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Sports gambling’s day in court

Nevada is the only state that federal law allows to have legal betting on sports.
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The Nevada gaming attorney who co-wrote the leading casebook on U.S. gambling law was deep into revisions of a coming text when the U.S. Supreme Court agreed to review the constitutionality of a 25-year-old federal statute that bans sports betting outside Nevada, scheduling a hearing for the first Monday in December.

Tony Cabot was stunned.

New Jersey Gov. Chris Christie’s attempts to allow sports betting in Atlantic City casinos had been reviewed five times by lower federal courts. All five times, the courts had sided with the NCAA and the four major pro sports leagues, who for the better part of the last 25 years have vigorously opposed any such attempts. While of intense interest to the sports industry, the matter of sports betting would not appear to be of great national interest, another factor that might compel the court to hear a case.

Though they planned an entire chapter on Christie v. NCAA, Cabot and his co-author, Drake University law professor Keith Miller, thought it unlikely that the case would make its way to the Supreme Court.

“It happens to be a gambling case, but it has nothing to do with gambling,” said Cabot, a partner in the gaming practice at law firm Lewis Roca Rothgerber Christie. “The court took this case because it wants to address states’ rights issues and this just so happens to be the vehicle they’re using to do it. I don’t think the Supreme Court cares about sports wagering at all. They just see this as a constitutional issue they need to resolve.

“The hard part is, I’m not sure of the direction they’re going with it.”

The it, as Cabot and other attorneys and legal scholars see it, is how and to what length the federal government can require states to enforce a federal law — in this case, the Professional and Amateur Sports Protection Act, which since 1992 has prohibited traditional sports betting outside Nevada. A states’ rights matter that hinges upon the Supreme Court’s interpretation of the 10th Amendment (federalism v. states rights), it is a question that reaches well beyond whether gamblers can take the Cowboys and lay the points, wading into polarizing issues such as immigration policy, marijuana regulation and gun laws.

The court almost certainly is thinking far beyond the merits and pitfalls of sports gambling, but its ruling could dramatically affect its future.

Americans gamble almost $150 billion illegally on sports each year, according to American Gaming Association estimates, dwarfing the record $4.5 billion in legal wagers handled by Nevada sports books in 2016. Sports betting proponents argue that regulation would generate about $5 billion annually in tax revenue for federal, state, local and tribal governments.

While the major pro leagues all have softened their opposition to sports betting in recent years, embracing daily fantasy and chasing sponsorship dollars from state lotteries and casinos, they most certainly oppose unregulated sports betting — in this case, wagers placed at licensed casinos, but without the oversight of state government. That is precisely what New Jersey proposes in this case, a workaround of PASPA that would require sports books to follow only the regulations that apply to most other businesses, and have them taxed only to the extent of other businesses.

Even the NBA, which raced to the front of this issue three years ago with Commissioner Adam Silver’s op-ed in support of the expansion of legal sports betting, does not want to see Christie and New Jersey prevail.

“If the court strikes down PASPA or simply agrees with what New Jersey did, the sports leagues will be hard-pressed to put the genie back in the bottle,” said Dan Wallach, a lawyer specializing in sports and gambling regulation at Becker & Poliakoff in Fort Lauderdale. “The question becomes whether [regulation] will occur under the federal framework or state by state. That’s at the heart of the Christie case. This case is all about dictating the timing and the character of the regulation. That’s why it’s so important not only to gaming, but to the sports industry.”

Arguments are scheduled for 10 a.m. Dec. 4, with each side represented by a former U.S. solicitor general, the Justice Department lawyer who argues cases before the Supreme Court for the federal government. Speaking on behalf of the NCAA and the leagues will be Paul Clement, who held the position in the George W. Bush administration. Arguing for Christie and New Jersey is Clement’s predecessor, Ted Olson. The Justice Department will present its position, largely in support of the leagues.

A ruling is expected in the spring, likely between April and June.

The Lineup
Lead attorneys for each side in the case, plus those filing briefs.

Attorneys for Petitioners 
(New Jersey Gov. Chris Christie, et al.)
COUNSEL OF RECORD: Ted Olson
FIRM: Gibson Dunn & Crutcher

Attorneys for Respondents 
(NCAA, MLB, NBA, NFL, NHL)
COUNSEL OF RECORD: Paul Clement
FIRM: Kirkland & Ellis


Other filing briefs
In support of New Jersey:
American Gaming Association; attorneys general of West Virginia and 17 other states and the governors of Kentucky, Maryland and North Dakota; Florida State University visiting law professor John Holden; U.S. Rep. Frank Pallone Jr.; European Sports Security Association; National Governors Association, National Conference of State Legislators and other groups representing local municipalities; Constitutional Law Scholars; Pacific Legal Foundation; Competitive Enterprise Foundation; Cato Institute

In support of NCAA, et al.:
U.S. Department of Justice; Stop Predatory Gambling and a coalition of 13 other religious groups and national advocacy groups; Eagle Forum Education and Legal Defense Fund (founded by lawyer and conservative activist Phyllis Scholarly)

In support of neither party:
New Sports Economy Institute; FSU law professor Ryan Rosenberg


Source: Court documents

All of this began in 2011, when New Jersey voters overwhelmingly approved a constitutional amendment that allowed state legislators to authorize sports wagering at casinos and racetracks while still barring bets on college games played in New Jersey and those involving New Jersey schools. Two months later, Christie signed into law a bill that did just that. The leagues and the NCAA quickly filed suit, arguing an obvious violation of PASPA.

