand Kentucky foals (or horses less than one year old) during 2001. Analysts estimate that the MRLS tragedy had an economic impact of $336 million. EIPH is a common condition in racehorses associated with bleeding from the lungs during strenuous exercise. Horses that experience EIPH are called "bleeders" and can be temporarily or permanently barred from racing depending on state regulations and the severity of the problem.

compulsive horse-racing gamblers. In terms of the human cost of horse racing, studies have shown a greater concentration of compulsive gamblers involved in pari-mutuel gambling than in other gambling activities. Results from the Gambling Impact and Behavior Study, published by the National Opinion Research Center at the University of Chicago in April 1999, support this. Of horse and dog racetrack patrons, 15% were considered

FIGURE 8.6

FIGURE 8.7

"problem" or "pathological" gamblers, compared to 10% of riverboat gamblers, 9% of those who visited casinos in Nevada or Atlantic City, New Jersey, and 6% of those in tribal casinos. These findings were based on the analysis of hundreds of gamblers who admitted multiple gambling visits during the previous year.

Greyhound Racing

Greyhounds are mentioned in many ancient documents. English noblemen used greyhounds to hunt rabbits, a sport known as "coursing." Greyhound racing is called the "Sport of Queens" because it was Queen Elizabeth I of England who established the first formal rules for greyhound coursing during the 1500s. Greyhounds were brought to America during the late 1800s to help control the jackrabbit population on farms in the Midwest, and soon local farmers began holding races. Early races were held using a live rabbit to lure the dogs to race. In the early 1900s Owen Patrick Smith invented a mechanical lure for this purpose. The first circular greyhound track opened in Emeryville, California, in 1919.

Three major organizations manage greyhound racing in the United States: the National Greyhound Association (NGA), the American Greyhound Track Operators Association (AGTOA), and the American Greyhound Council (AGC), a joint effort of the NGA and AGTOA. The NGA represents greyhound owners and is the official registry for racing greyhounds. All greyhounds that race on U.S. tracks must first be registered with the NGA. The AGTOA represents greyhound track operators. The AGC manages the industry's animal welfare programs, including farm inspections and adoptions.

Wagering on greyhounds is similar to wagering on horse races. However, greyhound racing is not nearly as popular as horse racing, and its popularity has declined dramatically in the past few decades. According to the Humane Society of the United States (HSUS), the handle from greyhound racing declined by 45% during the 1990s, leading to the closure or cessation of live racing at sixteen tracks around the country. In addition, seven states specifically banned live greyhound racing: Idaho, Maine, North Carolina, Nevada, Vermont, Virginia, and Washington.

In 2003 approximately four dozen greyhound racetracks were operating in fifteen states: Alabama, Arizona, Arkansas, Colorado, Connecticut, Florida, Iowa, Kansas, Massachusetts, New Hampshire, Oregon, Rhode Island, Texas, West Virginia, and Wisconsin. (See Table 8.2.) Greyhound racing is also legal in South Dakota, but the state has no operating racetracks. Greyhound racing is most prevalent in Florida.

florida's greyhound racing industry. Florida has sixteen greyhound racetracks, by far the most of any state. Greyhound races are the most attended pari-mutuel event in the state, attracting 1.7 million visitors during fiscal year 2002–03. Paid attendance was up by 9% from the previous year. The greyhound racing handle in fiscal year 2003 was $533 million, down 7% from 2002.

The handle from greyhound racing in the state experienced a steady decline over the past decade from $850 million in 1994 to $533 million in 2003. (See Figure 8.9.) This occurred even as horse racing in Florida increased its handle. Greyhound racing accounted for 35% of the state's total pari-mutuel handle during 2003.

Greyhound racetracks paid $17 million to the state during fiscal year 2002–03, accounting for 64% of the

FIGURE 8.9

state's total revenue from pari-mutuel gambling. The taxes paid to the state declined by 12% from the previous year.

Florida's greyhound racing industry paid out purses totaling $32 million during 2002–03. According to the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, almost all of the state's greyhound tracks actively sponsor greyhound adoption programs, and many have on-site adoption booths. The industry is required to pay 10% of the credit it receives for uncashed winning tickets to organizations that promote or encourage greyhound adoptions. These mandatory contributions amounted to $256,150 during fiscal year 2002–03.

the economic effects of greyhound racing. According to undated statistics accessed in December 2004 on the AGC Web site (www.agcouncil.com), greyhound breeding farms and racing kennels represent an investment of more than $150 million and pump another $96 million per year into local economies. The AGC valued the nation's racing greyhounds at more than $200 million. The AGC says that greyhound tracks around the country employ more than 100,000 people and raise nearly $200 million per year in state tax revenues. The tracks are credited with donating more than $10 million per year to charities and community causes. This includes donations of approximately $1 million per year to greyhound adoption efforts.

concerns about drugging. In May 2004 the Tampa Tribune reported that forty-four racing greyhounds

TABLE 8.5

Racing greyhound breeding statistics and estimated number of dogs killed, 1986–2003
Year Number of litters born (NGA) Estimated number born Dogs individually to race (NGA) Farm puppies culled before racing Estimated greyhonds adoptedb Estimated dogs retained for breeding Racing dogs killed Total killed (farm puppies and racing dogs)
Notes:
Litters: As reported by the National Greyhound Association (NGA), the U.S. registry organization.
Total born: Derived by multiplying the total number of litters by an average of 6.52 pups per litter (this is the conservative average that industry sources report).
Individuals registered to race: As reported by the NGA in the Greyhound Review, the official industry publication. Each owner must pay an additional fee to the NGA to have a greyhound individually registered.
Culled: This column shows the total number of dogs who disappear annually between birth and individual registration by 18 months of age. Very few greyhound puppies or young dogs are ever delivered to greyhound rescue groups.
aTo arrive at an estimated eighteen-year total of greyhounds killed, one must also subtract the number of dogs still in the racing system (approximately 40,000), the number of puppies/youngsters currently at farms (approximately 28,500) and the breeding stock required to produce thousands of litters a year (about 500 males and 3,000 females).
bA liberal estimate of figures from those in the adoption community.
cOrganized, large scale adoption efforts did not take place until the mid-1990s. During the late 1980s it is estimated that only a few hundred dogs made it into adoptive homes nationwide. For over 50 years all greyhounds were routinely destroyed.
source: Adapted from "U.S. Racing Greyhound Breeding Statistics and Analysis of the Annual Numbers of Dogs Killed from 1986–2003," in Know the Facts about Greyhound Racing, Greyhound Protection League, October 13, 2004, http://www.greyhounds.org/gpl/contents/PDFs/fact_sheet_advocate_vers.pdf (accessed October 13, 2004)
20035,17133,71426,2777,43714,5001,8009,97717,414
20025,20533,93627,1426,79414,0001,80013,14219,936
20015,01532,69826,7975,90113,0001,80011,99717,898
20005,23434,12626,4647,66213,0002,00011,46419,126
19995,26634,33427,0597,27513,0002,00012,05919,334
19985,03432,82226,0366,78613,0002,00011,03617,822
19975,19233,85228,0255,82712,5002,00013,52519,352
19965,43835,45628,8776,57912,0002,00013,97721,456
19955,74937,48331,6885,79510,0002,10019,58825,383
19946,23240,63334,7465,8878,5002,20024,04629,933
19936,80544,36939,1395,2306,0002,50030,63935,869
19927,69050,13938,02312,1163,0002,50032,52344,639
19918,04952,47938,43014,0491,0003,50033,93047,979
19909,47361,76438,61523,1496503,20034,76557,914
19897,69050,13938,44311,696450c3,00034,99346,689
19887,97952,02337,78414,2393002,75034,73448,973
19877,63849,80033,02116,7792002,50030,32147,100
19866,68843,60630,21913,387752,00028,14441,531
Totala 115,548 753,373 576,785 176,588 135,175 41,650 400,860 578,348

