A National Obsession: Are March Madness Office Pools Legal?

Billions of dollars are wagered in office betting pools each year, which are technically illegal but usually tolerated.

March Madness is far and away the largest sportsbetting event in the United States. Roughly $12 billion dollars are wagered annually on the tournament, making it the “undisputed biggest betting month of the year.” Despite this huge number, only a tiny fraction is placed with Las Vegas bookmakers: roughly $100 million. This is dwarfed by the $3 billion Americans wagered in informal office pools.

These pools aren’t just for basketball fans or hardcore gamblers. In fact, the majority of participants don’t regularly watch basketball or bet on sports. The activity is more about social interaction. It has been estimated that everywhere from 25 to 45 percent of full-time employees in the US have participated in an office pool.

What is an office pool?

In 1992 American gambling laws were revised with the passing of the Professional and Amateur Sports Protection Act, which outlawed betting in all but four states: Nevada, Delaware, Montana and Oregon. Because of a legislative quirk, Nevada is the only state in which bookies can legally take bets on basketball games. Most Americans are unwilling or unable to trek to Vegas to place bets each March, so most participate in office pools.

An office pool is an informal, unregulated betting relationship usually organized among colleagues, friends or family. Bets usually range from $20 to $100, and the participant with the best bracket takes home the cash. While the wagers are typically small they add up to $3 billion because so many people participate. Time estimated that 10 percent of the population (more than 30 million people) participated in an office pool in 2011.

Is your March Madness office pool legal?

• An estimated $3 billion are wagered annually on office pools

• An office pool is informal, unregulated, untaxed sportsbetting arrangement between friends, family or colleagues

• Participation in or hosting office pools is illegal, but the authorities have only shown interest in pools involving millions of dollars

Technically speaking, is betting in an March Madness office pool legal? No, as it represents an unregulated and untaxed gambling activity. There have been a few cases of federal officials going after office pools. In 2006 a New York City bar called Jody’s Club Forest held a pool in which the payout reached $1.5 million. This number was big enough to draw the attention of the authorities, who charged bar owner Jody Haggerty with tax evasion. He was forced to hand over the money he made hosting the pool, but was never charged in violation of any gambling laws.

Aside from a few big-money, high-profile cases, the authorities have shown no interest in combating the activity. There have been no cases of arrests or charges against participants or organizers of small office pools. The money involved in each pool is small, participation is generally seen as harmless, and Vegas bookmakers have not invested much in lobbying the authorities to crack down on office pools.

Some states such as Arizona have “social gambling” laws which allow the activity if all of the money is distributed at the end, all bettors are legal adults, and all bettors come from the state in which the pool is hosted.

Online pools may face crackdown

While the authorities largely turn a blind eye to the activity, there are some indications that the federal government may go after online office pools. In recent years countless pools have popped up on social media sites like Facebook. These are clearly illegal, as the federal government passed laws in 2003 and 2006 prohibiting most forms of online gambling. Even in Nevada, legal March Madness betting cannot be held online. In addition, social media pools are likely to attract bettors from across state lines, and currently any forms of inter-state gambling violate federal law.

Ross Rice, a Federal Bureau of Investigation spokesman, had this to say: “It is fair to say this raises questions… There could be a violation if there’s a payout and if the operators take a cut.” The legal case is straightforward, so the question is whether the authorities are willing to expend resources going after online pools. Our prediction? In most cases, no. But if enough people sign up and the pots get big enough, law enforcement may start to pay attention.

Should you participate?

Despite the clear illegality of office pools, you should absolutely participate if interested. They are a great way to have fun with friends, family and colleagues without risking large amounts of money. History shows that the chances of you facing any repercussions are extremely small. The few cases we’ve found involve millions of dollars; most office pools involve hundreds. So feel free to join the millions of Americans who fill out a bracket and lay down a small wager.