BIG STORY: S.C. to see new push to legalize online sports betting

South Carolinians will see a renewed major push for legalized online sports betting in January when the General Assembly reconvenes, despite two recent legislative failures and a pair of new studies that highlight gambling’s social costs.

The reasons, experts and policymakers say, are simple: money and momentum.

Since the U.S. Supreme Court struck down the federal law prohibiting states from authorizing sports betting in 2017, 38 states have legalized the practice in some form. Last year, states generated more than $2.5 billion in taxes from $11 billion in industry revenue.

And now with North Carolina generating eye-popping revenues just across the border in its first five months of legal online sports gambling, experts like Stephen Shapiro of the University of South Carolina Department of Sport and Entertainment Management think S.C. legislators will feel significant pressure to act.

“The success in terms of the tax revenue generated already in North Carolina will be enticing,” Shapiro said in an Aug.t 19 interview. “I would imagine that we’re going to see more of those types of [sports betting] bills and that there’s a good chance it would be legalized in the next couple years.” 

The North Carolina experience

When North Carolina’s new law allowing online sports betting went into effect at noon on March 11, it was expected to generate $64 million in its first year.

“The legalization of sports betting will provide a significant boost to North Carolina’s economy and will allow our thriving sports industry to continue to grow,” Governor Roy Cooper said that day, as he placed a bet on the Carolina Hurricanes to win the Stanley Cup.

So far, Cooper’s prediction appears to have been an understatement, with North Carolinians wagering more than $1 billion in the first 60 days after legalization. By July 1, the state had generated more than $50 million in taxes and fees – almost 80% of the $64 million it expected to collect for the entire year.

“They’ve definitely seen a consistent high level of gambling productivity in the market since March,” USC’s Shapiro said. “And we haven’t even gotten to football season, which is when you see the biggest boost in gambling activity.” 

Meanwhile, in South Carolina

Most South Carolinians probably first heard a sustained political argument for legal online sports betting in 2022 when then-Democratic gubernatorial candidate Joe Cunningham made it a major issue.

“Sports betting is happening in South Carolina. It’s just under the table, unregulated, and overseen by bookies. Our state gets nothing,” Cunningham said in 2022. “It’s time to legalize sports betting, bring it to the surface, and use the new tax revenue to cut taxes and invest in our teachers and roads.”

And while Cunningham lost to Republican Gov. Henry McMaster that fall in the ruby-red Palmetto State, two bipartisan bills to legalize online gambling were introduced in the following legislative session.

The first, sponsored by S.C. Rep. Russell Ott, D-Calhoun, was a limited bill aimed at subsidizing the state’s struggling equestrian industry by allowing online gambling on horse races. Ott now is running for state Senate.

“[Equestrians] are getting crushed by other states right now that have gotten with the times, that have passed this type of legislation and have given their constituents and the citizens in their states the freedom to be able to do what so many people are already doing,” Ott was quoted as saying at the time.

In a development that surprised many longtime Statehouse observers, Ott’s bill cleared the S.C. House 56-46 in an April vote before dying without a vote in the Senate as the legislature adjourned for the year in May.

The second bill, introduced by Dorchester County Republican Rep. Chris Murphy and co-sponsored by powerful Ways and Means Committee Chair Bruce Bannister, R-Greenville, was more ambitious. The bill proposed  online sports betting on professional and college sports. It was projected to raise at least $20 million a year in new revenues, with 80% going to the state’s General Fund.

“Studies have shown that there is about $2.5 billion annually that’s being wagered online in South Carolina illegally,” Murphy told his colleagues in a March 2023 committee hearing. “The hope of this legislation would be to eradicate that illegal wagering.” 

Despite a strong push by proponents and almost $300,000 in lobbying support from major industry players like the Sports Betting Alliance, the legislation died along with the horse-race gambling bill in May. 

New research raises expensive questions

As other states continue to bet big on gambling, two new studies raise serious questions about the social costs of putting a sports book in every citizens’ pocket.

The first, a study from the University of California San Diego’s Rady School of Management, used tax data, gambling hotline reports and digital payment records to examine the impact of legalization in 32 states. And while the findings confirmed that online gambling has been a boon to state budgets, they also showed strong evidence of financial distress among poorer residents, some of whom spend 10% or more of their income on gambling.

“Our data show that online gambling legalization leads to more irresponsible gambling spending among lower-income consumers than among higher-income gamblers,” said study co-author Kenneth Wilbur in a July 23 release. “These findings emphasize the high financial risk associated with online gambling.”

The second study, published this month by a team of researchers from the University of Southern California and the University of California Los Angeles (UCLA), examined consumer credit records across states as they implemented online gambling. Among the findings:

• In states that legalized online betting, bankruptcies rose between 25% and 30% in the first four years.
• Collections actions on unpaid debts rose 8%.
• Statewide credit scores fell by one full point.

Study co-author Brett Hollenbeck, a marketing professor at UCLA’s Anderson School of Management, told Statehouse Report the study’s results left him more concerned about online gambling than he was at the outset.

“For a small but significant proportion of a state’s residents, they’re going to  get into fairly serious financial difficulty once gambling becomes legal,” Hollenbeck said. “My prior belief would have been that the effects were probably very small, but we found larger effects than I was expecting.”

Still, Hollenbeck said he’s relatively agnostic on the underlying policy issue, due to elected officials’ need to balance the competing interests of increased state revenues, individual liberty and potential harms to some.

“It’s important that policy makers are fully informed about the downsides and that’s why we did the research,” Hollenbeck said. “But a lot of people find [online gambling] to be a perfectly enjoyable hobby that’s not harmful to them and the states generate tax revenue that can be put to good use.”

That’s an argument S.C. legislators are likely to be wrestling with during the next session. But at least one prominent South Carolinian won’t be joining them in weighing the pros and cons.

“The governor has always opposed legalized sports betting and campaigned against it during the 2022 gubernatorial election,” McMaster spokesman Brandon Charochak told Statehouse Report earlier this  month. “His position remains unchanged.”

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