Last week, NBA Commissioner Adam Silver published an op-ed in the New York Times arguing that Congress should legalize sports betting in the United States. Gambling on basketball, football, and other sports, he explained, is already an enormous underground industry run by illegal bookies and unsavory offshore websites. Better to bring the business out into the open and carefully regulate it, like in Nevada.
This all seemed like a fairly reasonable stance. But my editor and I were struck by one nugget in Silver's piece. "There is no solid data on the volume of illegal sports betting activity in the United States," the commissioner wrote, "but some estimate that nearly $400 billion is illegally wagered on sports each year." It is, of course, extremely difficult to approximate the size of any illegal industry, given that criminals aren't the best at keeping business records. But this was an irksome sentence. It seemed to say: Sure, nobody really knows how much of this shadowy activity goes on, but here's one eye-popping guess that's sure to be repeated by reporters. (And the number was indeed repeated). Moreover, $400 billion is a hulking sum of money-;an average of about $1,700 wagered by every American adult every calendar year, or equal to roughly 2 percent of the entire American economy.
So, we wondered, where did that number originate? Could it possibly be right? Spoiler alert: It's probably made up.
When I asked the NBA where Silver got that $400 billion figure, a spokesman pointed me to the 1999 final report of National Gambling Impact Study Commission. (He told me it was "one of the sources" Silver drew from, though the spokesman never identified any others.) Authored by a nine-member panel created by Congress, this was the first comprehensive study of gambling and gambling addiction in America in decades. The panel ultimately urged Capitol Hill to pass a raft of new limits on gambling, including a complete ban on college sports betting, even in places where it was already legal. (Happily for the city of Las Vegas, this did not come to pass.)
The section on sports is short but dramatic. "Estimates of the scope of illegal sports betting in the United States range anywhere from $80 billion to $380 billion annually," the commission wrote, "making sports betting the most widespread and popular form of gambling in America." Silver, it seemed, took the high end of that range, but didn't adjust it for inflation.
So, case closed? Not quite. The $380 billion figure was footnoted in the report, but the citation wasn't a research paper. Instead, it referred back to an Associated Press article that appeared in the May 18, 1999, edition of the Las Vegas Review-Journal, titled "Ban on College Sports Betting Could Cost State Books Millions."
That news article, it turned out, recounted one of the commission's own hearings, which had taken place in Las Vegas the previous November. "Commissioners were told that while legal sports betting in Nevada draws $2.3 billion a year, illegal sports betting runs anywhere from $80 billion to $380 billion annually," the article explained.
So, who told the commission about this $380 billion worth of sports betting? Thankfully, the commission's very retro website includes the complete transcripts of its hearings, including the Vegas meeting. In an introductory briefing, commission staffer Dr. John Shosky explained, although "reliable figures on the scope of sports gambling are difficult to find," at least one study suggested that about $88 billion was bet illegally each year. Vic Salerno, the CEO of American Wagering, a Vegas bookmaker, cited estimates between $50 billion and $250 billion (the latter of which appeared to have come from a clinical psychologist who studied gambling addicts rather than any kind of economic study). None of the other expert speakers appear to have presented specific numbers.
The $380 billion figure only emerged later thanks to an exasperated commission member, John Wilhelm. A fellow commissioner had suggested that the gambling industry itself needed to take more steps to combat sports gambling addiction. Wilhelm found this idea absurd, since most wagering was illegal. "According to the testimony and the staff briefings, there's about two and a half billion dollars' worth of legal sports gambling in this country and there's somewhere, depending on whose guesstimate you take, within $80 to $380 billion worth of illegal sports gambling," he said. "There's no way that I could see for anybody to get the neighborhood bookie or the local college bookie to step up to the plate and share in the responsibility for the apparently rampant compulsive gambling problems that directly relate to sports wagering."
A fair point, to be sure. But in his rhetorical flourish, Wilhelm seems to have pulled the number $380 billion out of thin air. If any experts did mention the number to him, it wasn't preserved for the public record. This might not have been a problem for the purposes of the meeting--his point was that illegal sports gambling probably dwarfed legal sports gambling. However, the AP proceeded to report the number as fact. The commission then cited the wire service's report in its final study, rather than the actual words of its expert panel. Thus, a statistic that may well have been made up on the spot was sealed into history. Among other places, the number (or inflation-adjusted versions of it) would eventually resurface in future congressional testimony, in academia, in a Supreme Court brief, and, of course, in the New York Times.
Though the NBA didn't provide it, I did find one other potential source for Silver's statistic. In 2008, the law firm Wachtell, Lipton, Rosen & Katz produced a study on sports gambling for the NBA's board of governors that stated: "By some estimates, total volume of sports betting in the United States is $325 to $400 billion, with less than 1 percent of this betting taking place legally in Nevada." Again, the document does not cite a source, and the lawyers who wrote it did not respond to my request for comment. It may very well be based on the Gambling Impact Study Commission's findings.
If not $400 billion, then how much money is bet on sports illegally in the United States each year? Honestly, I have no idea. During my reporting, I couldn't track down any contemporary studies that offered a credible estimate of the illegal sports betting market. When I asked the American Gaming Association if it knew of any, a spokesman pointed to the 1999 commission report, and said that the trade group was only just getting ready to conduct its own research on the issue.
Ultimately, we don't need to know the exact dollar amount that Americans wager each year to debate whether sports betting should be illegal. Even if it were simply $100 billion rather than $400 billion, it would still be a huge market. The point, though, is that it's always healthy to be suspicious of bold, shocking statistics, no matter how reliable the source might seem.