In 2024, Americans poured $150 billion into sports betting, generating $13.7 billion for the industry and $2.8 billion in tax revenue, a nearly 25 percent jump from the previous year. Today sports betting is legal in thirty-eight states and Washington, DC, with Missouri set to join the fold. Just a decade ago, this kind of freewheeling access was almost unthinkable. It only became possible after the Supreme Court struck down a 1992 federal ban on commercial sports betting in 2018, capping decades of gradual liberalization in the gambling sector, from commercial and tribal casinos to electronic gaming machines in bars and convenience stores.

What opened the floodgates for this liberalization? Before 1963, most types of gambling were banned in most of the United States. That year, New Hampshire voted to create the first state-run lottery. New Hampshire has no state income tax and no sales tax, and as a result it had the lowest education funding in the country. Half of the state’s revenue came from excise taxes on tobacco, alcohol, and horse racing. Under a Republican-controlled legislature and a Democratic governor, the creation of a state lottery was approved by 76 percent of voters in a popular referendum. After that, the number of states administering lotteries rose quickly, from fourteen in 1980 to twenty-eight in 1988 to thirty-nine in 2003. Today state-run lotteries exist in forty-five states, plus DC, Puerto Rico, and the US Virgin Islands.

New Hampshire’s move was driven by its unique lack of tax revenue sources, during a time of relative prosperity for most of the country. But the real explosion in lottery legalization came during the 1980s, the decade of feel-good Reaganomics following the widespread deindustrialization of the ’70s. “Faced with declining tax revenues due to industry and job losses and with intense resistance to raising taxes, state governments turned to lotteries to bolster strapped public coffers,” explains David Nibert in his 1999 book Hitting the Lottery Jackpot: Government and the Taxing of Dreams. “Federal revenue-sharing funds, community development block grants, mass transit programs, funds for education, housing subsidies, and other programs were substantially cut or eliminated, forcing state governments to assume the expense or scale back their programs.”