Answering Frequently Asked Questions about the Supreme Court’s PASPA Sports Betting Decision

by Jeff Harris
on May 26, 2018
15

Minute Read

Unless you’ve been living under a rock, you’ve probably heard by now that the United States Supreme Court has issued a landmark decision on sports betting.

But its only been a few days since the historic ruling was handed down, so plenty of people out there are still wondering what all the fuss is about.

To make a long story short, the Court decided that a 26-year old federal ban on sports betting -which applied to every state except Nevada of course – known as the Professional and Amateur Sports Protection Act (PASPA) is unconstitutional. The state of New Jersey had been attempting to legalize sports betting since 2011 – both through ballot initiatives approved by voters and legislation passed by lawmakers – but the NCAA and four professional sports leagues (NFL, MLB, NBA, and NHL) filed a lawsuit claiming those efforts violated PASPA.

The case initially went in favor of the leagues, but subsequent appeals eventually reached the highest court in the land, which sided with New Jersey by striking down PASPA altogether.

In doing so, the 6-3 decision effectively freed individual states to legalize and regulate sports betting a la the Garden State.

That’s the gist of it, but as the old saying goes, the devil is in the details.

And for an issue as complex as federal and state sports betting law, that’s especially true.

As a result, the immediate aftermath of the Court’s historic ruling has been rife with rumor, misinformation, and outright nonsense. With mainstream media pundits tackling an unfamiliar subject in gambling, and stakeholders on both sides of the debate stoking the flames, the PASPA repeal has become quite confusing for average folks.

I’ve got you covered on that front though, with the following laundry list of frequently asked questions – and of course, accurate answers to each.

The Background

What exactly was this PASPA law everybody’s talking about?

The Professional and Amateur Sports Protection Act (PASPA) was authorized by Congress in 1992.

The bill was sponsored and championed by former Senator Bill Bradley, who previously played professional basketball in the NBA before entering the political arena. Bradley argued that athletics – from the high school level on up – could easily be corrupted when huge sums are on the line. For that reason, PASPA is also commonly referred to as the Bradley Act.

As Bradley alluded to, the impetus for PASPA was the growing fear over “point shaving,” as several scandals rocked collegiate sports at the time. This scourge on the sports world was culminated in 1994, when several members of the Arizona State University (ASU) basketball team were caught shaving points at the behest of bookies.

Prior to that, the Senate Judiciary Subcommittee on Patents, Copyrights and Trademarks conducted public hearings on the issue in 1991. That subcommittee concluded that “sports gambling is a national problem. The harms it inflicts are felt beyond the borders of those States that sanction it.”

David Stern – who served as commissioner of the National Basketball Association (NBA) at the time – also testified that “the interstate ramifications of sports betting are a compelling reason for federal legislation.”

In crafting PASPA, lawmakers on Capitol Hill exempted Nevada under a “grandfather clause,” allowing the Silver State to become the only U.S. jurisdiction where single-game betting and sportsbooks were legal.

Three other states – Delaware, Montana, and Oregon – received a partial exemption permitting their state lotteries to offer parlay card games based on the results of professional games.

Thus, PASPA effectively prohibited the other 46 states from legalizing or regulating sports betting.

What are the most common objections to PASPA?

Of course, the law never came close to stopping bettors from seeking out action, it simply drove the industry underground.

Before the internet age, wagers were placed through bookies, and eventually online sportsbooks like Bovada took the reins. According to the American Gaming Association (AGA), more than $150 billion – that’s right, billion with a ‘b’ – is wagered illegally in this country every year. The AGA also estimates that 97 percent of the American betting market is underground, siphoning hundreds of millions of dollars in potential tax revenue away to offshore bookmakers.

America has experimented with federal prohibition of a popular “vice” before, but as we all know, it only took 13 years for the country to come to its collective senses. Alcohol proved to be so in demand that Congress re-legalized it in 1933, and they’ve kept their hands off the booze ever since.

Sports betting prohibition lasted for twice as long, but it was certainly no more effective.

Additionally, advocates of PASPA repeal have long asserted that local governments should at least have the right to govern their own affairs.

