On May 19th, New Jersey state senator Ray Lesniak announced that he was preparing a bill to allow sports betting at the state’s racetracks and casinos, in spite of the fact that it is not technically legal and could not be regulated. This is another logical step in the big sports betting battle which started back in 2012 and will determin the legal status of sports betting in New Jersey and possibly across the entire U.S.
Lesniak’s action is based on a remark made by U.S. Attorney Paul Fishman last June. At the Third Circuit court in Philadelphia, Fishman, representing the federal government, argued that the Professional Amateur Sports Protection Act of 1992 (PASPA), which stops most states from allowing sports betting, is not an example of “commandeering” rule of state conduct. He said that the state of New Jersey could, if it chose to, take no action to stop betting shops from running such a business. Fishman said that non-regulation would be a bad idea, but it is something not prohibited by PASPA.
Lesniak’s move is a response to the current situation in the lawsuit between the Department of Justice (DOJ), supported by the major sports leagues, and New Jersey governor Chris Christe. After losing his case in the lower courts, Christie is appealing to the U.S. Supreme Court to overturn the most recent ruling. If the court decides not to hear the case, the plan is for New Jersey to introduce the above-mentioned bill.
The Professional Amateur Sports Protection Act of 1992 (PASPA), also referred to as the Bradley bill, makes it illegal to bet on professional and amateur sporting events. The act does not apply to Nevada, Oregon, Montana, and Delaware, because these states had some form of sports betting between 1976 and 1990. PASPA allows these states to continue to provide sports betting in the exact form it existed during that period. New Jersey had the additional right to legalize sports betting within a year of PASPA enactment, but it failed to do so. Pari-mutuel animal racing and jai-alai are also excepted from this law.
Since 1992, there have been several challenges to PASPA. The first, in 2009, when the Delaware state government attempted to legalize single-game sports betting in addition to its originally PASPA-approved lottery parlay. Parlay is a “cumulative series of bets in which winnings accruing from each transaction are used as a stake for a further bet.” (Oxford Dictionaries) This kind of betting scheme is similar to a lottery in that it provides a small chance to win a large prize. Single-game betting, on the other hand, is a more conventional type of sports betting, with better odds but smaller winnings.
The attempt by the Delaware government to legalize single-game sports betting was met with hostility from the the National Football League (NFL), the National Basketball Association (NBA), Major League Baseball (MLB), the National Hockey League (NHL), and the National Collegiate Athletic Association (NCAA). After several lawsuits, the Third Circuit Court’s final ruling was that “[b]ecause single-game betting was not ‘conducted’ by Delaware between 1976 and 1990, such betting is beyond the scope of the exception in [section] 3704(a)(1) of PASPA and thus prohibited under the statute’s plain language.” (Muehle, 2012) This was unfortunate for Delaware, as the state was expecting to raise between $22 million and $30 million annually in state revenue from sports betting tax and increases in related betting and entertainment.
The second challenge to PASPA was by a private citizen of New Jersey, claiming that PASPA violated Tenth Amendment of the Constitution. The case was dismissed on the grounds that the plaintiff lacked standing.
The third challenge to PASPA was by Interactive Media Entertainment and Gaming Association (iMEGA), New Jersey state senator Lesniak, and the New Jersey horse-racing industry, with Eric Holder, the United States Attorney General, as defendant. The plantiffs claimed that PASPA violated the First, Fifth, Tenth, Eleventh, and Fourteenth Amendments of the Constitution, in addition to the Commerce Clause and the Equal Protection Clause. PASPA was said to violate the Tenth Amendment by depriving individual states of the right to raise revenue as they wished, namely through authorizing sports betting. The court dismissed the case, holding that the plaintiffs lacked standing, additionally noting that the Tenth Amendment claim could only be made by a state, and that New Jersey was not a party.
The current lawsuit between New Jersey governor Chris Christie and all major sports leagues, plus the NCAA, began in November of 2011 with the enactment of a bill by the New Jersey legislature that legalized sports betting, in any form, at all sporting events in New Jersey. The bill said it would take effect once PASPA was no longer in effect. Instead of challenging PASPA in court, Christie decided to just implement sports gaming in the fall of 2012. However, he was stopped when the major sports leagues sued him in federal court.
The biggest argument against PASPA is that it is unconstitutional, and specifically that it violates th Tenth Amendment, the Eleventh Amendment, and the Commerce Clause.
The Tenth Amendment states that “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” New Jersey may argue that PASPA violates the Tenth Amendment by forcing the state to prohibit sports betting, which takes away the state’s right to generate additional tax revenue.
The Supreme Court has recently developed an anti-commandeering rule, which clarifies the meaning of the Tenth Amendment. Instead of outlawing any intervention of Federal government in State affairs other than what is specified in the Constitution, the rule prohibits pressure from the federal government on the states to implement any particular legislation. This is the rule that senator Lesniak announced he intends to take advantage of. The question is whether PASPA forces states toward some particular action (unconstituional) or merely restricts it from some action (constitutional). Opponents of PASPA argue that it imposes on the state the requirement to comply with its provisions and ban sports betting. Proponents of PASPA argue that it merely prohibits states from passing legislation concerning sports gambling.
The Eleventh Amendment states that none of the United States can be sued by citizens of another state. There are several exceptions: a state official can be sued if the state acts unconstitutionally, if the state gives express permission to being sued, or if Congress has taken away the state immunity for a valid reason. PASPA allows a sports organization to seek injunctive relief against a state that allows sports betting, which does appear legal based on prior Supreme Court rulings.
The Commerce Clause states that Congress can regulate commerce among several states, with Indian Tribes, and foreign nations. Opponents of PASPA argue that sports gambling does not fall under the definition of commerce liable for regulation under the commerce clause, which is the sale of goods across state lines with the use of channels of interstate commerce such as roads and waters.
However, a broader interpretation of the Commerce Clause, an interpretation that is common today, implies that Congress may regulate an intrastate activity if it believes that this activity will have substantial impact on interstate commerce. In 1992 Congress found that sports gambling, in case it were legal, would be likely to quickly spread across the whole nation. This would have a substantial influence on interstate commerce. Therefore the challenge stating that PASPA violates the Commerce Clause is likely to fail.
The argument that if PASPA was repealed, sports gambling would quickly spread all over U.S., is questionable. There are several significant constraints to sports gambling expansion, other than PASPA, which are likely to keep its growth in check. First, in order for legal sports betting to take place, state has to explicitly allow it by passing a law to legalize it. If PASPA was no longer in place, some of the states including Delaware New Jersey, Missouri, Rhode Island, Iowa, and California, would indeed be likely to become hosts of legalized sports betting. But other states could be much more resistant.
There are a number of political, social, statutory, constitutional, and procedural obstacles that could slow or stop the spread of sports gambling in the U.S. For example, professional and amateur sports leagues can have substantial influence on this issue. They can refuse to organize sports tournaments in states where sports betting is legalized. For example, in 2005, Oregon eliminated its sports lottery in order to attract NCAA tournaments to the state. Delaware, on the other hand, chose to approve sports betting in 2009 in spite of pressure from NCAA. So the repeal or invalidation of PASPA would mean states would face a tradeoff between having additional sport tournaments and legalizing state-approved sports betting.
Note: Part 2, Public Policy Issues
Sources:
Brennan, J. (2014). “NJ Sen. Lesniak to craft sports betting bill for racetracks, casinos.”
Meer, E. (2012). “The Professional and Amateur Sports Protection Act (PASPA): A Bad Bet for the States”
Muehle, M. (2012). “Paving the Way for Legalized Sports Gambling”
