Question of the Day - 08 January 2021

[Editor's Note: The following answer is taken directly from our upcoming book, All about Sports Betting, by Blair Rodman.]

In the early days of sports betting, if a gambler didn’t want to play parlay cards, regardless of the sport, he was limited to betting a money line on whether a team or participant would simply win or lose. Before pointspreads, most bookies limited the games they offered to closely matched contests. Bookies shied away from games with big favorites, because they risked taking a big hit on underdogs or getting overloaded on favorites.

As basketball and football became more and more popular, bookies needed something more enticing to offer bettors than parlay cards and money lines. That something came about in the 1940s, with the ingenious concept of the pointspread, changing the nature of sports betting forever.

Legend has it that a Connecticut-based professional bettor and bookmaker named Charles McNeil refined and put into use the idea that had already been kicked around by some other bookies.

With the pointspread, even the most lopsided of games could be turned into a coin flip. Bookies were getting more balanced action and it was possible for a 35-10 blowout to be a cliff hanger for bettors at the end.

Sports betting was legalized in Nevada in 1949. The first books were independent from casinos and were known as “turf clubs” (many of these books in Las Vegas were named after race tracks — Del Mar, Saratoga, Santa Anita, Churchill Downs). The turf clubs and casinos had a loose agreement to stay out of one anothers' way; turf clubs wouldn't have casino games and casinos wouldn't have sports books. The truce lasted a couple of decades.

In 1951, Congress passed a regulation imposing a 10% federal excise tax on the sports betting handle, making it impossible for a sports book to be profitable with the 11/10 model. Many books passed on this tax to their customers, requiring bettors to lay 12/10, making winning in the long run all but impossible. Others found a workaround.

For example, in one book, for their regulars, ticket writers put an “R" at the bottom of a ticket, which meant that the ticket was worth 10 times the amount written. If the bet was written $110, the bettor would put up $1,100. Both the book and the bettor knew the deal and if the bet won, the bettor got back his $1,100, plus $1,000 profit. Gaming Control Board enforcement was lax in those days, so there were few issues. 

In 1974, the tax was lowered to 2%.

In 1975, Frank "Lefty" Rosenthal lobbied the Nevada legislature to pass a law allowing sports books in casinos. When the law quickly passed, the glory days of the turf clubs essentially ended (with the exception of Gene Mayday’s Little Caesars, which stayed open until the early ’90s).

Casino owner Jackie Gaughan opened a book in his Union Plaza, run by legendary linemaker Bob Martin, and Lefty Rosenthal opened and ran his own operation at the Stardust. When other casino operators saw that sports books were not only profitable as stand-alone operations, but also got crossover action on their casino games, sports books sprang up in casinos all over town.