Most Recent Update September 8 – Governor Christie has issued a directive allowing for sports betting in New Jersey in compliance with the Attorney General! It is now up to the sports leagues to move this again to Federal Court, but for now it’s legal. Coincidentally, the NBA commissioner Adam Silver just also announced today that they will begin supporting sports betting nationwide.
June 25 Update – The Supreme Court has rejected the appeal. The sports betting ban in New Jersey will remain. Multiple lawyers (including PokerStars ex-lawyer firm) have since commentated about NJ’s next move.The content below summarizes what lead up to this point.
As states across the country begin to legalize intrastate online gambling for both casino and poker, the state of New Jersey has had their sights set on legalized sports betting for quite some time. After numerous decisions that have gone against the state, legislators have their backs against the wall. In this study we will look at the events leading up to now for timely importance as stated below.
Happening This Week?
Their latest move may be an eleventh hour effort to legalize sports betting in state casinos and horse tracks. Back in February 2014, state Senator Raymond Lesniak filed an appeal with the U.S. Supreme Court. The state has yet to hear back from the SCOTUS on this matter, but a decision on whether they will take the case or not is expected by the end of June, some expect this Monday.
Professional and Amateur Sports Protection Act
The case is centered on the Professional and Amateur Sports Protection Act of 1992 (PAPSA). The law, also known as the “Bradley Act,” defines the legal status of sports betting on the federal level. The act essentially outlaws the expansion of sports betting across the country, but allows several states an exemption.
Delaware, Oregon and Minnesota all had some form of sports lotteries that were exempt, and Nevada’s legal bookmaking industry was also protected. Perhaps forgotten since the bill was passed was Congress’ one year window for state legislation on sports betting after the bill was signed. This grace period offered states with licensed casino gambling for the past ten years the opportunity to pass laws allowing sports betting.
This was a golden opportunity missed for New Jersey, the state that the caveat was likely written for specifically. The Garden State now finds themselves embroiled in a fight for legalized sports betting that goes back a number of years.
Timeline of Events
In March 2009, Sen. Lesniak filed a lawsuit challenging PAPSA citing the law as unconstitutional and projected a $100 million a year increase in additional tax revenue if it was legalized in NJ.
Over two years later, in Nov. 2011, New Jersey voters backed a statewide referendum that won by a large margin. Within 24 hours, Lesniak introduced a bill to legalize sports wagering in Atlantic City casinos and at horse racing tracks.
This was just the first step in the process of regulated sports betting in New Jersey, but a substantial majority win on the referendum provided some momentum for Lesniak’s cause.
Current New Jersey governor, Chris Christie, the man would have to sign the bill into law if it made its way through congress was apathetic at the time, and considered it a moot point because of the federal ban. However, he said a week later that he would fight for sports betting if the majority of voters approved the referendum.
Christie did keep his word and signed a bill introduced by Lesniak into law in January, 2012. The bill allowed bettors to wager on professional and college contests, but excluded New Jersey teams and sporting events that took place inside the state.
In Comes the Big Leagues
Later in the year, America’s top professional leagues struck back against the law. In August 2012, the country’s four major sports leagues, the NFL, NBA, NHL and MLB, along with the NCAA filed a lawsuit in U.S. federal court to block New Jersey from allowing sports betting.
The leagues and the NCAA issued a statement warning about the evils of expanding sports betting…
“Would irreparably harm amateur and professional sports by fostering suspicion that individual plays and final scores of games may have been influenced by factors other than honest athletic competition.”
The case finally made it to New Jersey District Court in March 2013, where Judge Michael A. Shipp ruled in favor of the NCAA and professional leagues, and barred New Jersey from issuing sports betting licenses. Shipp ruled that the federal ban on sports gambling was constitutional and overruled state law.
The state appealed the decision two weeks later, and the case was sent to the 3rd U.S. Circuit Court of Appeals in Philadelphia. In Sept. 2013, the court ruled against the state and upheld the earlier decision. However, one judge did agree that the federal law commandeered the state legislature and was unconstitutional. A month later, the federal appeals court concluded it would not give the state another chance to state their case, after yet another appeal.
