Article

Regulating Vice

What the U.S. Marijuana Industry Can Learn from State Governance of Sports Gambling

The United States has long been a country of prohibitions, with the most memorable prohibition in American history being the ban on alcohol sales in 1920, which lasted until the ratification of the 21st Amendment to the U.S. Constitution. While the federal ban on alcohol has long since been abolished, the United States has continued to maintain the rudiments of its federal bans on both marijuana and sports betting—even though the primary beneficiaries of both of these bans have been organized criminal syndicates that have garnered near monopolies over these industries.

While somewhat different from the alcohol ban of the 1920s, there are many similarities between today’s bans of both marijuana and sports betting. For instance, the U.S. Supreme Court’s decision in Murphy v. National Collegiate Athletic Association—which allowed states to legalize and regulate sports betting—catapulted the regulation of sports betting into the national spotlight, alongside marijuana. At the same time, however, there are also a few important distinctions—most notably that the federal Controlled Substances Act (“CSA”) classifies marijuana as a prohibited substance, whereas federal law classifies sports betting somewhat less harshly.

Since the U.S. Supreme Court’s May 2018 Murphy decision, more than thirty-five states have introduced legislation to legalize sports betting, with nineteen states successfully passing laws in the first eighteen months since the Court’s Murphy decision. Likewise, medical marijuana is currently legal in thirty-three states, and recreational marijuana is permitted in eleven states. Nevertheless, despite the growing state-level legality of both marijuana and sports gambling, the exuberance for sports gambling by entities like banks and institutional investors has surpassed the marijuana industry despite the marijuana industry having a significant head start. This Article explores why sports gambling has been widely accepted and has led banks and financial institutions to take risks that they have not been willing to take for the marijuana industry. It also explores best practices adopted by the sports gambling industry that the marijuana industry may be able to emulate to garner broader legal acceptance.

a. John T. Holden, J.D., Ph.D., Assistant Professor, Spears School of Business, Oklahoma State University. He can be contacted at [email protected] The authors would like to thank the Center for Legal Studies and Business Ethics and attendees at the symposium on Legal, Ethical, and Compliance Issues in Emerging Markets: Cannabis in the States for their helpful comments on an earlier draft of this paper. Additionally, the authors are grateful for comments received from anonymous peer re-viewers from the proceedings of the Academy of Legal Studies in Business Annual Conference.

b. Marc Edelman, J.D., Professor, Zicklin School of Business, Baruch College, City University of New York. He can be contacted at [email protected] We would like to thank Nelson Lund, Debora Person, and Eugene Volokh for their valuable comments. We are grateful to Nathan Cowper, Nathaniel DeMelis, and Taylor Scherck for their excellent research.

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