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Supreme Court Overturns Federal Ban on Sports Betting

In a landmark ruling today (May 14, 2018), the United States Supreme Court overturned the ruling of the 3rd Circuit Court of Appeals that upheld the constitutionality of the Professional and Amateur Sports Protection Act (PASPA), the federal statute that effectively prohibits all sports betting in the United States by restricting states (other than a few grandfathered states, including Nevada) from authorizing sports betting. On June 27, 2017, the United States Supreme Court granted certiorari in the appeal of Nat'l Collegiate Athletic Ass'n v. Governor of N.J., 832 F.3d 389 (3d Cir. 2016), New Jersey's ongoing (and second) challenge to PASPA. New Jersey challenged PASPA on several grounds, including a violation of the Commerce Clause and the United States Constitution's anti-commandeering and equal sovereignty principles. The case was heard by the Supreme Court in early December 2017.

In a 7-2 ruling, the Supreme Court has reversed the 3rd Circuit opinion, holding (i) that “PASPA’s provision prohibiting state authorizing of sports gambling schemes violates the anti-commandeering rule,” (ii) that “ PASPA’s provision prohibiting state ‘licens[ing]’ of sports gambling schemes also violates the anti-commandeering rule,” (iii) and that “[n]o provision of PASPA is severable from the provisions directly at issue” in the action, meaning to the extent that PASPA is unconstitutional for its violation of the anti-commandeering rule, the entire statute must be struck down. The Court held Congress can regulate sports gambling directly, but if it elects not to do so each state is free to act on its own.

Several states, including Connecticut, Mississippi, Pennsylvania, West Virginia, New York and New Jersey, have enacted legislation designed to spring into effect in the event PASPA was struck down, while other states have similar bills pending. Outside of Nevada, the illegal gambling market has thrived, and states have looked to take advantage of the substantial revenue opportunity that regulating – and taxing – legal sports betting can bring. According to the American Gaming Association, $150 billion was wagered on sports illegally in 2016 alone. The combined total of wagering on both Super Bowl 51 and 2017 March Madness was more than $15 billion, but only 3 percent of that number was wagered legally. A highly regulated wagering scheme – such as Nevada’s – will not only allow states to capitalize on licensing fees and taxes, but will also impose strict guidelines on operators and keep track of wagers, revenue and unusual betting patterns.

A link to the Supreme Court’s decision can be found here: https://www.supremecourt.gov/opinions/17pdf/16-476_dbfi.pdf

© 2018 Dinsmore & Shohl LLP. All rights reserved.

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About this Author

Laura A. DAngelo, Business transactions, lawyer, Dinsmore Shohl, law firm
Partner

Leveraging an MBA and law degree, with experience representing both international and domestic clients, Laura takes a practical, measured approach to achieve business results for her clients.

Working as lender’s counsel for more than 17 years, Laura has closed over one billion dollars worth of transactions. Her work includes asset-backed, middle market secured finance, work-outs, forbearance agreements, Uniform Commercial Code compliance, secured lending, including loan documentation, inter-creditor agreements, subordination agreements, and...

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Kerry Irwin, Corporate Governance Attorney, Dinsmore, law practice
Associate

A member of the Corporate Department, Kerry counsels clients in a wide variety of industries on corporate matters, including governance, mergers and acquisitions, financing, and other transactions. She also works with for-profit and non-profit organizations, as well as several trade organizations, tailoring her approach to meet each client’s unique corporate needs.

Kerry’s practice includes a focus on the mining and natural resources sectors. She regularly works with mining companies and investors on acquisitions and dispositions of mineral reserves, mining projects, permits and mining companies, as well as project development and matters related to mine operations. Additionally, she counsels clients in the natural resources industry on all manners of contracts and agreements, including financing agreements, sales and lease agreements, joint venture agreements and operating agreements.

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