in Florida tested positive for cocaine following their races during fiscal year 2003 (Alan Snel, "Drugs Taint Integrity of Greyhound Races," May 3, 2004). In total, the newspaper found that 119 greyhounds had tested positive for cocaine since 2001. Owners of greyhounds testing positive were forced to forfeit their winnings. However, there was no recourse for bettors who had wagered on greyhounds that might have won if the positive-testing dogs had been disqualified. Drug test results are not obtained until several weeks after a race has run. Rapid-screening tests that could provide results at the race track are considered too expensive by the greyhound racing industry.

The newspaper article questioned why state officials did not investigate how the drugs got into the dogs' systems. The president of the National Greyhound Association suggested that the cause could be trace amounts of cocaine on the hands of trainers or other people touching the dogs. State officials denied that trainers were purposely drugging greyhounds to influence race outcomes.

concerns about greyhound welfare. The National Coalition against Legalized Gambling claims that there were more than seventy-five well-documented cases of cruelty and abuse in the greyhound industry during the 1990s involving thousands of dogs that were shot, starved, abandoned, or sold to research laboratories. The HSUS reports that up to 20,000 adult greyhounds are destroyed each year because they are too slow. The organization claims that the racing industry severely overbreeds greyhounds in the hopes of producing winners, leading to the destruction of thousands of unwanted puppies each year. The HSUS also says that a racing greyhound's career is typically over at the age of four years, well below its average lifespan of twelve years, meaning that thousands of adult dogs are also destroyed each year when they are no longer useful.

The Greyhound Protection League (www.greyhounds.org) compiles statistics on what it says are the number of greyhounds bred, adopted, and killed each year. (See Table 8.5. Note that these are not exact figures—many are compiled by estimate.) The league claims that more than half a million greyhound puppies and adult dogs were killed by the industry from 1986 to 2001. During the same time period about 107,000 greyhounds were adopted.

In May 2002 a sixty-eight-year-old Alabama man named Robert Leroy Rhodes was arrested and charged with felony animal cruelty after the remains of two- to three were found on his property in Baldwin County, Alabama. The man, who worked as a security guard at the Pensacola Greyhound Park in neighboring Florida, claimed that the track paid him $10 apiece to shoot the dogs and dispose of their carcasses on his eighteen-acre farm. He admitted to performing the service for forty years at the request of race dog owners. Authorities report that autopsies indicate some of the dogs were not killed instantly and therefore suffered before they died. It is a felony in Alabama to torture an animal. Racetrack officials denied involvement in the case and fired Rhodes along with several other security guards and a kennel operator.

Alabama authorities eventually charged four greyhound owners and trainers under the state's animal cruelty law based on statements from Rhodes and Clarence Ray Patterson, a kennel owner at the Pensacola Greyhound Track. At an April 2004 hearing the Baldwin County sheriff testified that Rhodes, who died in 2003, had admitted killing two- to three thousand greyhounds that were too sick or old to race. Florida investigators testified that Florida kennel owners and trainers paid Rhodes to shoot unwanted greyhounds, because it was cheaper than having the animals humanely euthanized by a veterinarian. The defendants' lawyers asked for the case to be dropped because the key witnesses could not be cross-examined. Rhodes had died, and Patterson could not be located by authorities. The judge had not yet ruled on that motion when Patterson was found.

In June 2004 the Mobile Register reported that Patterson had been located in an Alabama jail where he had been incarcerated since March 2004 on unrelated charges (Brendan Kirby, "Key Figure in Greyhound Case in Custody," June 30, 2004). Prosecutors in the animal cruelty case said that locating Patterson should help their case against the other defendants.

Jai Alai

Jai alai is a court game similar to handball in which players bounce a ball against the wall and catch it using a long curved basket called a cesta, which is strapped to the wrist. The term jai alai (pronounced hi-uh-lie) comes from the Spanish Basque phrase for "merry festival." The first permanent jai alai arena (called a fronton) was built in Florida in 1924.

The game's scoring system has been adjusted over the years to make it more attractive to gamblers. Typical games include eight players with only two players competing for a point at one time. The game continues until one player obtains seven points. Win, place, and show positions are winning bets, just as in horse racing.

Jai alai peaked in popularity during the early 1980s, when more than $600 million was wagered on the sport. By 1996 the total handle was down to around $240 million.

In 2004 pari-mutuel gambling on jai alai was conducted in only two states: Florida at five frontons and Rhode Island at one fronton. (See Table 8.2.) Although formerly also conducted in Connecticut, the last jai alai fronton in that state closed in 2002.

Paid attendance in Florida was 377,105 in fiscal year 2002–03, and the handle was $102 million. Attendance was down by 21%, and handle was down by 8% from the year before. The state received just over $600,000 from the jai alai industry.

The Future of Pari-Mutuel Gambling

decreasing popularity and decreasing income. Pari-mutuel gambling is decreasing in popularity as it faces more and more competition from other gambling options, particularly casinos. The horse-racing industry, which comprises the bulk of the pari-mutuel business, experienced a 40% decline in attendance during the 1990s. Even though the handle increased over this time period, the increase is not statistically significant. The total pari-mutuel handle in 2000 was $18 billion; in 1987, it was $17 billion. Although this seems like an increase, it is actually a decrease when the effects of inflation are considered—the 1987 figure of $17 billion is equivalent to $26 billion in 2000 dollars. It has become increasingly difficult for racetracks to attract a large enough betting pool to afford to run races.

Statistics available from the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, are presented in its 72nd Annual Report (December 2003). Pari-mutuel attendance steadily decreased from fourteen million in 1990–91 to 2.7 million in 2002–03.

attempts to attract more and different gamblers. Gambling industry analysts say that there is a relatively small hard-core group of horse-racing attendees, most of whom are older people. The horse-racing industry is trying to attract a larger and younger fan base (twenty-five to forty-five years old) with more disposable income. Some racetracks have tried to become entertainment venues by offering food courts, malls, and music concerts. Although these gimmicks attract visitors, those visitors do not necessarily gamble. Devoted race fans complain that such promotions are too distracting and draw attention away from the racing.

Increasingly, pari-mutuel facilities are offering other gambling choices to patrons. Seven states allowed slot machines and/or video lottery terminals at their racetracks during 2004: Delaware, Iowa, Louisiana, New Mexico, New York, Rhode Island, and West Virginia. The addition of video gaming devices has saved some racetracks. The Dover Downs racetrack in Delaware increased its revenue from $14 million to $141 million following the addition of slot machines in 1994. The number of slot machines at racetracks is expected to triple during the first decade of the twenty-first century.

