How New Jersey could pave the way for Vegas style sports betting in other states

The result of the rehearing to determine whether New Jersey’s Sports Wagering Act is legal may affect whether other states will propose laws to regulate and permit wagering on professional and collegiate sport games across the nation.

Photo by Ethan Miller (Getty Images).

Las Vegas, Nevada is everyone’s favorite sin city for one reason or another.  Among the reasons why the masses flock to Las Vegas is that you can make a quick buck by betting on professional sports without getting hassled by the federal government.

Eighty-five percent of adults will bet on professional sports at one point during their lives.

Many throughout the United States make phone calls or engage with bookies online to place a bet on professional sports.  Eighty-five percent of adults will bet on professional sports at one point during their lives.  Four billion dollars is spent annually on sports related wagers in Las Vegas alone.  However, a decision from a case heard last Wednesday could end paving the way for other states to implement sports gambling framework similar to Nevada’s.

On February 17, 2016, the United States Court of Appeals for the Third Circuit held a rehearing en banc regarding the case National Collegiate Athletic Association  v. Governor of New Jersey.  The issue is whether New Jersey’s Sports Wagering Act violates the Professional Amateur Sports Protection Act (PASPA).

Passed in 1992, PASPA, is a federal law which prohibits states from offering any form of sports betting within its borders.  The law provided exceptions for Nevada, Delaware, Montana, and Oregon.  However, sports gambling in Delaware and Oregon must be conducted in the form of a parlay.  A parlay is a bet that combines multiple individual wagers and winning is dependent on winning all of the individual wagers together.  The states were excepted because they were grandfathered in at the passing of PASPA.  PASPA includes a remedial provision that permits any sports organizations whose games are or will be the subject of sports gambling to bring an action to enjoin the state sanctioned sports betting.

Five sports leagues initiated this action [against New Jersey] using the remedial provision when they sued to enjoin the law from taking effect.

Five sports leagues initiated this action using the remedial provision when they sued to enjoin the law from taking effect.   The leagues are the National Football League (NFL), National Collegiate Athletic Association (NCAA), National Basketball Association (NBA), National Hockey League (NHL), and Major League Baseball (MLB).   The defendants include several key politicians responsible for passing the law including current New Jersey  Director of the Division of Gaming Enforcement, David Rebuck, and Chris Christie, former Republican Presidential Candidate and current Governor of New Jersey.   Both the District Court and the Court of Appeals sided with the plaintiffs.  Defendants applied for, and were granted, a rehearing en banc (a hearing with a twelve judge panel).

The granting of a rehearing excited many in New Jersey because of the extensive history the state has had in attempting to implement legal sports betting. Originally, New Jersey challenged the Constitutionality of PASPA in the first National Collegiate Athletic Association  v. Governor of New Jersey (Christie I) alleging that the law violated states’ rights.  New Jersey lost in a 2-1 decision.

The case was not a total loss, however, as the ruling made clear that the state is not prohibited from repealing its own laws banning sports betting.  The court held that nothing in “PASPA requires that the states keep any law in place.  All that is prohibited is the issuance of gambling licenses or the affirmative authorization by law of gambling schemes.”  Repealing a law that prohibits a banned act is permissible, but authorizing a sports scheme out of law violates PASPA.

After voters approved the sports-wagering constitutional amendment, the New Jersey Legislature enacted … the Sports Wagering Act (SWA), in 2014, which provided for regulated sports wagering at New Jersey’s casinos.

New Jersey’s Constitution and state laws used to prohibit all forms of sports betting but the state decided to repeal and amend these laws.   After voters approved the sports-wagering constitutional amendment, the New Jersey Legislature enacted SB 2460, the Sports Wagering Act (SWA), in 2014, which provided for regulated sports wagering at New Jersey’s casinos.  The SWA established a comprehensive regulatory scheme, requiring licenses for operators and individual employees, extensive documentation, minimum cash reserves, and Division of Gaming Enforcement access to security and surveillance systems.

New Jersey, well known for gambling due to Atlantic City, has seen a decline in the state’s gambling sector.  Two casinos have shut down in Atlantic City in the last couple of years.  As the gambling industry declined, legislators decided to take action in order to save the industry by enacting the law.   In addition, a public referendum was conducted to gauge the support of the state.