New Jersey conceded its new law violated the federal sports wagering prohibition. But it argued that a federal ban exempting Nevada and two other states was unconstitutional because, among other things, it encroached upon state sovereignty and treated New Jersey differently from the grandfathered states. New Jersey lost that case in district court, then lost again on appeal.

The crux of that ruling centered on the appellate court’s assertion that PASPA does not “require or coerce the states to lift a finger” in order to abide by it, because it prohibited them from changing gambling laws rather than requiring it. The ruling also suggested that a state could either repeal its sports wagering ban or keep it in its entirety.

In 2014, New Jersey accepted that invitation. This time, it passed a bill that it positioned as a partial repeal of its prohibition of sports gambling, lifting that ban, but only at racetracks and casinos. Christie vetoed that bill, but two months later he signed a similar one. Sports wagering would be permitted at racetracks and casinos, but only with the consent of their operators, and not on college games in New Jersey or involving New Jersey schools.

Again, the leagues and the NCAA sued, arguing that the repeal served the same purpose as the 2012 law that the courts struck down. And, again, the lower court agreed with them, as did a three-judge panel of the appellate court and then the full appellate court. Still, the ruling appeared to invite another go-round, allowing that “other options may pass muster.”

While it could return a range of rulings, the court likely will start from one of three bases:

Reverse the ruling of the lower court, striking down PASPA as an unconstitutional infringement on a state’s authority to decide whether to allow sports betting and how to regulate it.

Affirm the ruling of the lower court, using the case as an opportunity to clarify what it sees as the line between federal and state authority, but still siding with the sports leagues and the NCAA on the constitutionality of PASPA.

Reverse the circuit court in part, allowing PASPA to stand, but also approving some version of the workaround that New Jersey crafted, allowing for sports wagering so long as it is not regulated by the state.

The last of those could be seen as a victory in New Jersey, but it might be the most disruptive of any option to the sports entities. In a brief filed to the court, Olson compared unregulated betting at approved New Jersey locations to “buying a cup of coffee at Starbucks … a private transaction subject only to generally applicable federal and state laws.”

“That certainly would push Congress to act a lot faster than it would be inclined to do,” said Sara Slane, senior vice president of public affairs for the American Gaming Association. “An unregulated sports betting marketplace obviously is not ideal. I get the strategy behind why they did what they did. But there may need to be some congressional action if there’s a decision that leads to unregulated sports betting.”

Fifteen states have either enacted or initiated legislation clearing the way for sports wagering if the Supreme Court allows it. Twenty have filed briefs in support of New Jersey.

In his brief filed with the court, Florida State University visiting scholar John Holden supported New Jersey’s contention. A law professor in Canada, Holden came to the states to study the Christie case more closely, fascinated by a law that not only barred all but one state from offering traditional sports wagering, but conferred a large measure of enforcement power upon the leagues.

“If New Jersey wins in some sort of meaningful way beyond a narrow interpretation that limits the result to New Jersey, I would expect the sports leagues to head to Congress lobbying for a federal framework,” Holden said. “The challenge there is that if New Jersey has been successful, how many other states are interested in having to negotiate a federal framework as opposed to a state-by-state based framework?”

In a case about gambling, it’s difficult to resist the temptation to handicap outcomes heading into the hearing. But most of the lawyers and scholars who have followed the case closely are hesitant to do so.

“Counting votes right now would be complete guesswork,” said Miller, the Drake law professor who is co-author of the sports gaming text. “You run into the central issue of many gambling disputes. You have states’ right issues and then you have social values issues. And when they conflict, rarely does the law that comes from that seem too consistent or comprehensive.

“More than any case I can recall in a long time, the oral arguments here will illuminate the positions of the justices and the issues they intend to address.”

States’ rights cases can create strange bedfellows. In New Jersey, Democratic legislators have led the push for sports betting, dating back to the introduction of PASPA. Now, they’ve embraced a 10th Amendment argument typically made by conservatives.

“I have no idea which direction the court is going,” said Cabot, the Nevada attorney and leading expert on gaming law and regulation. “If they decide there are constitutional problems with PASPA, my hope is that they give Congress some time to fix it. I think anything short of a legislative solution is going to have long-term negative ramifications.

“So many states already jumped into the fray by passing legislation that’s similar to what New Jersey did. If you think about it from public policy perspective, that’s really a crazy solution.”


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