Most of Florida's racetracks and jai alai frontons have card rooms in which gamblers wager on card games, mainly poker. According to the 72nd Annual Report of the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, the state's card room gross revenue was $2.8 million in fiscal year 2002–03. The card rooms contributed more than $363,000 to state revenues in the form of taxes and fees.

LEGAL SPORTS GAMBLING

Besides the sports involved in pari-mutuel gambling, legal sports gambling is extremely limited in the United States. Only one state, Nevada, allows high-stakes gambling on sporting events like football, basketball, and baseball games.

In 1992 Congress passed the Professional and Amateur Sports Protection Act. This act banned sports betting in all states except those that already allowed it in some form (Nevada, Oregon, Delaware, Montana, Washington, and New Mexico).

Limited Options Outside Nevada

There are a handful of states in which limited forms of sports betting are legal.

oregon. As of August 2004 Oregon operates two sports betting games as part of its lottery. The Sports Action game began in 1989. Proceeds from the game go to the state's Intercollegiate Athletic and Academic Scholarship Fund. The game has earned more than $25 million for the fund since it was started, averaging about $2 million per year. The betting is conducted only during the football season on selected professional football games. Lottery officials avoid legal restrictions that professional football leagues have on the use of trademark names by referring to teams by location only (for example, Denver vs. Miami). A second lottery game is called Scorecard. In this game bettors win money if they correctly pick a number that matches the last digit of the scores from selected professional football games.

delaware. Delaware tried a sports lottery in 1976 based on games of the National Football League (NFL). The NFL sued for trademark violations but eventually lost the case. The sports lottery, which was called Scorecard, proved to be unpopular with bettors and unprofitable for the state. It was abandoned after only one football season. A task force was formed during the summer of 2002 to investigate the feasibility of reinstating a sports lottery game in Delaware. The group's final report was issued to the Delaware General Assembly in 2003. It estimated that a legal sports lottery could raise approximately $13 million in state revenue. However, Governor Ruth Ann Minner is opposed to expanding gambling in Delaware, making it unlikely that a sports lottery will be initiated while she remains in office. The expansion of sports betting is also opposed by the National Football League, National Basketball Association, National Hockey League, Major League Baseball, and National Collegiate Athletic Association (NCAA).

montana. The State of Montana allows five types of sports gambling: sports pools, Calcutta pools, fantasy sports leagues, sports tab games, and fishing derbies.

Calcutta pools are operated similarly to pari-mutuel wagering in that all money wagered on a sporting event is pooled together. In a Calcutta pool, an auction is held before a sporting event, and bettors bid for the opportunity to bet on a particular player. For example, before a golf tournament, the pool participants bid against each other for the right to bet on a particular golfer. The highest bidder for each player wins that right. Calcutta pools are sometimes called auction pools for this reason. The money collected during the auction becomes the wagering pool. It is divided among the "owners" of the best finishing players and the pool sponsor. Calcutta pools are most often associated with rodeos and golf tournaments.

Fantasy sports leagues are games in which the participants create fictitious teams assumed to be composed of actual professional athletes. Each team wins points based on its performance against other teams in the league over a designated time period. Team performance is measured based on the actual performance of the selected athletes during real sporting events. The points collected by each participant in the league can be exchanged for cash or merchandise paid for by membership fees collected from each participant.

A sports tab game is one in which players purchase a numbered tab (ticket) from a game card containing one hundred tabs with different number combinations. Bettors win money or prizes if their numbers match those associated with a sporting event—for example, digits in the winning team's final score. The cost of sports tabs is limited by law to less than $5 each. Operators of sports tab games (except charities) are allowed to take no more than 10% of the total amount wagered to cover their expenses (charities are allowed to take 50%). Sports tab sellers must obtain a license from the state and pay licensing fees and gaming taxes.

other states. Other states offering limited sports gambling are Washington, which permits $1 bets on race cars, and New Mexico, where small bets on bicycle races are legal. Office pools on sporting events are legal in a few states as long as the operator does not take a commission. Despite these examples of sports betting in other parts of the United States, though, the big money in legal sports gambling in America is in Nevada.

Nevada Sports and Race Books

Sports books are establishments that accept and pay off bets on sporting events. They are legal only in Nevada and are mostly located in casinos, where they are often combined with the casino race books. Sports betting in Nevada is permitted only for people over age twenty-one who are physically present in the state.

According to the Nevada Gaming Control Board there were 172 locations in the state as of August 2004 licensed to operate sports books and/or race books. More than half of them are in Las Vegas. Most books are operated in casinos. The typical casino book is a large room with many television monitors showing races and games from around the world. Most casinos have a combined race/sports book, although the betting formats are usually different. Race book betting is mostly of the pari-mutuel type. Sports book betting is by bookmaking.

bookmaking. Bookmaking is the common term for the act of determining odds and receiving and paying off bets. The person performing the service is called the bookmaker or bookie, for short. Bookmaking has its own lingo, which can be confusing to those who are not familiar with it. For example, a "dollar" bet is actually a $100 bet, a "nickel" bet is a $500 bet, and a "dime" bet is a $1,000 bet. In order to place a bet with a bookmaker, the bettor lays down (pays) a particular amount of money to win a particular payoff.

Bookmakers make money by charging a commission called "juice" or "vigorish." Although the exact origins of the word "vigorish" are not known, Webster's Dictionary suggests that it may be derived from the Ukrainian word vygrash or the Russian word vyigrysh, both of which mean "winnings" or "profit." In any event, vigorish is a very important and very misunderstood concept for most bettors.

Most gambling literature describes vigorish as a 4.55% commission that a bookie earns from losers' bets. A differing interpretation of vigorish comes from J. R. Martin, a sports handicapper (or person who studies and analyzes betting odds and gives advice to bettors) and writer who publishes a Web site on professional sports gambling. According to Martin, statistically, only bettors who win exactly half of their bets pay exactly 4.55% in vigorish. Other bettors pay different percentages. Therefore, a bettor must win 53% of all equally sized bets to break even. However, this bettor would wind up paying a vigorish of at least 4.82%.

Some sports bets are simple wagers based on yes/no logic. Examples include under and over bets, where a bettor wagers that a particular game's final score will be under or over a specific number of points.

Most sports bets are based on the "line" set by the bookmaker. For example, the line for an NFL football game between the Miami Dolphins and the Tennessee Titans might say that the Dolphins are picked by seven and one-half points. A bettor picking the Dolphins to win the game wins money only if the Dolphins win the game by more than seven and one-half points.

The line is a concept designed to even up betting. It does not reflect by how much a sports expert actually believes a team will win. It is designed so that the bookmaker will get bets on both sides. This reduces the bookie's financial risk. Bookmakers will change lines if one side receives more betting action than the other. The skill aspect of sports gambling comes in recognizing the accuracy of the line. Experienced bettors choose games in which they believe the posted lines do not accurately reflect the expected outcomes. This gives them an edge.

The odds for most licensed sports books in Nevada are set by the company Las Vegas Sports Consultants, Inc. Formerly owned by SportsLine.com, Inc., the company was purchased in November 2003 by a group of private investors in Las Vegas.

how sports gambling came to be legal in nevada. Nevada legalized gambling during the Great Depression of the 1930s as a means to raise revenue. The 1930s also saw the development of the handicapping system, in which bookmakers establish the betting line. Charles McNeil, a Chicago securities analyst, is credited with this development. Prior to that time, there was little incentive for gamblers to bet on the underdog in a contest.

