November 16, 2018

November 16, 2018

Subscribe to Latest Legal News and Analysis

November 15, 2018

Subscribe to Latest Legal News and Analysis

November 14, 2018

Subscribe to Latest Legal News and Analysis

Gambling with SCOTUS: Christie v. NCAA

Having recently heard oral argument in Christie v. National Collegiate Athletic Association, the U.S. Supreme Court is set to decide this long-running case that is ostensibly about the legalization of wagering on sports competitions in the state of New Jersey. But, much like other sports-related cases that have found their way to the Supreme Court (see, e.g., NCAA v. Tarkanian (NCAA infractions process not requisite state action under Fourteenth Amendment); Federal Baseball Club v. National League (federal antitrust laws not applicable to professional baseball under Commerce Clause), Christie, at its core, presents a unique constitutional question involving the oft-forgotten Tenth Amendment.

Under a collection of federal, state, and local laws, it is currently illegal to operate a betting scheme in a majority of states. In Christie, the federal law at issue is the Professional and Amateur Sports Protection Act (PASPA), which makes it illegal for states to “authorize ... [a] lottery, sweepstakes, or other betting, gambling, or wagering scheme based ... on one or more competitive games in which amateur or professional athletes participate.” In other words, PASPA effectively bans land-based sports betting in all but four states that permitted sports gambling before 1992 - Delaware, Montana, Nevada, and Oregon. PASPA also included a time-sensitive exception for New Jersey. Under the exception, New Jersey had one year after PASPA went into effect to set up a sports betting scheme. If it had done so, sports betting would have been allowed in the state’s casinos. New Jersey failed to act within that year.

As the saying goes, never put off till tomorrow what can be done today. By 2010, New Jersey had second thoughts and held hearings to consider the possibility of legalizing sports betting. In 2011, New Jersey residents voted to amend the state constitution to grant the legislature the power to legalize sports betting, which the legislature did in 2012 by implementing New Jersey’s Sports Wagering Law.

The NCAA and the four major professional sports leagues - the National Basketball Association (NBA), the National Football League (NFL), the National Hockey League (NHL), and Major League Baseball (MLB) - quickly went to federal court to challenge the New Jersey law as a violation of PASPA. New Jersey, via named defendant Gov. Chris Christie, argued that PASPA violates the Tenth Amendment’s “anti-commandeering” doctrine, which essentially says that the federal government has no authority to force states to participate in implementing or enforcing its acts. New Jersey argued that Congress may not command states to “promulgate and enforce laws and regulations,” control the manner in which states “regulate private parties,” or “require the states to regulate their own citizens.” Why? Because, as the Supreme Court has recognized, a state’s ability to decide what its own law is (or is not) is a “quintessential attribute of sovereignty” and “precisely what gives the state its sovereign nature.”

The federal district court did not agree with New Jersey and granted the NCAA injunctive relief on the ground that PASPA preempted New Jersey’s Sports Wagering Law, which was deemed unconstitutional under both the Commerce Clause and the Tenth Amendment. On appeal, the Third Circuit affirmed, holding that the anti-commandeering doctrine did not apply because PASPA does not require the states to do anything; instead, PASPA simply bars them from allowing sports betting. The Supreme Court denied New Jersey’s request for review of the Third Circuit’s decision.

In 2014, the New Jersey legislature returned to the drawing board and passed a new law, which did not affirmatively legalize sports betting; instead, it repealed existing prohibitions - at least as they applied to New Jersey casinos and racetracks. Once again, litigation followed. The NCAA returned to federal court, where ultimately the en banc Third Circuit determined that, even though New Jersey had “artfully couched” the 2014 law as simply a “repealer,” the statute nonetheless “authorized” sports betting at casinos and racetracks. New Jersey appealed and, on December 4, 2017, the Supreme Court heard oral argument.

The NCAA contended that the Tenth Amendment does not apply to PASPA for two reasons: (1) PASPA does not require states to take any action, and therefore no commandeering is taking place; and (2) there is a distinction between banning the states from legalizing sports gambling and banning the “affirmative authorization” of sports gambling. The NCAA argued that the latter may be banned by Congress, even though the former cannot. According to the NCAA, the New Jersey law constituted an “authorization” of gambling because it goes beyond legalizing sports betting and actually regulates it.

During oral argument, several justices struggled to understand the Third Circuit’s endorsement of the NCAA’s “affirmative authorization” distinction, focusing entirely on the Tenth Amendment issue. As Justice Anthony Kennedy put it, “[PASPA] leaves in place a state law that the state does not want, so the citizens of the state are bound to obey a law that the state doesn’t want but that the federal government compels the state to have. That seems commandeering.” Justice Stephen Breyer conveyed similar concern, stating “the subject matter of this law is the state. That’s what this is about, telling states what to do.” Chief Justice John Roberts pointed out that if Congress wanted to impose a flat ban on sports gambling, it could have done so itself and included a clause that specifically indicated that conflicting state laws are preempted. Justice Samuel Alito echoed this sentiment, “Congress could have prohibited sports gambling itself.”

If the Supreme Court agrees with the NCAA’s interpretation that “authorization by law” also bars states from repealing laws, it is not difficult to imagine other examples in which Congress would be able to dictate policy outcomes in states without ever having to legislate on the issue directly. The federal government would be able to freely block any state effort to legalize activities previously forbidden under state law. Some experts fear that this could possibly prevent state experimentation on a wide array of issues, including drug legalization, licensing reform, gun control, land use restrictions, environmental policy, and countless others.

Conversely, sports gambling has historically been, and in many ways remains, antithetical to the “integrity of the game.” Opponents of sports gambling believe it would erode the pureness of athletic competition, and question whether legalized gambling would hurt athletes by turning them into metaphorical numbers on a roulette wheel. Should the Supreme Court reverse the Third Circuit, sports teams and leagues will need to work together with lawmakers to ensure that there are adequate regulations in place to prevent such corruption - no small task to be sure. Nevertheless, leagues seem to be open to the notion that sports gambling is something that they could use to their advantage if it were removed from the shadows of illegal markets where it currently operates. Legalized and properly regulated sports gambling could open the door to new revenue streams, help create more opportunity for fan engagement, and tap into international markets on a larger scale.

Stay tuned, as a decision from the Supreme Court is expected before the close of the current term in June 2018.

© 2018 Foley & Lardner LLP

TRENDING LEGAL ANALYSIS


About this Author

Mary K. Braza, Foley Lardner, Sports Industry Team Lawyer, Franchise Acquisition Attorney
Partner

Mary K. Braza is a partner and litigation lawyer with Foley & Lardner LLP and a former member of the firm’s management committee. As co-chair of the Sports Industry Team, she advises stakeholders in significant sports franchise acquisitions and valuations; stadium/arena financings, redevelopments and ancillary developments; and issues surrounding league and team operations such as broadcast television and radio deals, regional sports networks, new media, social media, mobile rights, sponsorship agreements, naming rights, concession and merchandising agreements, and...

414-297-5505