- Sports betting has exploded in recent years, going from 400 million in gross revenue in 2018 to over 11 billion in 2023.

In most states, you can bet on practically any game, from football to lacrosse, to surfing, to darts, and thanks to smartphones, you can do it from anywhere, at any time.

What could go wrong?

Philip.

Hey, we're shooting an episode here.

- Dang!

- What is it?

- Ah!

I was one prop away from completing a five-leg parley.

I should have shaved a few points off the spread.

- Betting on games?

I thought you didn't care about sports.

- I don't.

I was just researching the episode and kinda got hooked.

Now I'll have to make long odds on that moneyline to break even.

- Well, how much did you lose?

- Today, or lifetime?

(jaunty music) - In 1989, former MLB player and the then manager of the Cincinnati Reds, Pete Rose, was accused of placing bets on baseball games involving his own team, a major violation of the rules, since as a manager, he was in a position to influence the outcomes of the game.

He was eventually banned from professional baseball for life, but the implications went beyond one man's career.

- Congress began an investigation into sports betting, which culminated in 1992 with the passage of the Professional and Amateur Sports Protection Act, which essentially outlawed all gambling on sports events, except for a few states, where there were already established betting markets, like Nevada.

Most major sports leagues, including the MLB, NBA, NHL, and NFL, supported the ban and have fought attempts to repeal it.

Why?

They feared that gambling scandals like Pete Rose's could shake their fans' confidence in the fairness and integrity of the games.

If that happened, the whole survival of the industry could be in jeopardy.

- Then, in 2018, the Supreme Court invalidated PASPA under the argument that it violated state's rights to decide for themselves.

Over the next several years, more and more state legislatures voted to legalize sports gambling, and today, it's legal in all but 12 US states.

- The company's best position to take advantage of the repeal weren't gambling establishments at all, but fantasy league platforms.

FanDuel and Draft Kings quickly introduced real money betting options on their apps, and by the time other players tried to get into the game, they had already cornered the market.

Even heavy hitters like MGM, ESPN and Fox Sports couldn't dent their market share, which today stands at around 70%.

- Part of these companies' success lies in their constant innovation.

Instead of just betting on which team wins, known as moneyline bets, or by how much, known as the spread, they allow users to place bets on many different events within a game, known as propositions, or prop bets.

For instance, you can bet that a certain player will hit a home run, which team will get the jump ball, or even how long the National Anthem will last.

Many of these bets can be made live during the game with algorithms constantly updating the odds, depending on what happens.

- Perhaps their most lucrative innovation is the single game parlay, which allows you to bundle multiple bets into one big one.

For instance, you could bet that the Dodgers win the game, that Ohtani gets a home run, and that the Phillies steal at least two bases.

If all three of those things happen, you win an oversized payout, bigger than if you had bet on each one by itself.

But if just one of them doesn't happen, you get nothing.

- Single game parlays, also known as same game parlays, appeal to risk-takers who dream of a big payday, but they're notoriously bad bets, because the odds get exponentially worse for the bettor.

According to one study, a typical moneyline bet will only mean a five to six percent return for the bookie, but a typical single game parlay nets a profit of around 30%.

- Proponents of legalized sports gambling argue that they are merely providing a service that people want, and instead of that money going to criminals and black markets, it can now be taxed by local governments.

And it's true that many states have seen significant boosts to their budgets, thanks to sports betting.

- But legalizing something doesn't just change the industry, it expands it.

Ease of access and the decrease of social stigma has enticed many more people to get in the game.

According to a Sienna College survey, 39% of men 18 to 49 now bet on sports.

Among those who place bets through an online sports book, 38% say they gamble more than they should, and 18% say they've lost money that was needed for financial obligations.

New Jersey, the state that led the way in repealing PASPA, has seen calls to its gambling addiction helpline nearly triple since then.

- New studies have found that households in states where sports betting was legalized experienced a decrease in savings and investments, a deterioration of aggregate credit scores, and an increase in bankruptcies, and that low income households were disproportionately impacted.

One of the biggest factors fueling this expansion is the smartphone.

Well before gambling was legalized, software engineers and app designers had been mastering the art of influencing people's behavior through interface design, notifications, and data mining.

Betting platforms collect copious amounts of information on their users, tracking their habits and weaknesses, and use it to craft bespoke notifications that keep gamblers gambling, or entice those taking a break to jump back in.

Though they may position their product as just a fun social hobby, under the hood, it's more like psychological warfare.

- This thinking extends to more traditional marketing.

These days, it's almost impossible to watch a sports event without being inundated with ads for one of the major betting platforms.

A 2023 NCAA survey found that 52% of people were more likely to want to gamble after watching one of these ads.

For people struggling with a gambling problem, that goes up to 80%.

Even the league's own streaming services will sometimes offer the ability to place bets.

The act of watching sports is gradually becoming inseparable from gambling.

- And this has a lot of people worried about the survival of sports itself.

Over the last couple of years, there have been several high profile gambling scandals.

Jontay Porter, a center for the Toronto Raptors, was barred from the NBA for life for betting on games and disclosing confidential information to other bettors.

Same for the Padres' Tucupita Marcano from the MLB, and the Dodgers' star player, Shohei Ohtani, was robbed of millions of dollars by his own interpreter to pay for his gambling addiction.

- Whether or not these are isolated incidents, the perception that this sort of thing goes on behind the scenes is increasing.

Prop bets are particularly conducive to this kind of cynicism.

The idea that one player could influence the outcome of a whole game is a bit farfetched, but if the bet is on that player's specific performance, it's much more credible that they could alter their play for the sake of a bet.

It's already common for athletes to be inundated with threats and accusations of corruption for missing a free throw or walking a batter.

If fans lose confidence in the fairness of the games, that could be devastating for sports leagues and the betting companies.

- Unfortunately, it's almost impossible to dismantle an industry once this kind of money is involved, so gambling will likely continue to be a part of modern sports.

However, the industry may not grow as fast as it has, because states that haven't legalized it yet, like California and Texas, don't seem too eager to get in the game, perhaps spooked by recent scandals.

- If you live in a place where it's legal and are thinking of placing your first bet, there's absolutely nothing wrong with that, as long as you are aware of the risks and approach it as a diversion, not a sensible way to make money.

The odds are always in the house's favor, especially when they're constantly being updated by an advanced AI algorithm.

- And even if you score a big win, there's a chance you won't get paid out.

Most sports books have a clause in their terms and conditions known as obvious error, which means that if they deem the odds to be erroneously calculated, they don't have to make good on the payout.

Of course, they don't often correct the math if it would mean having to pay out more.

- If you're looking for a risky way to make money, may we instead suggest the stock market?

- As we've explained before, it actually pays out more than it takes in.

Unlike casinos and sports books, the average player will actually make money rather than lose it.

- Which means that, since 2018, you'd have made more money investing in Draft Kings stock than betting on its platform.