During the 1940s the Nevada legislature legalized OTB on horses. The sports and race books were popular in the state's casinos until the early 1950s. A series of Senate hearings, led by Senator Estes Kefauver of Tennessee, was held in 1950 and 1951 to investigate the role of organized crime in the gambling industry. The hearings were televised and focused the nation's attention on gangsters, corrupt politicians, and legal and illegal gambling. One of the results was the passage of a 10% federal excise tax (FET) on "any wager with respect to a sports event or a contest." The tax was devastating to the casino sports books, which were making only a small profit anyway. They were forced to shut down.

In 1974 the FET was reduced to 2%, and the sports books slowly made a comeback. Frank "Lefty" Rosenthal, a renowned handicapper, is credited with popularizing the sports book in Las Vegas during the 1970s.

The 1980s were boom years for the sports and race books. In 1983 the FET was reduced to only 0.25%. Jimmy "the Greek" Snyder brought some legitimacy to sports gambling through his numerous television appearances on network sports shows. The amount of money

FIGURE 8.10

wagered in the Nevada sports books increased by 230% between 1982 and 1987 alone. Betting volume continued to increase until the mid-1990s, when it began to level off.

money and games. As shown in Figure 8.10 Nevada's sports books had a betting volume (or handle) of $1.86 billion during fiscal year 2002–03. This is down 4% from the previous fiscal year and down 25% from the $2.5 billion wagered in 1996.

Despite the decrease in betting volume the sports books actually took in more revenue over this time period, from $77 million in 1996 to $122.6 million in 2003. In 2003 this revenue represented 6.6% of the total amount wagered. This means that $1.74 billion was paid out to gamblers.

According to the Nevada Gaming Commission and Gaming Control Board, football wagers accounted for 44% of the state's sports book wagering during 2002, the latest year available. (See Figure 8.11.) Basketball and baseball accounted for 27% and 20%, respectively. Other sports and parlay bets were far less popular. A parlay bet is a combination bet in which the bettor selects the winners of two or more events. Every selection must be correct for the bettor to win the wager.

Football's share of sports betting was around 40% during every year from 1996 to 2002. The Super Bowl alone generated $81 million in wagers in 2004 as shown in Table 8.6. Sports book revenue (or win) was $12.4 million. However, the largest single wagering event for the Nevada sports books is believed to be the men's Division I college basketball tournament known as "March Madness." Betting volume for the 2004 tournament exceeded $85 million in Nevada.

Industry experts estimate that one-third of the bets placed in the Nevada sports books are on college sporting events. Wagering is not allowed on high school sporting events and Olympic events. Bets were prohibited on amateur sporting events either held in Nevada or involving Nevada teams prior to 2001. Nevada law restricts the sports books to wagering on events that are athletic contests. Betting is not allowed on related events, such as who will win most valuable player awards.

the controversy over college sports. In 2000 Senator John McCain of Arizona introduced the Amateur Sports Integrity Act to ban betting on college sports at the Nevada sports books. Although it was brought up again in 2001, 2002, and 2003, the act had not been passed by Congress as of mid-2004. The act is supported by the American Council on Education (ACE), the NCAA, and numerous other organizations representing colleges and universities.

During testimony before the U.S. Senate in April 2001, an ACE spokesperson gave the following reasons in support of the act:

  • Gambling on college sports threatens the integrity of intercollegiate athletic competition.
  • The state of Nevada has been arbitrary and selective in choosing which amateur sporting events are permissible for betting.
  • Colleges cannot combat illegal campus gambling as long as legal gambling on intercollegiate sports is condoned by society.

Nevada politicians and the American Gaming Association (AGA) are opposed to a federal ban on legal wagering

FIGURE 8.11

on college sporting events. The AGA advocates better enforcement of the existing laws against illegal sports gambling and stiffer penalties for those who engage in it. According to the AGA, the Nevada sports books have a direct computer link with the NCAA and share betting information with the NCAA. Further, the FBI credits this practice with bringing to light a gambling scandal at Arizona State University during the mid-1990s. The basketball team's coach was notified about a possible problem after Nevada sports books alerted the Pac-10 conference and the FBI about betting irregularities. The NCAA hopes that a ban on all college sports wagering will pressure newspapers to stop publishing the line on college games. The NCAA has repeatedly asked major media outlets not to post lines on college sports because it encourages gambling. However, the NCAA has been accused in the media of hypocrisy for its stance on legal gambling on college sports. The NCAA has a multiyear deal worth billions of dollars with television broadcaster CBS, even though CBS is part-owner of SportsLine.com, an Internet Web site that posts the line on college games.

the internet challenge. Following the advent of Internet gambling in the late 1990s, the Nevada sports books began to feel some serious competition. Internet gambling is technically illegal in the United States because it violates the federal Wire Act of 1961. However, online gambling is increasingly popular among Americans, particularly sports gamblers, who can place their bets from home or the office. The Internet provides gamblers with an easier way to monitor the many games of the tournament and to keep up with changing betting lines.

TABLE 8.6

Nevada sports book wagering on Super Bowls, 1995–2004
Year Wagers Win/(loss) Win % Game results
source: "Summary of Nevada Sports Book Performance for the Last Ten Super Bowls," in Nevada Gambling Control Board Press Release: Super Bowl 2004, State of Nevada Gaming Control Board, February 3, 2004, http://gaming.nv.gov/documents/pdf/pr_04superbowl.pdf (accessed September 28, 2004)
2004$81,242,191$12,440,69815.3%New England 32, Carolina 29
2003$71,693,032$ 5,264,9637.3%Tampa Bay 48, Oakland 21
2002$71,513,304$ 2,331,6073.3%New England 20, St. Louis 17
2001$67,661,425$11,002,63616.3%Baltimore 34, N.Y. Giants 7
2000$71,046,751$ 4,237,9786.0%St. Louis 23, Tennessee 16
1999$75,986,520$ 2,906,6013.8%Denver 34, Atlanta 19
1998$77,253,246$ 472,0330.6%Denver 31, Green Bay 24
1997$70,853,211$ 2,265,7013.2%Green Bay 35, New England 21
1996$70,907,801$ 7,126,14510.1%Dallas 27, Pittsburgh 17
1995$69,591,818$ (396,674)(0.6%)San Francisco 49, San Diego 26

In response to this potential new gambling market, Nevada politicians began a drive to make Internet gambling legal in the state. In August 2002 the U.S. Department of Justice (DOJ) sent a letter to the Nevada Gaming Commission warning that any state legislation seeking to make Internet gambling legal would be in violation of federal law. The commission, on the other hand, has indicated that the state will continue to pursue legalization of online gambling for its residents, despite significant technical and legal obstacles.

A major problem in regulating any Internet gambling, including sports gambling, is the determination of jurisdiction. The Internet knows no state boundaries. Nevada officials hope that technology can be developed that will allow gambling Web sites to determine in what state a potential gambler lives. In this way, Internet gambling could potentially be allowed for the residents of Nevada only. Although several major casinos were working to take their games and sports books online, the political climate for legalized Internet gambling in the United States as of mid-2004 was not promising.

ILLEGAL SPORTS GAMBLING

The AGA estimates that the Nevada sports books account for only 1–3% of all sports gambling conducted in the country. The vast majority of sports bets, then, 97–99%, are illegal. This makes it difficult to assess exactly how much money is involved.

