Time to Rethink Laws Against Sports Betting

I agree with almost everything in this opinion piece by Al Neuharth, the founder of USA Today:

Plain Talk By Al Neuharth
USA TODAY Founder

More than half of all adults across the USA, about 112 million of us, will bet on the Super Bowl this weekend. Most of the wagers will be illegal. Estimates from noted USA TODAY sports analyst and oddsmaker Danny Sheridan:

More than $8 billion will be bet, most with back-street bookies, offshore, on the Internet, all illegal.

Only between $90 million and $100 million will be bet legally in Nevada.

Laws against betting today are as silly as was the ban on booze before Prohibition ended with the 21st Amendment in 1933.

Legalizing booze means more of us drink in moderation now. I was only 9 when that ban ended, but I remember well the basement or backyard binges on home brew or moonshine by some of my grown-up relatives and neighbors during Prohibition.

My hunch is that if gambling on sports events were out in the open, more of us would bet for fun only. Now, too many recklessly and secretly risk the rent money.

The silliness of betting bans is illustrated when governors, mayors and even university presidents of teams involved in big games now usually publicly announce bets with each other. In some states, that’s not illegal. Same is true of office pools if the organizer doesn’t take a cut.

Politicians in Nevada take a bite for the state on all legal gambling. If Super Bowl betting there is around $100 million, the state tax take could be more than$1 million.

Back to the Super Bowl game itself: I agree with Sheridan that Indianapolis will win, even though I went against his oddsmaker’s advice and properly picked Florida to upset Ohio State in the BCS title game.

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Laws that are so widely violated and blatantly ignored do not make sense to have. History (and economics) tells us that it is typically better to use the price mechanism in the form of legalization with taxes to alter people’s behavior when that is society’s desired goal. Moralistic arguments against sports betting hold no sway when governments have so broadly institutionalized the lottery. Although the NFL might publicly be against sports betting, much of the popularity of the sport rests on the ability to bet on it.

There are a few things in the Neuharth article I don’t agree with.

First, legalization of gambling would almost certainly lead to an increase in the number of people who lose the rent money, just as more people die from smoking today than would be the case if we made tobacco illegal.

Second, I don’t understand why Neuharth and everyone else thinks Indianapolis is such a favorite to win the Super Bowl. Indianapolis is favored by 6.5. A good rule of thumb during the regular season is the spread is equal to half of the gap between the two teams’ point differentials in games so far, adjusted for the home field advantage. During the regular season, Indianapolis outscored its opponents by 67 points. Chicago outscored its opponents by 172 points. During the playoffs both teams outscored their opponents by 28 points (Indy in 3 games, Chicago in 2 games). By this usually reliable rule of thumb, Chicago should be favored by 2 or 3 points.

The answer that people will give, I suppose, is that the Super Bowl is different, whatever that means. For that same reason, the over/under is always much higher than one would expect based on regular season game outcomes. My own view, though, is that forty Super Bowls is too few to know whether the Super Bowl is different or not. Absent a good theory on why the Super Bowl should be different, I think it makes more sense to treat the Super Bowl like it is just another game, at least from a betting perspective.

So I’ve got my money on the Bears and the under.