South Carolina residents will see a renewed strong push to legalize online sports betting when the General Assembly next meets in January, despite two recent failed pieces of legislation and two new studies highlighting the social costs of gambling.
According to experts and politicians, the reasons for this are simple: money and dynamism.
Since the U.S. Supreme Court struck down federal law in 2017 that prohibited states from allowing sports betting, 38 states have legalized the practice in some form. Last year, states collected more than $2.5 billion in taxes from $11 billion in industry revenue.
And now that North Carolina, just across the border, has seen eye-popping revenue in the first five months of legal online sports betting, experts like Stephen Shapiro of the University of South Carolina’s School of Sports and Entertainment Management believe South Carolina lawmakers will feel significant pressure to act.
“The success in the form of the tax revenue already generated in North Carolina will be enticing,” Shapiro said in an interview on Aug. 19. “I would imagine that we will see more of these (sports betting) laws and that there is a good chance that they will be legalized in the next few years.”
The North Carolina Experience
When North Carolina’s new law allowing online sports betting took effect at noon on March 11, it was expected to generate $64 million in revenue in its first year.
“Legalizing sports betting will provide a significant boost to North Carolina’s economy and enable continued growth of our thriving sports industry,” 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, as North Carolinians wagered more than $1 billion in the first 60 days after legalization. As of July 1, the state had collected more than $50 million in taxes and fees – nearly 80 percent of the $64 million it had expected for the entire year.
“You’ve definitely seen consistently high levels of gambling productivity in the market since March,” said USC’s Shapiro. “And we haven’t even started football season yet, which is when you see the biggest spike 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 exists in South Carolina. It’s underhand, 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.”
In the following legislative session, two bipartisan bills were introduced to legalize online gambling.
The first bill, sponsored by South Carolina Rep. Russell Ott (D-Calhoun), was a limited bill aimed at subsidizing the state’s struggling horse industry by allowing online betting on horse racing. Ott is currently running for the state Senate.
“(Riders) are currently being crushed by other states that have moved with the times, that have passed these kinds of laws and given their voters and the citizens in their states the freedom to do what so many people are already doing,” Ott was quoted as saying at the time.
To the surprise of many, Ott’s bill passed the South Carolina House of Representatives in April by a vote of 56 to 46, but then failed in the Senate when the legislature adjourned in May without a vote.
The second bill, introduced by Chris Murphy, a Republican representative from Dorchester County, was more ambitious. It would allow online sports betting on professional and college sports and would generate at least $20 million in new revenue per year, 80 percent of which would go to the state budget.
“Studies have shown that approximately $2.5 billion is wagered illegally online in South Carolina each year,” Murphy told colleagues at a committee hearing in March 2023. “With this legislation, we hope to eradicate this illegal betting.”
Despite strong pressure from advocates and nearly $300,000 in lobbying support from major industry players such as the Sports Betting Alliance, the bill failed in May along with the horse racing gambling bill.
New research raises costly questions
While other states continue to wager large sums of money on gambling, two new studies raise serious questions about the social costs of putting a sports betting shop in every citizen’s pocket.
The first study, from the Rady School of Management at the University of California, San Diego, used tax data, gambling hotline reports and digital payment records to examine the impact of legalization in 32 states. And while the results confirmed that online gambling has been a boon to state budgets, they also showed clear evidence of financial hardship among poorer residents, some of whom spend 10% or more of their income on gambling.
“Our data show that legalizing online gambling leads to more irresponsible gambling spending among lower-income consumers than among higher-income gamblers,” study co-author Kenneth Wilbur said in a July 23 press release. “These findings underscore the high financial risk associated with online gambling.”
The second study, released this month by a team of researchers from the University of Southern California and the University of California Los Angeles (UCLA), examined the credit scores of consumers in various states that adopted online gambling. The findings include:
In states that legalized online betting, the number of bankruptcies increased by 25 to 30 percent in the first four years.
The number of debt collection actions for unpaid debts increased by 8%.
The credit rating of the entire state fell by a full point.
Study co-author Brett Hollenbeck, a marketing professor at UCLA’s Anderson School of Management, told the City newspaper The results of the study left him more concerned about online gambling than when he started.
“A small but significant portion of a state’s residents will experience pretty serious financial difficulties once gambling is legalized,” Hollenbeck said. “We’ve seen a larger impact than I expected.”
Still, Hollenbeck said he was relatively agnostic on the underlying policy issue, saying elected officials must balance competing interests between increased government revenue, individual freedom and potential harm to some.
“It’s important that policymakers are fully informed about the downsides, and that’s why we conducted this research,” Hollenbeck said. “But many people find that (online gambling) is a perfectly enjoyable hobby that doesn’t harm them, and states generate tax revenue that can be put to good use.”
While lawmakers will likely still be addressing the issue in 2025, Governor Henry McMaster will not be on the scene.
“The governor has always opposed legalized sports betting and campaigned against it in the 2022 gubernatorial election,” McMaster spokesman Brandon Charochak told the Charleston City Paper earlier this month. “His position remains unchanged.”
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