The 1999 final report of the NGISC estimated that $80 billion to $380 billion per year is wagered illegally on sports in the United States. In 1998 the FBI estimated that illegal sports gambling was a $100 billion industry.

Illegal sports gambling encompasses a wide variety of activities. Most illegal bets on sporting events are placed with bookies. Internet gambling and office pools are also popular methods. In addition, there are some "sporting" events, illegal in themselves, that are popularly associated with gambling—for example, cockfighting and dog fighting.

The Link to Organized Crime

Illegal sports gambling has long been associated with organized crime in the United States. During the 1920s and early 1930s, illegal sports gambling became big business for mobsters as they set up organized bookmaking systems around the country. Betting on horses, in particular, was popular during this time period.

In 1931 Nevada legalized casino gambling again, and organized crime soon controlled most of the casino business. During the 1940s Nevada legislation was expanded to include OTB on horses. At that time two illegal and nationwide wire services were operated by known mobsters: Continental Wire Service and Trans America Wire. The latter was under the direction of notorious gangster Al Capone. The mobsters set up the services because the legitimate wire service, Western Union, was prohibited by law from transmitting race results until races were officially declared over. Sometimes this declaration did not take place for several minutes after the race finish. To prevent bettors from taking advantage of these delays by posting winning bets before the official results were wired, the mobsters set up their own wire services. Trans America became widely used in Nevada thanks in large part to the efforts of famous Las Vegas gangster and casino owner Ben "Bugsy" Siegel.

During the 1950s the federal government cracked down on organized crime and eventually drove mobsters out of the Nevada casino industry. As the casinos were taken over by corporations, organized crime strengthened its hold on the illegal business of bookmaking. Although law enforcement officials acknowledge that there are now many "independent" bookies operating throughout the country, the big money in sports gambling is still controlled by organized crime figures.

The Link to the Nevada Sports Books

Most illegal books use the odds posted by the Nevada sports books because these are well publicized. They also provide illegal bookies with a means for spreading the risk on bets. Illegal bookies who get a lot of action on one side of a bet often bet the other side with the Nevada sports books to even out the betting.

Transmitting gambling information across state lines for the purpose of placing or taking bets is illegal. News items about point spreads (the predicted scoring difference between two opponents) can be reported for informational and entertainment purposes only, but betting lines are still published by many U.S. newspapers. The Newspaper Association of America, which represents nearly 90% of daily-circulation papers in the country, defends the practice as free speech protected under the First Amendment of the Constitution. The association claims that readers want to see the lines to learn which teams are favored to win, not necessarily for betting purposes.

The NCAA hopes that a ban on all college sports wagering will pressure newspapers to stop publishing point spreads. The AGA counters that betting lines would still be accessible through independent sports analysts, offshore Internet gambling sites, and other outlets.

The AGA conducted an informal poll during March 2001, around the time of March Madness, the men's collegiate Division I basketball tournament. The AGA asked the student newspapers at all sixty-five colleges that qualified for the tournament whether or not they would accept advertising for Internet gambling sites, despite the fact that Internet gambling is illegal in the United States. All of the newspapers indicated that they would do so. The AGA criticized the NCAA for blaming illegal collegiate sports gambling on the Nevada sports books while illegal Internet gambling is promoted on college campuses.

Animal Fighting

The practice of gambling on animal fights has a long history in the United States, despite its unsavory reputation. Most staged animal fights involve cocks (male chickens) or dogs specially bred and trained. Although such fighting is usually associated with rural areas of the country, urban police reports about cockfighting and dog fighting have increased in recent years, as the "sport" has become popular among street gangs. Animal fights are of particular concern to law enforcement authorities because typically large amounts of cash and weapons are present.

Although no national statistics are available on animal fighting, some animal welfare groups collect data on its prevalence. Pet-Abuse.com is a Web site devoted to collecting and documenting information about animal abuse cases. The Web site is operated by a nonprofit organization based in California. As of December 2004 the Web site database included 239 documented cases of animal fighting.

cockfighting. Cockfighting is performed by cocks, which are male chickens also known as roosters. In the wild, cocks fight and peck one another to establish a hierarchy within their social order. However, these altercations rarely lead to serious injury. Fighting cocks are specially bred and trained by humans to be as aggressive as possible. They are given stimulants, steroids, and other drugs to heighten their fighting nature. Sharp spikes called gaffs are attached to their legs. The cocks are thrown into a pit together where they cannot escape. They slash and peck at one another, often until death. Spectators wager on the outcome of these fights. Cockfighting was banned by most states during the 1800s. It is now illegal in forty-eight states.

TABLE 8.7

State laws on cockfighting, April 2004
State Cockfighting: on the law books Cockfighting: a felony or a misdemeanor Loophole: possession of cocks for fighting Loophole: being a spectator at a cockfight Loophole: possession of Implements
Alabama§ 13A-12-4MisdemeanorLegalLegalLegal
Alaska§ 11.61.145FelonyFelonyMisdemeanor5Legal
Arizona§ 13-2910.03 and § 13-2910.04FelonyFelonyMisdemeanorLegal
Arkansas§ 5-62-101Misdemeanor3LegalLegalLegal
CaliforniaCal Pen Code § 597b, 597c, 597i, 597jMisdemeanor6MisdemeanorMisdemeanorMisdemeanor
Colorado§ 18-9-204FelonyFelonyFelonyFelony
Connecticut§ 53-247FelonyFelonyFelonyLegal
Delaware11 Del. C. § 1326FelonyFelonyMisdemeanorLegal
Florida§ 828.122FelonyFelonyFelonyFelony
Georgia§ 16-12-4Felony3LegalLegalLegal
Hawaii§ 711-1109MisdemeanorLegalLegalLegal
Idaho§ 25-3506MisdemeanorLegalMisdemeanorLegal
Illinois510 ILCS 70/4.01Felony2Felony2M isdemeanorM isdemeanor
Indiana§ 35-46-3-8 to § 35-46-3-10FelonyMisdemeanorMisdemeanorMisdemeanor
Iowa§ 717D.2 and § 725.11FelonyFelonyMisdemeanorFelony
Kansas§ 21-4319MisdemeanorLegalMisdemeanorLegal
Kentucky§ 525.130MisdemeanorLegalMisdemeanorLegal
LouisianaLegalLegalLegalLegal
Maine117 M.R.S. § 1033FelonyFelonyMisdemeanorLegal
Maryland Md.Crim . Law Code Ann. § 10-608FelonyFelonyMisdemeanorFelony
Massachusettsch. 272, § 94 and § 95FelonyFelonyMisdemeanorLegal
Michigan§ 750.49FelonyFelonyFelonyFelony
Minnesota§ 343.31FelonyFelonyM isdemeanorLegal
Mississippi§ 97-41-11MisdemeanorLegalLegalLegal
Missouri§ 578.173FelonyLegal7MisdemeanorMisdemeanor
Montana§ 45-8-210FelonyFelonyLegalLegal
Nebraska§ 28-1005FelonyFelonyFelonyLegal
Nevada§ 574.060Felony2LegalFelony2Legal
New Hampshire§ 644:8-aFelonyFelonyFelonyLegal
New Jersey1§ 4:22-24FelonyFelonyFelonyLegal
New MexicoLegal7LegalLegalLegal
New York NYCLS A gr & M § 351FelonyMisdemeanorMisdemeanorLegal
North Carolina§ 14-362Felony2LegalMisdemeanorLegal
North Dakota§ 36-21.1-07FelonyFelonyMisdemeanorLegal
Ohio§ 959.15MisdemeanorMisdemeanorMisdemeanorLegal
Oklahoma21 Okl. St. § 1692.2,§1692.5, § 1692.6FelonyFelonyMisdemeanorLegal
Oregon§ 167.355FelonyFelonyMisdemeanorMisdemeanor
Pennsylvania18 Pa.C.S. § 5511FelonyFelonyFelonyLegal
Rhode Island§ 4-1-9 to § 4-1-11FelonyFelonyFelonyLegal
South Carolina§ 16-17-650MisdemeanorLegalMisdemeanorLegal
South Dakota§ 40-1-9MisdemeanorLegalMisdemeanorLegal
Tennessee§ 39-14-203MisdemeanorMisdemeanorMisdemeanorLegal
TexasTex. Penal Code § 42.09FelonyLegalLegalLegal
Utah§ 76-9-301 and § 76-9-301.5MisdemeanorLegalMisdemeanorLegal
Vermont13 V.S.A. § 352FelonyFelonyFelonyLegal
Virginia§ 3.1-796.125Misdemeanor4LegalMisdemeanor8Legal
Washington§ 16.52.117MisdemeanorMisdemeanorMisdemeanorLegal
West Virginia§ 61-8-19, §61-8-19a, §61-8-19bMisdemeanorMisdemeanorMisdemeanorLegal
Wisconsin§ 951.08FelonyFelonyMisdemeanorLegal
Wyoming§ 6-3-203MisdemeanorMisdemeanorMisdemeanorLegal
48 Illegal31 Felony24 Felony11 Felony5 Felony
2 Legal17 Misdemeanor8 Misdemeanor30 Misdemeanor5 Misdemeanor
2 Legal18 Legal9 Legal40 Legal