The results showed sixty-four percent supported amending the state Constitution to permit sports betting that would bring in significant revenue.  The only restrictions on sports betting applied to New Jersey collegiate sports and events occurring in New Jersey.

Many also consider the PASPA to be outdated and hypocritical given the rise in popularity of fantasy sports.

New Jersey Congressmen, Frank Pallone and Frank LoBiando, feel that the 2015 Appellate Court judgment “robbed New Jersey of the opportunity to benefit for the billion dollar sports betting industry.”  Many also consider the PASPA to be outdated and hypocritical given the rise in popularity of fantasy sports.  The fact is that sports organizations have some skin in the game since most organizations, particularly the MLB and NFL, are directly invested in fantasy sports companies such as Fanduel and Draft Kings.

Opponents of sports betting claim that legalization may create more addicts and hurt the integrity of professional and amateur sports.  Pallone likens these arguments to the alcohol prohibitionists of the 1920’s.  He argues that like the prohibition, those who wish to engage in sports gambling must do so illegally.  This often occurs through organized crime.  The validity of the law would deter individuals from engaging with certain criminal elements.

After the law was passed, the major professional and amateur sports organizations brought suit alleging that the SWA violated PASPA because the SWA was legislation that authorized a sports gambling scheme.    The original hearing was argued March 17, 2015 and decided on August 25, 2015.  The 2015 Appellate court affirmed the District Court’s award of summary judgment to the plaintiffs declaring the SWA in violation of PASPA.  As a result of the rehearing however, the 2015 decision has been vacated as a matter of procedure.

 The defendants and supporters of sports betting did not leave the hearing confident last Wednesday.   It was a hot bench.  According to Daniel Wallach, a sports and gaming attorney with Becker & Poliakoff out of Florida, the judges seemed unconvinced by the state’s arguments.  Wallach also stated that coming into trial the state had a “fifty percent chance at winning but by the end, only a twenty to thirty percent chance.”  The decision is not expected for three or five months.  In order for the state to prevail, New Jersey needs a 7-5 result in their favor or better.  If the court splits 6-6, the court will simply re-institute the holding from the 2015 hearing.

If, however, the Third Circuit reverses the holding and determines the SWA is legal, many more states will likely create legislation like the SWA in New Jersey.

New Jersey had to show that the SWA was not legislation that authorized a sports gambling scheme.  This is a difficult task given the SWA explicitly does just that – authorizes a sports gambling scheme.   The crux of the state’s argument relied on characterizing the SWA as a repeal of law instead of an authorization of law.  The state attempted this argument given the holding in Christie 1, where the court held a repeal of a law that banned an act specified in PASPA does not violate PASPA.

Given the confusing nature of both of these cases, some have speculated that the court granted a rehearing in order to better harmonize the law surrounding the cases and not necessarily to overturn the decision from 2015.

If however, the Third Circuit reverses the holding and determines the SWA is legal, many more states will likely create legislation like the SWA in New Jersey.  Some states already have a bill written and are just waiting for the repeal of PASPA.  A couple of weeks ago, Pennsylvania passed a resolution asking Congress to repeal PASPA.

It all really depends on the court’s rationale and reasoning.  If the court bases a reversal under the “repeal theory” asserted by the defendants, then states will use the structure and diction of the law as a blueprint for sports gambling legislation.   If not, the court could choose an entirely different approach to analyzing laws that conflict with PASPA.  Until the ruling comes out in the next few months, Joe Shmoes will have to continue using Vegas to place sports bets.

Johnny Hutchens, Senior Staff Writer Emeritus
About Johnny Hutchens, Senior Staff Writer Emeritus (19 Articles)
Johnny Hutchens is a 2017 graduate of Campbell Law School and served as a Senior Staff Writer for the Campbell Law Observer. He is originally from Charlotte and graduated from the University of South Carolina in 2012 with a Bachelor of Arts in Political Science. The summer following his first year, he interned as a research assistant for Professor Collins in the Legal Research and Writing department at Campbell.
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