The Game Within the Game
The History, Scandal, and Impact of Sports Betting
Recently, a lot has been written about and debated on sports betting. The breaking news of Shohei Ohtani and Jontay Porter has been the topic of conversation on every talk show. I wasn't sure I'd have anything to add to the conversation, but I looked into the historical context of sports betting and decided to share what I learned. I'll focus on 1) The history of sports betting, 2) Major sports betting scandals, and 3) The impact of legalized betting.
The Origins of Sports Betting
Sports betting has existed for almost as long as humans have been alive. Egyptians bet on dice, board games, and chariot racing as far back as 3000 BC. Even when the Roman Empire banned gambling, it periodically allowed it during the holidays for local races and games.
In modern times, King James announced the first lottery in England to fund the development of the Jamestown colony across the pond. The lottery played a significant role in America's growth, with many buildings, colleges, and roads being funded through different lotteries. The First Continental Congress even created a lottery to finance the Revolutionary War.
After the war, gambling centered around horse racing. By the late 1800s, there were over 300 horse racing tracks in the U.S., with gambling at the center of the festivities. In 1949, Nevada legalized sports betting to improve its tourism industry, which helped Vegas become the gambling mecca.
More recently, the Professional and Amateur Sports Protection Act was passed in 1992, making sports betting illegal in the United States. Due to preexisting sports betting frameworks, Delaware, Montana, Nevada, and Oregon were exempt from the law.
However, in 2018, the Supreme Court deemed the 1992 law unconstitutional, thus paving the way for sports betting to be legalized. Today, 38 states have legalized sports betting in some way.
Major Sports Betting Scandals
Despite sports betting moving in and out of legality, one thing remains constant—The human desire to feel the highs of winning. Sports betting is one way the Average Joe can feel the adrenaline rush of victory.
There have always been sports betting scandals, no matter the legal status of gambling. From the Black Sox and Boston College to Pete Rose and Tim Donaghy, betting scandals have rocked the sporting world for ages. And for every high-profile sports betting scandal, there may be another 10 that don't get broad media coverage or even go undetected.
In 2013, two researchers examined the data to understand the prevalence of point shaving in college basketball. They looked at the point spread of all college basketball games between 1995 and 2009.
There was a normal distribution with no anomalies in the data for games with smaller point spreads. But there was a non-normal distribution when they looked at games with an 11½-point spread. Instead of the data looking like a standard bell curve, there was a spike in the number of times the favorites failed to cover and won by seven, eight, or nine points. Similarly, there were abnormalities for teams winning by much more than 11½ points. Interestingly, the same non-normal distribution wasn't observed in post-season tournament games.
If you try to explain the data, you could imagine a player willing to point shave, but not to a point where it costs their team the game. Players are potentially less willing to manipulate the score in games with a small spread. Similarly, players are less willing to point shave in tournament games because the season is over if they lose.
However, shaving a few points won't cost their team the game in games where they are favored by a large margin. And if a player on a worse team feels they have no shot at winning, they may be willing to help their team be blown out by a significant amount over the spread.
Using the same methodology as these two researchers, an economist in 2006 suggested that point-shaving in college basketball occurs in as many as five percent of games.
There is evidence that something weird is happening, but it doesn't mean point-shaving is rampant. There are ways to explain the data and not think the worst is happening.
For example, coaches often remove starters in blowouts, reducing the margin of victory. It's also interesting to note that as the point spread in college basketball increases, the average margin of victory becomes less clustered around the final spread. In other words, the point spread is less predictable and more challenging for Vegas to determine when the talent level of the two teams is so different. Though this doesn’t entirely explain the lack of anomalies in the NCAA tournament data.
A 2010 study concluded widespread point shaving is unlikely after incorporating information from additional betting markets and considering game halftime scores. But the possibility of point shaving wasn't eliminated. It likely occurs, but not as often as some previous studies suggest.
Why would a player get involved in point-shaving, though? It comes down to the money. A common pattern emerges when looking at the data on players indicted or implicated for point shaving over the last 50 years. Most basketball players involved are either seniors or in the last year of their playing days. Those about to leave the game are more likely to rationalize their decision to point shave and don't fear retribution from the NCAA.
Take Brandon Johnson as an example. Before getting injured, he was a potential future NBA player from the University of San Diego. After returning from injury, he wasn't nearly as effective on the court. A discouraged Johnson became frustrated and started losing focus. He gained weight, became moody, and started hanging out with his former USD coach. As Johnson continually complained about the team's situation, his former coach placed bets against USD. Soon, Johnson started slipping insider information to his former coach, which soon led to point shaving. In return, he would receive a small kickback for every bet won.
The Impact of Legalized Betting
Many believe that the legalization of betting will increase sports betting scandals. All the major sports leagues in the U.S. have embraced partnerships with sportsbooks. The NFL is partnered with DraftKings, Caesars Entertainment, and FanDuel. Similarly, the NBA has made DraftKings and FanDuel the "sports betting partners of the NBA."
Though there has been recent news of sports betting scandals, there isn't enough evidence to show that the legalization of betting is a key contributor. Sports betting will happen no matter the legalized status of sports betting.
Before 2018, sports betting was usually done throughout the week, and the bet was generally focused on the game's outcome. Now, with instant access 24/7 via a mobile app, bettors can offer up small sums of money to bet on specific moments within the game. Betting has become more gamified to entice fans in the moment. And therein lies the dark truth: The real impact of the legalization of sports betting will be on the fans.
According to the American Gaming Association, Americans spent $119.84 billion on sports betting in 2023, up almost 28% from 2022. That's about the same amount of money that social media giant Meta generated in revenue from all its advertisers worldwide in 2022.
More and more fans care about the outcome of their bet rather than cheer for their favorite team. The widespread presence of betting apps has changed the culture of how people watch sports. Everyone loves a friendly wager or occasional bet, but studies have also suggested that gambling can be harmful to one's health, relationships, finances, and work productivity if left unchecked.
The U.K. is two steps ahead of the U.S. thanks to the 2005 Gambling Act. However, behind the argument of poor societal outcomes, the U.K. is largely backtracking on an open capitalistic gambling market. They have since banned the use of credit cards for online gambling, don't discuss gambling odds during sports commentary, and banned celebrities, sports stars, and social media influencers from appearing in gambling ads. Additionally, soccer teams will no longer be able to have gambling companies as their sponsors on the front of their jersey starting in the 2026/27 season.
Meanwhile, almost all these practices are being embraced by the U.S. sports betting industry. Darragh McGee, a professor at the University of Bath who has studied the impacts of online sports gambling on young adult males in the U.K., said:
"What has happened in the States since 2018 has, in so many ways, been a 'Hold my beer' moment."
Don't get me wrong. I don't believe sports leagues have any moral obligations to police how sports betting is conducted. However, the leagues that need to uphold the integrity of the game and ensure no foul play occurs among their players are profiting off the industry and, more precisely, its fans. A bit of a juxtaposition if you ask me. It's an interesting dilemma professional sports leagues will likely have to grapple with sooner or later as sports betting continues to explode.