From the Washington Post:

The roughly $80 million wagered on the NCAA tournament in Las Vegas represents a minute fraction of the total betting on college basketball's championship, dwarfed by the estimated $2.5 billion staked with neighborhood bookmakers, in office pools and, increasingly, over the Internet with offshore sports books based in the Caribbean and Costa Rica. The betting in Nevada's sports books also is the only legal way to bet on the tournament. And periodically, it's targeted by members of Congress, the NCAA and college basketball's most esteemed coaches, who feel it should be outlawed.

Betting on college sports threatens the integrity of the games, in the view of Bill Saum, the NCAA's director of agent, gambling and amateurism activities. At worst, it exposes college athletes to pressure from criminal elements conspiring to fix the outcome of games. At its most benign, it sends mixed signals about the propriety of gambling, whether on sports, slots, poker or pool.

The decision to shave points comes down to a balancing of its marginal benefits and marginal costs. What drives the fear of folks like Bill Saum is the lack of salaries paid to players - salaries commensurate with the revenues generated by their games. The payment received by a player who shaved points is a component of the marginal benefit of point shaving. In addition to the penalties already in existence (jail time, etc) if colleges paid each player, say, $15,000 a year, they increase the marginal costs of point shaving (if a player shaves points and gets caught, in addition to the other penalties already out there, he will lose his $15,000 yearly salary). It would also make it more expensive for gamblers to have players shave points. Moreover, since players would be more likely to police themselves, some of the resources put towards monitoring gambling activities could be put to other uses.

Outlawing the gambling is not the answer. Doing so will most likely just drive it offshore and underground, which could very well make the problem worse.