After PASPA: Fragmentation and Integrity in the U.S. Sports Gambling Landscape
Written by Zahed Kachhi | March 26, 2026
Introduction
Sports gambling has become a massive American industry in recent years, with the American Gaming Association reporting nearly $17 billion in sports gaming revenue in 2025, a 22.8% increase over 2024 (American Gaming Association, 2026). The drastic expansion of sports gambling is downstream of the Supreme Court’s 2018 decision in Murphy v. National Collegiate Athletic Association, which held that the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional, allowing states to legalize sports betting. This decision reshaped the legal architecture of American sports gambling, creating a wide range of benefits and drawbacks for major stakeholders and raising fundamental questions about integrity and regulatory mechanisms in the sports world.
Murphy v. NCAA and Sports Gambling Legalization
PASPA’s primary mechanism to disallow sports gambling was not a blanket federal prohibition, but instead a prohibition on states' ability to authorize sports betting. While PASPA did create exceptions for some states, such as Nevada and Montana, its primary effect was to lock existing state laws into place and prevent legislatures from changing course. However, in 2012, the New Jersey legislature enacted a law legalizing sports betting in Atlantic City and at horse racing tracks, following a voter amendment to the Constitution that gave the legislature the authority to do so. Major American sports leagues legally challenged this law under PASPA, and the District and Appellate courts concurred, upholding PASPA and stopping New Jersey’s attempts to legalize sports gambling. The state took a different legal approach in 2014 by repealing existing prohibitions rather than outright legalizing sports gambling, and after lower courts again sided with the leagues, the Supreme Court agreed to hear this new case (Purdum and Rodenberg, 2018).
Ultimately, the Supreme Court held that PASPA was unconstitutional, restoring state authority to decide whether to legalize sports betting. The majority decision relied on the anti-commandeering doctrine, rooted in the 10th Amendment of the Constitution, which prohibits the federal government from compelling state legislatures to enact legislation or enforce federal regulatory programs. The Court wrote that Congress cannot direct state legislatures to maintain or enact federal regulatory schemes. The overturning of PASPA in Murphy v. NCAA opened the door for states to legislate sports gambling on their own terms, and in the years that followed, many states would do so (Ifrah and Yellin, 2018).
Contributions and Drawbacks of Sports Gambling Legalization
Legalization of sports gambling creates both substantial opportunities and potential downsides for major stakeholders, including states, sportsbooks, and ordinary citizens. For one, states that allow sports betting have benefited from the tax revenue it generates. According to the US Census Bureau, the legal sports betting market in the US generated just under $3 billion in state tax revenue, with states like New York and Rhode Island levying 51% tax rates on online sports betting (Simon, 2025). Additionally, sports betting legalization has been a boon for sports leagues themselves, as major leagues like the NFL and NBA have signed multi-billion-dollar sponsorship deals with betting operators and benefited from increased fan engagement from sports-betting audiences (Isidore, 2025). The picture for ordinary sports bettors is considerably less favorable, especially in the long term. For instance, a 2024 study found that for every $1 of online sports betting, net investments fall by $0.99, suggesting that bettors subsidize their betting activity by undermining long-term equity investment. Moreover, sports bettors shift their consumption patterns to complement the betting experience by increasing expenditures on entertainment and food, a shift that is especially prominent in financially constrained households (Baker et al., 2024). The growth in gambling activity is also apparent in public health outcomes, as the incidence of sports betting is positively correlated with markers of mental distress like anxiety and loneliness (Shaygan et al., 2024). Furthermore, sports betting can pose distinct challenges to sports leagues’ institutional integrity.
The potential for insider trading and fragmented regulation of sports betting pose serious challenges to the integrity of sports leagues, as players, coaches, and others can use insider information to make profitable bets and harm ordinary bettors. For example, the NBA has recently addressed multiple apparent insider trading incidents involving players like Terry Rozier and Jontay Porter, who have both been accused of exploiting non-public information to advantage certain individuals in betting markets, to the tune of hundreds of thousands of dollars (Katersky, 2026). Incidents like these could have a significant reputational impact on sports leagues and sportsbooks alike. Moreover, leagues face emerging challenges in the gaming space, as prediction markets have quickly emerged, allowing individuals to bet on sports outcomes while circumventing existing regulations on sports gambling (Hardy, 2026). The fact that prediction markets like Kalshi and PolyMarket operate under the Commodity Futures Trading Commission's regulations rather than those of individual states complicates regulatory efforts. As the sports gaming industry continues to expand, stakeholders in sports leagues, governing authorities, and bettors will face evolving challenges in ensuring that sports gambling is properly regulated and maintains its integrity.
Conclusion
Less than a decade after the Supreme Court’s 2018 decision in Murphy v.NCAA, which repealed PASPA, sports gambling has been legalized in most US states and has generated billions in economic activity. The hotly contested legal debate over PASPA has paved the way for a complete reimagining of sports betting and fundamentally altered the lives of bettors, leagues, and sportsbooks. However, the fragmentation of regulation and the rapid evolution of sports gaming are likely to continue to challenge regulators and leagues in finding a balance between a free, booming gaming industry and league integrity.
References
American Gaming Association. (2026, March 15). Commercial gaming revenue tracker. Retrieved March 18, 2026, from https://www.americangaming.org/resources/commercial-gaming-revenue-tracker/
Baker, S. R., Balthrop, J., Johnson, M. J., Kotter, J. D., & Pisciotta, K. (2024). Gambling away stability: Sports betting's impact on vulnerable households. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.5008671
Hardy, K. (2026, March 6). Kalshi and Polymarket are skirting laws on sports betting, states say. Stateline. https://stateline.org/2026/03/06/kalshi-and-polymarket-are-skirting-laws-on-sports-betting-states-say/
Ifrah, J., & Yellin, D. (2018, May 30). Murphy v. NCAA: New Jersey wins big after betting on unconstitutionality of federal sports-betting ban. George Washington Law Review. https://www.gwlr.org/murphy-v-ncaa-new-jersey-wins-big/
Isidore, C. (2025, October 25). Do recent sports gambling scandals mean the end of leagues' deals with sportsbook apps? It's a longshot. CNN. https://www.cnn.com/2025/10/25/business/this-is-how-sports-gaming-has-become-crucial-to-leagues-bottom-lines
Katersky, A. (2026, January 21). Man gets 2-year prison sentence for role in NBA betting scandal. ESPN. https://www.espn.com/nba/story/_/id/47685126/man-gets-2-year-prison-sentence-role-nba-betting-scandal
Purdum, D., & Rodenberg, R. (2018, May 14). The odds of legalized sports betting: New Jersey vs. the leagues. ESPN. https://www.espn.com/chalk/story/_/id/22605881/the-odds-legalized-sports-betting-new-jersey-vs-leagues
Shaygan, A., Lambuth, J., Song, F., Hurtado, M., Lostutter, T. W., & Graupensperger, S. (2024). More than fun and games: Problematic sports betting and its adverse impact on mental health and well-being in young adults. Psychiatry Research, 342, 116258. https://doi.org/10.1016/j.psychres.2024.116258
Simon, R. (2025, December 10). Quarterly summary of state and local tax revenue shows nationwide surge in sports betting revenue. United States Census Bureau. https://www.census.gov/library/stories/2025/12/sports-betting.html
