May 14 (Bloomberg) -- Delaware became the first state east of the Mississippi River to legalize sports betting in a move designed to cut the state’s budget deficit.

Governor Jack Markell signed the bill approving the change today in a ceremony at the oldest of Delaware’s three horse tracks. By September those so-called racinos will add sports wagering to their 8,200 slot machines and horse-betting operations that have been legal in Delaware since 1995.

“There is tremendous interest in the sports lottery throughout our region and nationally.” Markell, a Democrat, said today.

Delaware joins Nevada as the only states to allow sports betting. Two other states, Oregon and Montana, have the option of introducing betting because they are exempt from a 1992 federal ban.

Delaware expects to cuts its $778 million budget deficit by more than $50 million through sports betting and an increase in the state’s share of slot-machine money.

Markell proposed allowing sports wagering to help plug a deficit in his $3.2 billion budget for the fiscal year beginning July 1. The plan, announced in March, also calls for $331 million in spending cuts, higher taxes on cigarettes and alcohol and increased income taxes on earnings exceeding $60,000 annually.

Types of Bets

The type of bets allowed hasn’t yet been determined. Under the state’s constitution, only lottery-style games are legal. In the past that has been interpreted to mean players must choose more than one outcome with each bet by choosing a winner for more than one game.

Later this month lawyers for Markell will appear before the state Supreme Court for arguments on exactly what Delaware’s Constitution will allow, Markell’s spokesman Joe Rogalsky said.

When Delaware first tried sports betting in the 1970s, players were required to bet on the outcomes of several games. Gambling consultant Joseph Weinert, with Spectrum Gaming Group, said players prefer to bet on a single game because it gives them a better chance to win.

Once the Supreme Court gives the state advice on what is legal, Delaware will search for a vendor to design and run a sports-betting program that sets the odds for all three racinos, Rogalsky said.

The law excludes college games in which any Delaware college or university plays and sets a minimum age of 21.

A lawmaker in neighboring New Jersey has filed a federal lawsuit seeking to overturn the federal ban, which exempts sports betting in Nevada, Delaware, Oregon and Montana.

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

Last Updated: May 14, 2009 13:07 EDT