The future of sports betting: Is PASPA a thing of the past?

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The number one sport to watch is also the number one sport to bet on. That makes sense. What makes even more sense is that the number one sport to watch finds itself at the top because it is the number one sport to gamble on. It is estimated that $90 billion will be wagered on NFL and college football games this season. Only two percent of those bets will be placed legally. The rest will change hands underground, supported by a myriad of online bookkeeper services.

Sports betting in the United States is currently illegal in all states except for Nevada, Montana, Oregon, and Delaware. In most of Europe, bookkeeping is a lawful profession; it is regulated but not criminalized. The clear majority of the United States have been prohibited from legalizing and regulating sports betting. Under the Professional and Amateur Sports Protection Act (PASPA), which took effect on January 1, 1993, states are forced to keep in place their sports betting laws as they were when the Act was passed.

Back in 2011, New Jersey recognized how much revenue the State was missing out on due to its prohibition on sports betting. As stated above, sports betting on football alone is a $100 billion market. In an attempt to take advantage of this largely untapped marketplace, the State sought to create its own regulatory scheme allowing for sports betting. At odds with PASPA, the state filed a lawsuit seeking to overturn the Act and allow its State legislature to legislate according to the wants and needs of its constituents.

Congress could simply outlaw sports betting pursuant to the power granted to it under the Commerce Clause. There are three broad categories of activity which congress may regulate pursuant to its commerce power: (1) channels of interstate commerce; (2) instrumentalities of interstate commerce, or persons or things in interstate commerce; and (3) activities having a substantial relation to interstate commerce or, activities substantially affecting interstate commerce.

The Supreme Court in United States v. Lopez stated, “where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained…” Here, Congress could have simply passed a version of PASPA that prohibited individuals from sports betting.

The Act regulates the manner in which states may regulate their own private parties with regard to sports betting.

PASPA does not directly regulate sports betting, though. The Act regulates the manner in which states may regulate their own private parties with regard to sports betting. This distinction may be an important one. Under what is known as the “anti-commandeering doctrine,” Congress may not require that states prohibit certain activities, despite Congress being authorized to outright prohibit those activities on its own.

The Supreme Court’s 1992 decision in the case of United States v. New York gave us the anti-commandeering doctrine. In New York, at issue was the so-called “take title” provision of the Low-Level Radioactive Waste Policy Amendments Act of 1985. The take title provision required that states either enact legislation providing for the disposal of radioactive waste generated within their borders, or take title to and possession of the waste.

The provision effectively required the states to either pass legislation pursuant to Congress’ direction or implement their own administrative solution through lawmaking. The take title provision was ultimately invalidated and the remainder of the Act was left in place.

Justice O’Connor delivered the majority opinion and eloquently explained the policy behind the decision. Towards the close of the opinion, Justice O’Connor explained that the Framers of our Constitution, in an effort to create a stronger central government, chose a framework that conferred upon Congress the power to regulate individuals, not States. Citing decisions in both FERC v. Mississippi and Hodel v. Virginia Surface Mining, the opinion states an understanding that “where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.”

There is no doubt that sports betting is a commercial activity for purposes of applying to Congress’ Commerce power. But, Congress has to regulate that activity directly, not through the regulation of State governments.

The anti-commandeering doctrine was reinforced and expanded 5 years after the New York decision in Printz v. United States. At issue in Printz was a certain provision of the Brady Handgun Violence Prevention Act which commanded that State and local law enforcement officials conduct background checks on prospective handgun purchasers. The Printz court held that Congress cannot circumvent the prohibition established in New York by conscripting the State’s officers directly.

Delivering the majority opinion for the Court, Justice Scalia articulated the anti-commandeering rule as it still stands today, stating, “[t]he Federal Government may neither issue directives requiring the States to address particular problems, nor command the States’s officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.”

“The State of New Jersey is challenging the Act as unconstitutional, claiming the Act’s effect of freezing the State’s sports betting laws in place has commandeered the State’s sovereignty.”

During its next term, the Supreme Court will decide whether or not PASPA is in violation of the anti-commandeering doctrine. The State of New Jersey is challenging the Act as unconstitutional, claiming the Act’s effect of freezing the State’s sports betting laws in place has commandeered the State’s sovereignty. The lawsuit, Christie v. NCAA, will likely be argued before the Supreme Court sometime this fall or winter.

If the State of the New Jersey is successful in its attempt to challenge the Act, more States may begin the process of creating a workable regulatory scheme to permit sports betting. With hundreds of billions of dollars being wagered illegally each year, many see PASPA as a clear failure.

As a result of PASPA, an underground sports betting marketplace has developed, lacking institutional safeguards, and most importantly, taxation. With so much money to be made, and with the support of most major league commissioners, many argue PASPA simply needs to go.

Another result of New Jersey’s success would be the correction of the public’s misperception of who is really at fault in the sports betting enterprise. The American Sports Betting Association, though clearly having a dog in the fight, reports that 6 out of 10 Americans and 72 percent of avid sports fans want to see an end to the ban on sports betting. Many of these people are likely misguided by PASPA’s effects and believe the States in which they reside are making the choice to keep their bans on sports betting.

PASPA’s “freezing” effect on State sports betting laws effectively passes off accountability to the States. The Federal government is not necessarily banning sports betting—the States are (pursuant to a Federal regulation). This passing of accountability works to an unfair disadvantage in States whose voters may misplace their concern or outrage.

When the Federal government can enact laws that control the manner in which States regulate their electorate, the very idea of federalism and dual sovereignty are affronted. Not only do the laws constrain the States’ sovereignty, but they also paint a picture in which State and local governments are the “bad guys” who prohibit activities, all while the Federal government escapes without accountability. Congress could have banned sports betting altogether, but instead it devised a regulatory scheme in which State officials, and not Federal officials, would face the brunt of any public backlash.