According to the HSUS, cockfighting was legal only in parts of Louisiana and New Mexico as of April 2004. (See Table 8.7.) It was a felony in seventeen states and a misdemeanor offense in thirty-one others. States differ in their treatment of cockfight spectators and those caught in possession of birds for fighting. The federal Animal Welfare Act prohibits the interstate transport of birds for cockfighting into states with laws against cockfighting.

Because cockfighting is still legal in some parts of the United States, in Mexico and the Caribbean, and in many Asian countries, there is a commercial breeding industry in America. The industry is represented by an organization called the United Gamefowl Breeders Association and similar groups operating at the state level. Although these groups claim to be agricultural organizations, the HSUS accuses them of promoting cockfighting.

In July 2004 South Carolina's agriculture commissioner, Charles Sharpe, was arrested and charged with taking payoffs from the South Carolina Gamefowl Management Association (SCGMA). According to media reports Sharpe lied to law enforcement officers investigating activities taking place at a SCGMA facility in Aiken County (Jennifer Holland, "Sharpe Indicted," The State). Sharpe allegedly told the officers that the facility was a legal operation

1These states do not use the terms "felony" or "misdemeanor," but rather have felony and misdemeanor equivalent penalties.
2A repeated offense can trigger a felony prosecution.
3While it is not specifically prohibited by state law, cockfighting can be prosecuted under the general anti-cruelty statute. On June 9, 2003, three people were indicted under felony charges for cockfighting under Georgia's new felony cruelty law.
4While it is not specifically prohibited by state law, cockfighting can be prosecuted under the general anti-cruelty statute as well as other statutes addressing cockfighting.
5In Alaska, a first offense is a violation, and a second offense becomes a misdemeanor.
6Felony charges may also be leveled against persons responsible for the mutilation of birds.
7In New Mexico, cockfighting has been prohibited in 13 counties and 28 municipalities
8In Virginia, being a spectator at an animal fight is only illegal if an admission fee is paid.
source: "Cockfighting: State Laws," in Cockfighting: State Laws, Humane Society of the United States, April 2004, http://files.hsus.org/web-files/PDF/cockfighting_statelaws.pdf (accessed September 13, 2004)
Washington DC§ 22-1015FelonyFelonyMisdemeanorLegal
American SamoaLegalLegalLegalLegalLegal
GuamLegalLegalLegalLegalLegal
Puerto RicoLegalLegalLegalLegalLegal
Virgin IslandsLegalLegalLegalLegalLegal

because it was conducting fighting only to test the bloodline and hardiness of cocks. In November 2003 the facility was shut down by authorities, and more than a hundred people were arrested for cockfighting. Sharpe was subsequently indicted for taking at least $20,000 in payoffs from the SCGMA during 2002 and 2003. It is also alleged that he used his position as agriculture commissioner to influence regulations that were beneficial to the SCGMA. Sharpe has proclaimed his innocence in the case.

The database maintained by Pet-Abuse.com lists dozens of documented cases of cockfighting reported in the United States during the early 2000s. One of the largest cases occurred in July 2004 in Sacramento County, California. A law enforcement raid busted a cockfighting ring involving approximately five hundred birds. Fights conducted at the facility were estimated to involve up to $90,000 in wagers per fight. Officials said it was common for dozens of birds to die during each fight. Two people were charged in the incident.

In June 2004 police in Wayne County, West Virginia, raided an ongoing cock fight and arrested 125 people on drug and animal fighting charges. Approximately $30,000 in cash and nearly eighty roosters were confiscated.

dog fighting. Dog fighting is conducted between two dogs placed in a pit or small boarded arena. Spectators place bets on the outcome of the fights. Fights can go on for hours, sometimes to the death. Dogs that show any cowardice or unwillingness to fight are killed on the spot by their owners. American pit bull terriers are the most commonly bred and trained for this purpose because of their powerful jaws. Fighting dogs are bred, trained, and drugged to enhance their aggressiveness. Authorities report that the dogs are often draped in heavy chains to build muscle mass and systematically deprived of food and water. Stolen and stray pet dogs and cats are commonly used as bait to train the fighters. The smaller animals are stabbed or sliced open and thrown to the fighting dogs to enhance their blood lust.

Dog fighting is illegal in all fifty states. (See Table 8.8.) According to the HSUS as of April 2004 dog fighting is a felony in forty-eight states and a misdemeanor in only two states, Idaho and Wyoming.

In January 2004 Georgia authorities busted the largest dog fighting ring ever reported in the state. Sheriff's deputies in Jones County arrested 123 people after raiding a vacant house in which a dog fight was taking place. Officers found one dog that had already died from its wounds and two that were mortally wounded. Ten surviving dogs were turned over to animal control agencies. The people arrested were charged with a variety of offenses, including animal cruelty, gambling, and weapons and drug charges. A number of guns and thousands of dollars in cash were seized along with dog fighting paraphernalia, including trophies and plaques that were to be awarded to the owners of winning dogs.

In December 2000 the Harvard Medical School's Weekly Addiction Gambling Education Report published its research findings on the cultural aspects of dog fighting in the southern United States. Researchers conducted interviews with thirty-one men involved in dog fighting in Louisiana and Mississippi. They found that dog fighting was closely associated with the men's need to assert their masculinity. An aggressive, brave dog reflected well on its owner, even if it lost. The perceived "macho qualities" of the dog brought the owner status and prestige within the group. A dog showing cowardice or a willingness to quit reflected poorly on its owner's masculinity. Such dogs are called curs and are killed by their owners. Research showed that favor among their peers was more important to the men than even gambling winnings.

TABLE 8.8

State laws on dogfighting, April 2004
Year Dogfighting: on the law books Dogfighting: a felony or a misdemeanor Loophole: possession of dogs for fighting Loophole: being a spectator at a dogfight
1These states do not have felony or misdemeanor offenses per se, but rather have felony and misdemeanor equivalent penalties.
2A repeated offense can trigger a felony prosecution.
source: "Dogfighting: State Laws," in Dog Fighting: State Laws, Humane Society of the United States, April 2004, http://files.hsus.org/web-files/PDF/dogfighting_statelaws.pdf (accessed September 13, 2004)
Alabama§ 13A-12-4MisdemeanorLegalLegal
Alabama§ 3-1-29FelonyFelonyFelony
Alaska§ 11.61.145FelonyFelonyMisdemeanor
Arizona§ 13-2910.01 to 02FelonyFelonyFelony
Arkansas§ 5-62-120FelonyFelonyMisdemeanor
California§ 597.5FelonyFelonyMisdemeanor
Colorado§ 18-9-204FelonyFelonyFelony
Connecticut§ 53-247FelonyFelonyFelony
Delaware§ 1326FelonyFelonyMisdemeanor
Florida§ 828.122FelonyFelonyFelony
Georgia§ 16-12-37FelonyLegalLegal
Hawaii§ 711-1109.3FelonyFelonyLegal
Idaho§ 25-3507MisdemeanorLegalMisdemeanor
Illinois510 ILCS 5/26-5FelonyFelonyMisdemeanor
Indiana§ 35-46-3-4 to 9.5FelonyMisdemeanorMisdemeanor
Iowa§ 717D.1 to 6FelonyFelonyMisdemeanor
Kansas§ 21-4315FelonyFelonyMisdemeanor
Kentucky§ 525.125 to 130FelonyFelonyMisdemeanor
Louisiana14:102.5FelonyFelonyMisdemeanor
Maine117 MRS §1033FelonyFelonyMisdemeanor
Mary landArt 27 § 59FelonyFelonyMisdemeanor
MassachusettsCh. 272 § 94 to 95FelonyFelonyMisdemeanor
Michigan§ 28.244FelonyFelonyFelony
Minnesota§ 343.31FelonyFelonyMisdemeanor
Mississippi§ 97-41-19FelonyFelonyFelony
Missouri§ 578.025FelonyFelonyMisdemeanor
Montana§ 45-8-210FelonyFelonyFelony
Nebraska§ 28-1005FelonyFelonyFelony
Nevada§ 574.070FelonyLegalFelony2
New Hampshire§ 644:8-aFelonyFelonyFelony
New Jersey1§ 4:22-24FelonyFelonyFelony
New Mexico§ 30-18-9FelonyFelonyFelony
New YorkAgr & M § 351FelonyMisdemeanorMisdemeanor
North Carolina§ 14-362.2FelonyFelonyFelony
North Dakota§ 36-21.1-07FelonyFelonyMisdemeanor
Ohio§ 955.15 to 16FelonyFelonyFelony
Oklahoma21 § 1694 to 1699.1FelonyFelonyMisdemeanor
Oregon§ 167.365FelonyFelonyFelony
Pennsylvania18 Pa.C.S. § 5511FelonyFelonyFelony
Rhode Island§ 4-1-9 to 13FelonyFelonyFelony
South Carolina§ 16-27-10 to 80FelonyFelonyFelony2
South Dakota§ 40-1-9 to 10.1FelonyFelonyMisdemeanor
Tennessee§ 39-14-203FelonyFelonyMisdemeanor
Texas§ 42.10FelonyMisdemeanorMisdemeanor
Utah§ 76-9-301.1FelonyFelonyMisdemeanor
Vermont13 VSA § 352FelonyFelonyFelony
Virginia§ 3.1-796.124FelonyFelonyMisdemeanor
Washington§ 16.52.117FelonyMisdemeanorMisdemeanor
West Virginia§ 61-8-19 to 19aFelonyMisdemeanorMisdemeanor
Wisconsin§ 951.08FelonyFelonyMisdemeanor
Wyoming§ 6-3-203MisdemeanorMisdemeanorMisdemeanor
50 I llegal48 Felony41 Felony20 Felony
0 Legal2 Misdemeanor6 Misdemeanor28 Misdemeanor
3 Legal2 Legal
Washington, DCCh. 106FelonyFelonyMisdemeanor
American SamoaLegalLegalLegalLegal
Guam§ 34205ViolationLegalLegal
Puerto Rico15 LPRA § 235FelonyLegalMisdemeanor
Virgin Islands19 VIC § 2613aFelonyFelonyFelony

Dog fighting is not limited to southern states and rural areas. In February 2004 a reporter for the Buffalo News reported on the growing problem of dog fighting in urban neighborhoods of Buffalo, New York (T. J. Pignataro, "Betting on Cruelty," February 8, 2004). The article describes drug and weapons raids by police that accidentally uncovered well-organized dogfighting operations around the city. One detective is quoted as saying "There is big money involved in this, and there are substantial bets." Authorities report that thousands of dollars in cash and other valuables, such as car titles, guns, and drugs, are commonly wagered at these dog fights. Gruesome scenes are described in which owners chop off the heads of dogs that disgrace them by losing or backing down during a fight. Trash bags full of mangled pit bulls have been found by city authorities in vacant fields or along city streets.

THE EFFECTS OF ILLEGAL SPORTS GAMBLING ON SOCIETY

Money and Crime

Because the vast majority of sports gambling that occurs in this country is illegal, it is difficult to determine its economic effects. However, the only people certainly benefiting from illegal sports gambling are the bookmakers. Large bookmaking operations overseen by organized crime groups take in billions of dollars each year. The betting stakes are high and the consequences for nonpayment can be violent. Small independent bookies typically operate as entrepreneurs, taking bets only from local people they know well. Illegal bookmaking cases reported in the media range from multi-million dollar enterprises to small operations run by one person.

In 2004 five people were arrested for running a massive bookmaking operation in Chicago. The illegal business made profits of $3 million between 1999 and 2002. Prosecutors allege that Joseph "The Pooch" Pascucci and his accomplices took bets on football, basketball, and baseball games. They were also charged with income tax evasion. In June 2004 Pascucci pleaded guilty in federal court and could be sentenced to up to fifty-one years in prison.

In late 2003 police in the small town of West Newport, California, arrested a bartender at a popular restaurant for operating a small illegal bookmaking operation. The man was allegedly taking bets on sporting events. Undercover agents reported making bets at the bar and receiving payouts of several thousand dollars. Authorities believe the bookie was acting alone without the knowledge of restaurant managers.

College Students

The extreme popularity of sports gambling has to do in large part with the perception that it is a skills-based risk-taking activity. This type of activity appeals to men in general and young men in particular. Because of the high concentration of young men on college campuses, sports gambling is believed to be very prevalent among college students. The issue first came to light in 1992 in a New York Times article titled "Newest Concern for Colleges: Increases in Sports Gambling." In this article the director of Harvard University's Center of Addiction predicted that "we will face in the next decade or so more problems with youth gambling than we'll face with drug use."

