In 1919, a group of Chicago White Sox players, including Shoeless Joe Jackson, threw baseball’s world series against the Cincinnati Reds.
The impact the fix had on the American public was encapsulated by the apocryphal story of a young boy approaching his hero, Jackson, and crying plaintively: “Say it ain’t so, Joe.”
The White Sox players had been corrupted by Arnold Rothstein, a well-known gangster of the era.
Rothstein, a fictionalised version of whom was central to the TV series Boardwalk Empire, was widely reputed to have fixed many sports events in the post-WWI era.
Rothstein was also one of the first to use gambling as a means of money laundering.
Later, in the post-WWII era, the New York mafia, and particularly the so-called “Prime Minister of the Underworld”, Frank Costello, would adapt Rothstein’s criminal approach.
Costello and others laundered the illicit profits they made from racketeering through elaborate interstate sports gambling networks.
Match fixing and money laundering was a perfect marriage for the mob. They could profitably launder hot money through betting on a sporting event they had already fixed.
In the 1950s, a US senator, Estes Kefauver, sought to smash the mob by focusing on the link between laundering and sports gambling — what he called the mob’s “lifeblood”.
Kefauver arranged Senate Committee hearings which are now online. My favourite clip is of a clearly terrified underling of Costello’s, who had been arrested, being brought before the Senate hearing to testify against his boss.
The Committee ask him about his profession. They know he is an illegal bookie or runner for Costello but he gives them nothing:
What’s my bidness (sic)? I ain’t got no bidness on account of me being in jail.
Costello is also interrogated but stalls by pleading the Fifth. Costello’s raspy voice and mannerisms were used by Marlon Brando in his preparations for The Godfather. The Godfather movies — and particularly Michael Corleone’s decision to move the family’s business to Nevada — give an insight into how the United States decided to regulate gambling from the 1950s onwards.
The US government confined gambling to four states nationwide and restricted it mainly to casino gambling.
Apart from Nevada, another state to see the potential tax dollars in gambling was New Jersey.
In the 1970s, New Jersey liberalised casino gambling and especially on the Atlantic City boardwalk but by the 2000s, revenues had begun to decline.
The rise and fall was epitomised by the building of the Taj Mahal casino in Atlantic City in 1990. The real estate mogul who built it was forced to liquidate the property last year for four cents in the dollar selling it to Florida’s Seminole Indians who, in a quirk of US law, have certain dispensations when it comes to gambling licences.
The seller was US President, Donald “The Art of the Deal” Trump.
When Chris Christie became NJ governor in 2010, he vowed to diversify the state’s gambling base and drafted legislation to this effect in 2012.
Christie’s legislation appeared, however, to violate federal law and namely the Professional and Amateur Sports Protection Act of 1992 (PASPA), which maintained the long-standing ban on sports gambling in the US outside of Nevada and three other states.
The idea of PASPA was a simple one. If you restrict betting on sport, you better protect it from corruption. If it’s difficult to bet on a sport, then there is little point in pressurising a player or umpire to fix a game.
It is for this reason — the integrity of sport — that the US Department of Justice and all the major US sports leagues (NBA, NFL, NHL, and MLB) challenged the NJ approach.
In the end, the US Supreme Court sided with New Jersey. The reason for the decision relates to how the US constitution regulates disputes between individual states and the federal government.
It means that each of the 50 states can now licence sports gambling. A number of states, led by New Jersey and Mississippi, are ready to go immediately. The majority of states are likely eventually to allow betting, though a patchwork quilt of regulation from highly restrictive to liberal will cause regulatory headaches.
As for the major sports, although they lost at the US Supreme Court they have, unsurprisingly, long had contingencies in place for what potentially is now the world’s biggest betting market.
Last year’s approval by the NFL of the Oakland Raiders’ relocation to Las Vegas is an example. Similarly, the NBA has long realised that the game was up on restrictive sports betting in the US.
The NBA is demanding payment of a “betting rights fee”. What they want is for betting operators to pay a fee to the leagues for the right to offer bets on its games.
The NBA and others say that the fee is primarily an “integrity levy” that they will use to pay for a system to monitor, pursue, and punish any corruptive behaviour such as match fixing.
In part, that’s true; in reality, it’s all about the money. The NBA have proposed the levy on betting operators should be 1% of the total amount bet on its games.
When you keep in mind that in 2017 Nevada sports gambling alone hit a record total of a quarter of a billion dollars in revenue for the year, and that outside of Nevada the illegal betting market in the US last year was worth between $150bn (€127,1bn) and $200bn (€169,6bn), the integrity fee sought by the NBA takes an altogether different meaning.
The US Supreme Court’s decision will also affect gambling globally.
The level of technology and innovation that US companies will now bring to betting exchanges and betting data analytics will be immense and it will be exported.
US companies and sports are also brilliant at marketing their “product”. The marketing of gambling as part of the gameday experience is likely to be taken to a deeper even more immersive level.
In contrast, the US is poor at responding to social and public health ills.
Discussion of addictive or problem gambling behaviour among fans has been largely ignored by the major sports leagues.
In sum, the US Supreme Court decision was an acceptance that prohibition as a social policy does not work. The US discovered this in the 1920s and 1930s with its failed prohibition on alcohol.
Arnold Rothstein profited from the prohibition era. In 1919 he took advantage of the greed of the owners of the Chicago White Sox who were grossly underpaying a talented roster of players.
Shoeless Joe Jackson was then more amenable, even desperate, to cash in on Rothstein’s offer.
A century later that gambling-related greed has resurfaced and the Rothsteins of the 21st century are ready to exploit it.
And some kid, this time on Twitter and with emojis, might once again have to ask their fallen hero to say it ain’t so.