I had the pleasure of participating in a podcast program with Chad Millman of ESPN. The podcast is here, if you want to listen or download.
We talked about the current state of the law with respect to sports betting and about the prospects for legalization.
One point I tried to get across was that, as a practical matter (if not a legal one), things are pretty good just the way they are. Most U.S. citizens who want to make a bet on a game can find a way to do so without too much trouble. Payouts from the big on-line sports books are to my understanding quick and reliable. And the vig/overhead is not too bad.
In my view, there's one problem with legalization that has not been fully considered by its proponents. The call for legalization typically means a call for regulation and taxation, much as Congressman Frank's bill would provide. Is that really what people want? Do U.S. gamblers wish to trade today's permissive liberality for government oversight and control?
Last I checked, governments do not come cheap. I would imagine an overhead fee sufficient to fund a new government "sports betting" division would be quite a bit higher than the vig needed to pay the bookie's cell phone bill. Further, when it comes to gambling, governments do not like to lose. Take a look at state lotteries. Only a portion of state lottery revenues is paid out in winnings; the state diverts the lion's share to public uses. States regard gambling as a means to increase the fisc, not as an opportunity to take a counter-position on a wager. The limited forays by state government into sports betting (in Oregon, Delaware, Montana) prove the point: the only bets allowed were multiple-pick parlays against the spread, a bet that the state was overwhelmingly sure to win.
Even if "legalization" meant that private enterprises, and not the state, would run the sports book, undoubtedly the regulatory costs would be substantial, as they are for casinos. The cost of state regulation and the accompanying tax/rake would likely render payouts not as generous as the private bookmaker. You'd get the same thing as now, only at higher cost. The widespread legalization of sports betting might lead to an inferior betting product.