For 25 years, a little known law called the Professional and Amateur Sports Protection Act made sure that sports betting could only occur in Nevada. This May, that all changed when New Jersey took on the NCAA and won.
For those (like me) that don’t know anything about college basketball, the history of sports betting — and the reason why the NCAA was so invested in keeping sports betting illegal — is the kind of ‘holy smokes, really?’ series of events that you’re shocked hasn’t been turned into a Hollywood movie. And it all started n 1950 in a point shaving scandal.
Junius Kellogg, a standout 6 ft 8 in (2.03 m) Manhattan College center, was offered a $1,000 bribe to shave points before a game against DePaul. Although he was working for minimum wage at a frozen custard shop near campus, he refused to take the money and reported the solicitation to his coach, Ken Norton. Norton sent him to the District Attorney. To get evidence about the corruption, he wore a wire when he was again approached in a nearby bar.
The scandal first became public when New York City District Attorney Frank Hogan arrested seven men on charges of conspiring to fix games on February 18, 1951. Those taken into custody included All-America forward Ed Warner, center Ed Roman, and guard Al Roth, the three stars of CCNY’s five that won both the NIT and NCAA tournaments, still the only such double in history. The police had set up an undercover, or “sting”, operation. The arrests were made in Penn Station when the players returned to New York from Philadelphia, after CCNY had defeated Temple, 95–71. In all, 32 players from seven colleges admitted to taking bribes between 1947 and 1950 to fix 86 games in 17 states. Jack Molinas would not be caught in 1951, but after he was suspended for gambling by the NBA, he would be linked back to the 1951 scandal by betting on his then college team, Columbia University.
The Supreme Court overruled the 20 year old law, arguing that without a direct mandate from Congress itself, each state should be free to legalize sports betting or not. Some states were quick to prepare for the decision. Others are still deliberating. If you want to know the numbers, the AP as you covered.
— AP Interactive (@AP_Interactive) May 14, 2018
So what’s the next step for consumers? Credit cards.
Nevada’s solution is to allow bettors to fund a prepaid card. However, the fees are heavy. There’s a reason why Nevada’s Sportsbooks set a quarter of a billion record in 2017 from sports betting. It’s because betting with a credit card doesn’t come cheap, but when you can make your wagers so readily on your mobile devices, it’s harder to exert self control.
That’s why the Supreme Court decision poses such a potential problem per Bloomberg.
The stakes are huge. Americans illegally bet an estimated $150 billion on sports games each year, a figure that’s enticing for credit-card issuers looking to gin up extra spending by their customers. Still, allowing cardholders to fund their gambling habit with a credit card could create problems for lenders, which are left on the hook if a borrower can’t repay.
The potential solution is to for lenders to use special codes that can set limits on how much a borrower wants to gamble; meaning whatever your credit card limit is, only a set amount determined by the bank could be spent on sports gambling. So now what?
The whole point of your credit score is to assess a general risk profile. Do you spend within your means? Are your debts out of control? Lenders view you as a risk even when you’re responsible. How will lenders view you when you have debt, AND you’re gambling? Legal or not, it’s easy to see why lenders will face some serious challenges. A credit score gap of 40 points can be the difference of thousands of dollars in interest rates for an auto loan, student loans, a personal loan, a mortgage, etc. How much wider will the gap be if lenders are dinging you for types of borrowing?
While the scoring model doesn’t discriminate, keep in mind that FICO has nothing to do with things like dealer markups, where sellers can decide on their own terms what the interest rate on an item like a car should be. Lenders already have a risk sector; which are credit scores. There’s bad risk (a FICO of 580), medium risk (620), and then there’s good risk (720). With the legalization of sports betting, lenders will have to consider a new type of risk; the risk of betting itself. How will that change the credit model? That’s the billion dollar question. The banks may find a solution to gamblers who want to use their credit cards to borrow. But that doesn’t mean you’re protected from everything else.
For a FREE credit evaluation that won’t let you gamble on credit, contact us by visiting us at our committed offices at 6989 Alamo Downs Pkwy, San Antonio, TX 78238, or call us at 210-520-0444.