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New Jersey’s Rush For Sports Betting Must Blast Through Federal Courts

Federal injunction will test the limits of the Commerce Clause and Tenth Amendment

Federal law prohibits betting on sports in all of the United States, with a few narrow exceptions. Be that as it may, several state governments now want to license brick-and-mortar venues to offer wagering on sports. Sooner or later, the controversy will have to be tried in federal court.

US Congress enacted the Professional and Amateur Sports Protection Act (PASPA) in 1992. At that time, America’s commercial and Indian gaming industries were in their youth but undergoing rapid expansion. It had once been the case that Nevada and New Jersey were the only states with licensed casinos, but the years 1988-1992 saw eight new states enact gaming laws and several more begin preparations. Only the licensed casinos in Nevada offered direct sports wagering, but New Jersey was flirting with the idea.

Meanwhile American sports leagues take the position that wagering should be banned because it harms the integrity of games. Sports leagues wanted to ensure that a wave of sports betting expansion would not follow the wave of casino expansion.

Because Nevada had already authorized sports wagering prior to 1992, PASPA’s drafters carved out an exception allowing the state to continue regulating this activity. Exceptions were also carved out to enable the continuation of sports lotteries for the handful of states that ran them. Every other state was given a one-year window of opportunity in which to obtain an exception, but none accepted the offer.

The window closed 19 years ago, but New Jersey never stopped flirting with the prospect of legalized sports betting. Today the state government is as serious as it gets. In November 2011 the people of New Jersey voted to approve a referendum to legalize sports betting. The legislature immediately passed an enabling act, and just last week Governor Christie confirmed the state will proceed.

“Am I expecting there may be legal action taken against us to try to prevent it? Yes,” Governor Christie said at a press conference two weeks ago (AP). “But I have every confidence we’re going to be successful.”

Ultimately the matter must be settled by the federal courts. New Jersey Senator Raymond Lesniak tried to initiate the process last year but the case was dismissed for lack of standing because Lesniak did not show actual or imminent harm. The appropriate timing for the case will not occur until a licensed New Jersey operator finally takes the bold step of processing a wager in violation of PASPA. That event will trigger a requirement that the US Attorney General seek an injunction against offenders.

Constitutional Questions

New Jersey will argue that PASPA should be struck down as a violation of the US Constitution. New Jersey will rely on the 10th Amendment, which gives to state governments all powers not reserved for the federal government. States’ power is generally construed as a plenary police authority to provide for the health, safety, and welfare of people located within their territories. Traditionally gambling fits within the states’ zone of authority, at least to the extent activities can be kept within the state.

The counter-argument is that Congress also has jurisdiction over sports betting by way of the Commerce Power, which gives the federal government authority over activities which take place in interstate commerce. Sports wagering is a massive industry which exerts a substantial effect on interstate commerce, and the underlying sports themselves are inherently interstate organizations. Hence a federal court is likely to find that the federal government does have power to make and enforce laws related to sports wagering.

New Jersey may still have the prospect of challenging PASPA as an invalid use of the Commerce Power because of its discriminatory preference for Nevada. The great weight of precedence seems to favor the federal government on this point though. Supreme Court case law indicates that Congress may, in its discretion, regulate the states unevenly when using the Commerce Power. In other words, there is no requirement that a law treat the states uniformly. To prevail, New Jersey may have to convince the Court to reinterpret the Commerce Clause as requiring some sort of uniformity standard which PASPA offends.

The fight could last years

New Jersey is still probably months from processing its first wager, and a final judgment on PASPA could be years away. But the movement toward sports betting will continue in other ways. The legislatures of California and New York are already preparing their own laws to legalize sports betting. And of course many countries around the world have fostered healthy relationships between betting and sports– much like the US has already seen with horse racing.

What is happening now is the beginning of a chipping away at the general prohibition on sports betting. It could take many years, but political pressure will continue to mount. Eventually sports leagues’ resistance will become a bargaining chip that ensures future Congressional legislation will reserve for the leagues certain rights and revenues derived from wagering on their games.

About the Author: Bradley Vallerius is an Illinois attorney specializing in gaming and technology issues. He assists clients with licensing and regulatory compliance of video gaming machines in Southern Illinois. Visit his website at www.ForTheBettorGood.com.

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