Earlier in the century, betting had been made illegal after a number of race-fixing scandals. When the depression hit, some states decided to legalize betting on races as a source of state income. The states would gain revenue from the sport by imposing a steep tax on the sport. Racing benefited by this because the incentive of legalized betting on the sport would bring more people to it (revitalizing racing which had been in decline since betting had been made illegal earlier).
During the 30s, people would spend their free time at the race tracks, baseball games (it would be during the 30s and 40s that it became known as the "national pastime"), or at the movie theaters.
Illegal gambling in the 30s would consist of much of the same as had been seen during the 1920s: at speak-easies where one could also obtain alcohol (which had also been outlawed earlier in the century); from con-artists on the streets and back-allies; and from private betting between average "Joe Citizens."
Various criminal groups (most notably in the New York and in Chicago mobs and gangs) would organize the running of illegal gambling and availablity of illegal alcohol. These groups would profit greatly from the sale of alcohol and revenues from gambling and these profits would translate into power and power struggles between opposing groups. The drama between the oppossing criminal groups and between the criminal groups and the police and FBI would translate into the stuff of gangster and film noir movies, as well as drama for the masses in the newspapers.
The inspiration of legalizing betting on races for the purpose of raising state revenue would later inspire many states to create state lotteries. The increase in mass air transit in the coming decades would make Nevada a more viable place for gambling. Many states would also permit casinos in their land as long as they were hosted on river boats and barges set within rivers or off-shore. By the end of the 1990s and the use of the internet, online gambling would become yet another venue for betting. All these changes that would come in the following decades would make the 1930s a unique time for the character of gambling -- no time was like it before, and gambling would change dramatically from all time afterwards. However, all the change that would come had many of its roots in the depression era 1930s.