In April 1995 Sports Illustrated magazine published a three-part report on sports gambling on college campuses. The first installment, titled "Bettor Education," reported that collegiate gambling was rampant and estimated that nearly one-fourth of college students gamble at least once a week. Reporters visited campuses around the country and found sophisticated bookmaking operations with large numbers of students, mostly men, as clients. These young men shared some common traits: an obsession with sports, a social network in which gambling was acceptable and supported by peer pressure (such as a fraternity house), access to money, intelligence, and naive illusions about what they were actually doing.

The report found instances of athletes jeopardizing their athletic futures by betting on games, as well as students betting above their means and getting into serious debt. Some students ultimately went to the police or their parents when they got in too deep. However, parents tended to treat the problem lightly—much less seriously than other concerns, such as drug use.

Several academic studies examining illegal sports gambling by college students were published during the late 1990s and early 2000s. These included "Prevalence and Risk Factors of Problem Gambling among College Students," in Psychology of Addictive Behaviors (1998), "Sports Betting by College Students: Who Bets and How Often?" in College Student Journal (1998), "The Extent and Nature of Gambling among College Student Athletes" published by the University of Michigan Department of Athletics in 1999, and "Gambling, Its Effect and Prevalence on College Campuses: Implications for Student Affairs" by the NASPA Center of Student Studies and Demographics (2002). The studies noted that thriving sports books operated by college students had been discovered by authorities in Arkansas, Florida, Iowa, Maine, Michigan, Rhode Island, South Carolina, and Texas.

Sports Tampering

Sports tampering is officially defined by the U.S. Criminal Code as follows: "To unlawfully alter, meddle in, or otherwise interfere with a sporting contest or event for the purpose of gaining a gambling advantage." The most common form of sports tampering is called point shaving. Point shaving occurs when a player deliberately limits the number of points scored by his or her team in exchange for payment of some sort—for example, if a basketball player purposely misses a free throw shot in exchange for a fee.

There have been some famous sports scandals involving gambling, mostly in college basketball games. However, any link between an athlete and gambling gives rise to suspicions about the integrity of the games in which that athlete participates.

The professional baseball player Pete Rose is an excellent example. On September 11, 1985, at Riverfront

TABLE 8.9

Comparison of statistics on gambling by student athletes reported by the National Collegiate Athletic Association and the Harvard School of Public Health College Alcohol Study, 2004
Student athletes who gamble on anything Student athletes who gamble on any sport Student athletes who gamble on college sprots Student athletes who gamble on the Internet
Study Women Men Women Men Women Men Women Men
1CAS student athletes self-reported that they played or practiced intercollegiate sports.
source: "Table 1. Comparison between NCAA and CAS Statistics on Student Athletes Who Gamble," in Pushing the Limits: Gambling among NCAA Athletes, in The Wager, vol. 9, no. 21, May 26, 2004. Data from Harvard School of Public Health College Alcohol Study (CAS), Harvard School of Public Health, Boston, MA, 2004 and Executive Summary for the National Study on Collegiate Sports Wagering and Associated Health Risks, National Collegiate Athletic Association, Indianapolis, IN, 2004.
NCAA47%69%10%35%6%21%2%6%
CAS133%57%10%33%6%26%2%5%

Stadium in Cincinnati, Ohio, Rose broke Ty Cobb's all-time hit record. Before the end of the decade, however, Rose was under investigation by the commissioner of Major League Baseball and by federal prosecutors for betting on sporting events and associating with known bookies. He agreed to leave baseball, and the case was dropped. At the time Rose denied ever betting on baseball games. However, in January 2004 he admitted that he had bet on baseball games while he managed the Cincinnati Reds team during the late 1980s. His misdeeds mean that he can not be eligible for induction into the National Baseball Hall of Fame.

the integrity of college sports. The widespread popularity of sports gambling among college students also leads to suspicions that athletes, coaches, and officials associated with collegiate sports could be wagering on the very games in which they are participating.

A study titled "Gambling with the Integrity of College Sports" was conducted at the University of Michigan in March 2000. Researchers found that 84% of college referees polled admitted they had gambled at some point during their careers. Nearly 40% had bet on sporting events, and 20% had bet on the NCAA basketball tournament. Two of the referees even admitted that the published point spread on games they were officiating affected the manner in which they officiated those games.

Several gambling-related scandals involving college athletes and coaches were publicized in the media during the early 2000s. These included University of Washington football coach Rich Neuheisel, University of Michigan basketball player Chris Webber, Florida State quarterback Adrian McPherson, and University of Florida basketball player Teddy Dupay.

TABLE 8.10

Summary of gambling risks and avoidance strategies noted by the National College Athletic Association
source: "Table 1: Summary of Gambling Risks and Avoidance Strategies Noted by the NCAA," in "Don't Bet on It: Curtailing Gambling among Student-Athletes," in The Wager, vol. 7, no. 18, Harvard Medical School, May 1, 2002. Data from "Don't Bet on It," National Endowment for Financial Education, Greenwood Village, CO, and the National Collegiate Athletic Association, Indianapolis, IN, 2004.
Potential risks of gambling
  • Removal from team
  • Expulsion from college
  • Humiliation in the media
  • Embarrassment to your family and team
  • Banishment from professional sports
  • Association with organized crime
  • Financial or physical ruin
  • Poor employment prospects
  • Incarceration
Avoidance strategies
  • Walk away from friends who bet
  • Call Gamblers Anonymous
  • Call the state council on problem and compulsive gambling
  • Do not give out information on your team
  • Do not talk about odds or point spreads
  • Do not associate with bookies or gamblers
  • Do not accept money or gifts from people associated with sports
  • Keep up your guard
  • Talk to your coach, athletic director, NCAA official, or law enforcement officer if you are being pressured
  • Start on the road to legal financial independence

In May 2004 the extent of gambling among college athletes was examined in "Pushing the Limits: Gambling among NCAA Athletes," in The WAGER. The WAGER is published by the Harvard Medical School and the Massachusetts Council on Compulsive Gambling. The article summarized the findings from two major studies: the NCAA's "Executive Summary for the National Study on Collegiate Sports Wagering and Associated Health Risks" and Harvard School of Public Health's "Correlates of College Student Gambling in the United States," published in the Journal of American College Health in 2003.

Table 8.9 compares the findings of the studies regarding gambling prevalence among student athletes. The NCAA study reports gambling activities reported by students during the previous twelve months. The other study asked students about gambling participation during the current school year. The results indicate that approximately one quarter of the male student athletes had gambled on college sporting events.

The NCAA opposes both legal and illegal sports gambling in the United States. Bylaw 10.3 of the NCAA prohibits staff members and student athletes from engaging in gambling activities related to college and professional sporting events. It also forbids them from providing any information about collegiate sports events to persons involved in organized gambling activities.

The NCAA opposes illegal sports gambling for the following reasons:

  • It attracts organized crime.
  • The profits fund other illegal activities, such as drug sales and loan-sharking.
  • Student athletes who become involved can become indebted to bookies, leading to point shaving schemes.

Table 8.10 is an NCAA summary of the potential risks of illegal sports betting and ways for college athletes to avoid that temptation.

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