After the final federal court denial, the state filed an appeal to the nation’s highest court, the Supreme Court. That is where we stand today, waiting for a decision on from the SCOTUS on whether or not they will take the case.
Will The High Court Take The Case?
Getting the SCOTUS to hear arguments is an uphill battle in itself. The Supreme Court gets about 7,000 requests to hear cases each year and only about 80 are heard. They decide an additional 50 without hearing arguments.
However, several factors may be in New Jersey’s favor when it comes their case. The court generally takes on cases that address constitutional issues or federal law. The sports betting case falls under both categories. The states’ rights vs. federal laws argument is certainly in play in a big way here.
New Jersey’s Argument
Even though they have lost in court several times at this point, the argument that New Jersey has against PAPSA should still give them some hope.
Essentially, the argument centers on the law’s discrimination between states and that it violates the 10th amendment and commandeers the state legislator. The latter part seems especially true, because of the overwhelming support the proposal got in the initial referendum.
The citizens voted in favor of sports betting. Their representatives moved the bill through congress, and the governor signed it into law, only for more than 20-year old federal law to nullify the will of the people.
As anyone who follows sports betting industry knows, the amount wagered in Nevada sportsbooks each year (see this infograph on Nevada profits for sportsbetting, avg $4.2 mill per casino) is a paltry amount compared to the amount wagered in underground or illegal sports betting markets. Local bookies and offshore betting sites take in billions of dollar in wagers each year.
The prevalence of illegal sports betting won’t be a factor in the SCOTUS decision because their possible acceptance of the case and ruling will be from a constitutional and legal perspective, but it’s something that those following New Jersey’s quest for legalize sports betting should consider.
As we mentioned above, Sen. Lesniak estimates over $100 million in potential tax revenue would be created in New Jersey with legalized sports betting. That number could conceivably be higher because so little is known about how much money is truly wagered illegally across the state.
The recent arrests of an illegal bookmaking ring operating in the state charged 29 people with gambling and conspiracy charges. The group grossed an average of $3 million per year and took in over $50 million dollars in wagers in a one year span.
The PAPSA law is depriving New Jersey citizens with a safe and regulated sports betting environment (once again, something that they voted for) and not allowing the state to tax an activity that going on constantly within their borders and via offshore gambling sites.
Can NJ Conceivably Prevail?
Even if the Supreme Court takes their case, it still seems unlikely. Their argument is a strong one, but the fact still remains that they have lost at every level so far. The High Court would have to agree to hear their case, something that may happen by the end of June, but could be done after the court’s summer recess. Even so, they would still need to win their argument.
The State May Act, if the Court Doesn’t
However, legislators and officials in New Jersey aren’t lying down and waiting from a decision from the Supreme Court. It’s being reported, that the state may plan to move ahead with sports betting regardless of what the court decides to do.
Lesniak already has an agreement in place with English-based bookmaker William Hill to run sports betting operations at popular racetrack, Monmouth Park. The decision to bypass the federal statute would need support from the state senate and Governor Chris Christie.
Lesniak seems to think there’s a chance Christie will support this move. “He’s a fighter, so I believe he’d go for it,” said the state Senator when speaking of Christie.
It may be unlikely they go this route, but if they do decide to disregard the federal law and move forward, there’s little doubt the Department of Justice will sit on the sideline and just let it happen. The DOJ, NCAA, and professional leagues would likely do everything in their power to stop citizens from placing bets.
The state does have some legal ground to stand on if they did try and go around the federal ban, however. PAPSA outlaws licensed sports betting in all but four states, but if New Jersey decided to not enforce their current state laws on sports betting and give operators the green light they may have a loophole.
Since the state wouldn’t actually issue licenses for sports betting this would create a technically unregulated, but semi-regulated sports betting market at the state’s several racetracks. Lesniak has stated that he already has legislation drafted for sanctioned sports betting at racetracks for the 2014-15 NFL Season.
If the Supreme Court decides to hear arguments on the case, their decision will go a long way in predicting the future of sports betting expansion across the United States. What may be more interesting is how New Jersey will proceed if the High Court chooses not to grant them their final appeal.
Author: Joseph Falchetti