Sports gambling isn't a federal crime. After all, why can you go to Vegas and place wagers on just about any game you like? But a federal law did allow federal authorities and sports leagues to sue states for "authorizing" sports betting, and block them from doing so.
This small distinction was the statute's undoing, as the Supreme Court repealed the law, leaving it up to the states to legalize or criminalize sports betting. You can read the Court's ruling below:
Placing Bets Under PASPA
The Professional and Amateur Sports Protection Act (PASPA) made it illegal for states to "sponsor, operate, advertise, promote, license, or authorize by law or compact ... a lottery, sweepstakes, or other betting, gambling, or wagering scheme based ... on one or more competitive games in which amateur or professional athletes participate." (The law did allow four states to maintain sports gambling under "Grandfather" provisions, and while Nevada took advantage of the loophole, New Jersey did not.) But the Supreme Court ruled the law violated "anticommandeering" doctrines that prohibit the federal government from "commandeer[ing] the legislative process of the States by directly compelling them to enact and enforce a federal regulatory program."
Because states like New Jersey were simply repealing their own bans on sports betting, PASPA could not "regulate a State's exercise of its lawmaking power by prohibiting it from modifying or repealing its laws prohibiting sports gambling." Therefore, the Court ruled that the statute is unconstitutional.
The Court's decision merely opens the door for states to legalize and regulate sports betting -- not all of them will walk through it. And even those that do will need time to design regulatory schemes and structures. In the meantime, you can see the Supreme Court's reasoning in full: