The first professional sports betting company was established in the U.S. in 1869, which was nearly 100 years before the Supreme Court declared sports betting to be constitutionally protected in 1935. However, it wasn’t until the early 20th century that states began to pass legislation to legalize sports betting. In New York, that occurred in 1914, establishing the basis for one of the most recognizable sports betting logos in existence today.
Early Days Of Legalized Sports Betting
New York was one of the first states to pass legislation authorizing sports betting in a statewide referendum in 1914, which was later upheld by the Supreme Court. That same year, the state became the first in the U.S. to license and regulate bookmakers. World War I delayed state regulation of sports betting until after the war. In 1919, New York allowed for parlays on sports events and expanded the definition of which sporting events were eligible for wagering. A constitutional amendment in 1922 allowed for the legalization of pari-mutuel wagering, which is wagering on horses as well as other animals, thus expanding the types of sporting events that could be used for bets.
The legalization of sports betting in New York didn’t only pertain to pari-mutuel wagering. In 1923, the state authorized bets on all professionally or amateur-officiated sports events held within the state. In 1932, the State Legislature passed the State Charities Aid Act, which allowed state-funded charities to take wagers. Two years later, the state passed the New York State Racing Law, which permitted horse races to be used for betting purposes and established the New York Thoroughbred Breeders Association (NYTBA). The following year, the State Legislature passed the State Lottery Law, which regulated the establishment of state lotteries and enabled them to offer betting games.
During the Great Depression, sports betting became less of a luxury and more of a necessity for many Americans. The numbers of people placing bets soared, and a number of states passed legislation to legalize sports betting in response. In New York, this occurred in 1935. That same year, the state also established a commission to regulate sports wagering, which was later renamed the New York State Gaming Commission. In 1939, the state passed the Sports Betting Exemption Act, which permitted pari-mutuel wagering and barred the government from interfering in any way with the legality of sports betting.
Modern-Day Regulations For Sports Betting
Since the end of World War II, the U.S. has maintained a law-and-order approach to prosecuting and regulating sports betting activities, which have largely remained unchanged since their inception. The federal government does not officially recognize sports betting as a sport or act of gambling, and they have thus remained unaffected by the legalization of sports betting in the other states.
In 1968, the U.S. Supreme Court ruled in the case of New York State Sport Shop that selling sporting equipment and apparel constituted commercial activity, which meant that they were not protected by the First Amendment, enabling the government to prosecute and regulate sports betting in the same manner as other types of gambling. In 1973, the U.S. Supreme Court struck down state prohibition on sports betting as unconstitutional in the case of Oregon v. Kennedy. In response, the federal government took the opportunity to shut down all sports betting operations across the country. Despite this, a few states, like Nevada and New York, continued to allow for sports betting to exist in some form.
In 1974, the Professional and Amateur Sports Protection Act was passed, which prohibited the IRS from treating sports gambling as a form of illegal gambling and enabled states to continue regulating and taxing sports betting activities. However, this legislation only applied to sports betting establishments located within a state’s borders, so licensed sportsbooks continued to be subject to raids and shutdowns by federal authorities as before. It wasn’t until the 1992 United States v. Morrison case that the federal government explicitly legalized sports betting for charitable causes, establishing the basis of today’s modern-day regulatory framework.
Key Legislation
To learn more about the history of legal sports betting in New York, one must look to the key legislation that helped establish the basis for today’s regulatory framework. Below, we have compiled a comprehensive list of the significant pieces of sports betting-related legislation that have occurred in the state over the past century.
The Evolution Of How New York Regulates And Taxes Sports Betting
While there have been significant updates to the Sports Betting Legalization Act over the past century, the framework has remained largely unchanged. Below, we will discuss some of the significant updates that have occurred over the years.
License And Registration Requirements
In the initial years following the legalization of sports betting in 1914, only a handful of states required that sports betting operators register with the government. Today, all 50 states require some form of registration for any business that conducts financial transactions over $10,000. Additionally, all states require that operators of sportsbooks obtain a license from the state before they can legally operate in the industry.
However, the requirements for obtaining a license vary from state to state. Some states only require that operators register with the government, while others require that they obtain a license from the state before they can legally operate. A few states, like New York, require that they do both. The types of licenses that states issue also vary, but they generally fall into one of three categories: 1) Race tracks and casinos—these are the most common types of licenses, as they allow for the operation of betting parlors at the facility; 2) Lotteries—these allow for the operation of state lotteries and their associated betting activities; and 3) Multi-sports operators—these operators must be registered with the government and obtain a license from the state to operate their books within a particular state. It is important to note that while most states have moved away from tracking betting activity on individuals, the majority of them still require that operators keep records of all bets placed, including the names of the players and the teams involved. The required length of time that operators must keep accurate records varies from state to state, but many states, like New York, require that they retain their records for a minimum of three years.
Banking & Financial Transaction Requirements
While many states today require that sports betting operators maintain some form of banking relationship, the regulations concerning which types of banking relationships are permissible and which ones are prohibited have changed significantly over the years. In the early days of sports betting in New York, bookies would often maintain their bank accounts with a local bank and would physically deposit and withdraw bets using cash or check. Since then, the industry has moved to fully electronic banking, which means that operators either A) maintain their accounts with a bank that has a local presence or B) use an online banking platform to process all financial transactions. As a result, today, all states allow for the operation of “brick and mortar” bookmakers as well as online betting operators. However, not all transactions performed by online betting operators are permitted, as most states have implemented some form of restrictions concerning which types of financial transactions can and cannot be performed by such entities.
Penalties For Violations
The State of New York imposes a number of severe penalties on anyone who violates the terms of the Sports Betting Legalization Act. First and foremost, it is a criminal offense to conduct business in the state if you are not licensed, register, or authorized to do so. Second, it is an administrative offense to knowingly make a false statement when registering or licensing as a sports betting operator. Third, all bets made by an unlicensed entity are void and will not be honored by the sportsbooks. Finally, the state also imposes a minimum $1,000 fine on anyone convicted of violating the law.
It is important to note that while New York has maintained a very stringent regulatory environment when it comes to sports betting, they have also maintained a very light criminal enforcement regime, resulting in only nine federal and state criminal charges brought against sports betting operators from 2014-2017.
Key Terms
Below, we have provided a glossary of some of the terms that are commonly used when discussing sports betting, particularly in New York.
Bookmaker
This term refers to a person who takes bets from the public. A bookmaker accepts wagers and provides odds on the outcomes of sporting events. Bookmakers are typically found at casinos, horse tracks, and stadiums. In New York, these individuals are required to obtain licenses from the State Gaming Commission.
Horse Tracks