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Failed Prohibitions in the Areas of Marijuana and Sports Betting Open Doors for New Business Opportunities

Grewal Law PLLC

When Americans hear the word “Prohibition,” most associate the term with America’s “noble experiment” to ban the manufacture, sale, or transportation of alcohol by adopting the Eighteenth Amendment to the Constitution in 1920. The results of Prohibition were predictable. Americans who enjoyed consuming alcohol were undeterred and went to great lengths and criminal exposure to enjoy their favorite beverage. Bootlegging, secret distilleries, and organized crime became rampant. Brutal mobsters such as Al Capone came to power. Bootlegging of alcohol became a lucrative criminal enterprise that empowered gangs to expand into other criminal elements, such as corruption of public officials, prostitution, loan-sharking, and narcotics trafficking. Alcohol that was consumed was potentially dangerous and, in some cases, even caused blindness and death due in part to the lack of any oversight or safety regulations. By the early 1930’s, it was clear that the “noble experiment”—Prohibition of alcohol—was a complete failure. As a result, the Twenty-First Amendment to the Constitution was adopted in 1933, which had the sole effect of repealing the Eighteenth Amendment.

While prohibition of alcohol ended in 1933, most Americans have lived with some form of prohibition of marijuana and sports betting for their entire lives. As was the case with the prohibition of alcohol, the illegality of marijuana or sports betting has done little to curb use or participation by everyday Americans. History does have a tendency to repeat itself, and prohibition of these two activities has caused significant unintended consequences while doing little to prevent participation.

With the enactment of the Controlled Substances Act of 1970, Congress enacted a federal prohibition on the possession, use, and cultivation of marijuana. Marijuana was classified as a Schedule 1 drug, the highest classification reserved for drugs with no accepted medical use and high potential for abuse. Other Schedule 1 drugs include heroin, LSD, and MDMA (ecstasy). The federal prohibition on marijuana did not and has not stopped Americans from using and cultivating marijuana for medical or recreational purposes. Estimates suggest that nearly 22% of American adults currently use marijuana at least once per year and more than half have tried marijuana in their lives.

Instead of stopping use, prohibition created a black market for marijuana and the funds were used to help build international criminal cartels that have engaged in heinous and unspeakable evils. Unsurprisingly, state efforts to legalize marijuana for recreational use have devastated cartel business and profits. Obviously, Americans would prefer not to have to deal with criminal organizations or networks to obtain marijuana but would rather obtain it from a safe, trusted, tested, and regulated retail source. The parallels between the failed attempts at prohibition of alcohol and marijuana should not surprise any casual observer of history. It has taken decades, but the public at large seems to have realized that as a society we have repeated the failures of prohibition of alcohol with prohibition of marijuana. A recent survey from Michigan State University shows that 61% of Michigan voters favor recreational marijuana, which Michigan voters will have an opportunity to approve this November.

Similarly, wagering on sports contests has largely been illegal throughout the United States—with an exception for Nevada and a few other states. Despite another prohibition, the prominence of sports betting is apparent in any contest you watch. Betting lines, odds, favorites, point spreads, and over/unders frequently accompany virtually every televised sporting contest. With so much publicity on the subject of sports betting and the fact that it occurs on a large scale, with various outlets estimating the size of the U.S. sports betting industry to be anywhere from $60 Billion to $150 Billion, continued prohibition is illogical. Last week, the Supreme Court of the United States paved the way to end the prohibition on sports betting by holding in Murphy v. NCAA that the 1992 Professional and Amateur Sports Protection Act was unconstitutional.

While prohibition has largely failed in American history whether one considers alcohol, marijuana, or gambling, blanket repeal without any regulation is not the solution and ignores valid concerns. Addiction is a serious public health crisis. Any substance or activity that has the potential for abuse or addiction should be closely monitored to ensure that we do not swap one problem for another. While prohibition has certainly been a failure and has caused countless unintended other negative consequences, an overcorrection to legalization without any restrictions could be equally damaging. There is plenty of room to compromise in the middle.

While the issues of legalization of recreational marijuana and sports betting are separate debates, they are held together by the common thread of the seemingly imminent repeal of these longstanding prohibitions. As NBA Commissioner Adam Silver noted in his 2014 op-ed for the New York Times, “I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.”

Entrepreneurs rightfully see a new opportunity to develop a business in these spaces. The specifics of what the regulatory environment will look like are unknown. However, with this much potential money at stake, the governmental oversight in these fields is sure to be extensive—and rightfully so. The concerns of the critics are legitimate. Protecting the integrity of the game, combating addiction, avoiding exposure to children are all legitimate concerns and noble to advocate for. There is a middle ground that can be found to create new and exciting opportunities for entrepreneurs, consumers, sports fans, and Americans at large, as each industry stands to generate significant tax revenue for public benefit.

If you’re an entrepreneur looking to navigate the complicated regulatory legal framework of the marijuana or sports betting industry, you need a team of trusted experts on your side. Attorney John W. Fraser and the rest of the team at Grewal Law PLLC have a track record of helping businesses navigate difficult regulatory environments. If you’re interested in entering either of these spaces, contact Grewal Law PLLC today at (888) 211-5798.

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