All Bets Are Off on the Supreme Court’s View of Sports Gambling

On Behalf of | Apr 26, 2018 | Firm News

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Sports gambling has seen a rapid increase in popularity over the years. Companies such as Draft Kings make millions of dollars every year through online fantasy sports gambling, and states want their cut. Recently the State of New Jersey repealed a law that made it illegal for casinos and racetracks within the state to allow gambling based on sporting events. But sports gambling still runs afoul of a federal law called the Professional and Amateur Sports Protection Act (PASPA), which prohibits sports gambling everywhere except a few states – Delaware, Nevada, Oregon, and Montana. Right after the New Jersey repeal, professional sports leagues including the NCAA, NFL, and NBA sued New Jersey to prohibit sports gambling under PAPSA. The Supreme Court heard oral argument in the case, Murphy v. NCAA in the Fall of 2017, and should rule in the Spring of 2018.

This case has a long history. In 2011, New Jersey voters overwhelmingly passed a referendum to allow sports gambling within the state, and legislation was enacted the referendum was passed in early 2012. The five sports leagues, the NCAA, NFL, NBA, MLB, and NHL (the “leagues”) spoke out vehemently about sports gambling and the New Jersey Law. The baseball commissioner went on record to say that sports gambling is “corruption.” The leagues sued New Jersey to stop the referendum claiming that the new legislation violated PAPSA. The leagues challenged the decision to repeal the law as a de facto authorization to condone sports gambling and the leagues have been successful up to this point. The most recent ruling of the US. Third Circuit Court of Appeals upheld the trial Court’s ruling that New Jersey’s repeal violated PAPSA.

However, three years later the leagues had a change of heart. By 2015 the leagues had seen the enormous money-making potential of sports gambling. The NBA’s commissioner wrote an op-ed piece in the New York Times advocating for Congress to legalize and regulate sports gambling so that it can be “brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.” The NBA proposed a 1% “integrity fee” on all wagers. The integrity fee would amount to 20-29% of the total revenue from sports gambling, according to the CEO of the American Gambling Association.

So why are the leagues still pursuing the case. The issue for the leagues now revolves around who would regulate sports gambling; the federal government or the states. The leagues have been involved in lobbying Congress before and have some clout to influence federal regulation. In state legislatures, however, the lobbying effectiveness of the gambling industry has been strong, perhaps stronger than the leagues. State legislatures would also come up with several different approaches, few of which would likely involve the league’s desired 1% integrity fee. On the financial side of the case, it comes down to a turf war.

The legal issue in the sports gambling case is 10th Amendment, which reserves all powers not expressly delegated to the federal government or prohibited to the states are left up to the states. Here, New Jersey argues that it is not authorizing sports gambling, but only repealing a law that prohibits it. Barring it from repealing a law is the same as unconstitutionally forcing the state to enforce federal regulation when no state regulation exists to prohibit a behavior. The leagues, on the other hand, argue that repealing an prohibition is the same as an authorization, and that New Jersey should not be allowed to claim that a double negative does not equal a positive.

This case has large implications for the 10th amendment, which is also being tested this year by sanctuary cities that do not want to enforce Trump’s immigration agenda. If New Jersey wins, then states could theoretically circumvent federal government regulations merely by repealing prohibitions that are in line with federal law. If the leagues win, then the federal government could armchair legislate simply by disallowing states from changing their laws in a way that would conflict with federal regulations.