You’ll learn more about the constitutional mandate known as the anticommandeering doctrine a little later on, but sufficed to stay, the state’s right position provides the strongest argument for striking down PASPA.

How did New Jersey get itself involved in challenging PASPA?

Well, that all depends on how you frame the question.

When the nuts and bolts of PASPA were initially written, lawmakers carved out an exception for any state that had previously operated licensed casino gaming for at least the last 10 years.

At that time, only New Jersey qualified, having opened its first legal casinos in Atlantic City in 1978. Legislators were clearly opening the door for New Jersey to join Nevada as full-scale gambling providers – complete with casinos and sportsbooks – but the state legislature declined to take advantage.

Looking back on the decision with the benefit of hindsight, former U.S. Senator Robert Torricelli – a leading advocate of legal sports betting while representing New Jersey in Washington D.C. – called the inaction “a missed opportunity.”

State Sen. Raymond Lesniak (D-Union), who spearheaded the most recent efforts at regulation, was blunter in his assessment, telling reporters that “it was a huge mistake.”

Fast forward to 2011, and New Jersey was ready for take two.

A ballot referendum was put to voters that November, and 64 percent of the electorate turned out in favor of adding a sports betting amendment to the state constitution. By 2012, the state legislature passed the Sports Wagering Act, which authorized casinos and racetracks throughout the state to offer regulated sportsbooks.

Chris Christie, who was Governor at the time, signed the Sports Wagering Act into law.

Almost immediately, the National Collegiate Athletic Association (NCAA) joined forces with North America’s four major professional sports leagues (NFL, MLB, NBA, NHL) to sue New Jersey. According to the coalition of leagues, PASPA prohibited the state from making such attempts.

A district court ruled on behalf of the leagues, and subsequent appeals were shot down. A ruling by the Third Circuit made it clear that PASPA barred states from regulating sports betting in any capacity. This clarification prompted New Jersey to pass a second Sports Wagering Act in 2014, one designed to skirt the PASPA obstacle for good.

Rather than regulating sports betting on the state level, which wasn’t allowed under PASPA, the second Sports Wagering Act simply repealed state laws criminalizing the activity. Christie directed law enforcement agencies to allow casinos and racetracks to operate sportsbooks without direct regulation from the state.

Once again, the NCAA and its allies filed suit, and history repeated itself when multiple lower courts ruled againstChristie.

Eventually, having already declined to hear New Jersey’s appeal in the original case, the Supreme Court decided to hear Christie v. NCAA, et al in June of 2017. Oral arguments were heard on December 4, and after months of deliberation, the Court issued a 6-3 ruling in favor of New Jersey.

The case – known today as Murphy v. NCAA after Phil Murphy replaced Christie as Governor – had three possible outcomes.

First, the Court could’ve opted to uphold the lower court’s ruling and preserve PASPA’s ban.

Second, they could’ve amended PASPA slightly while maintaining the federal prohibition.

Third, the could’ve ruled PASPA to be unconstitutional on its merits, repealing the measure in full.

The third option was taken, as a clear majority of Justices agreed that the law violated the Tenth Amendment’s anticommandeering doctrine. For those unfamiliar with Constitutional law, that doctrine is based on the following concept, as written by the Framers:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

The Court’s majority opinion summed up the prevailing view of PASPA in light of the states’ rights debate:

“The legalization of sports gambling requires an important policy choice, but the choice is not ours to make.

Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution.

PASPA is not. PASPA ‘regulate[s] state governments’ regulation’ of their citizens … The Constitution gives Congress no such power.

The judgment of the Third Circuit is reversed.”

Hammering the final nail into PASPA’s coffin, Justice Samuel Alito delivered a scathing rebuke of the law’s inherent overreach:

 “The PASPA provision at issue here – prohibiting state authorization of sports gambling – violates the anticommandeering rule.

That provision unequivocally dictates what a state legislature may and may not do. And this is true under either our interpretation or that advocated by respondents and the United States.

In either event, state legislatures are put under the direct control of Congress. It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals.

A more direct affront to state sovereignty is not easy to imagine.”

Joining Alito in the majority were Justices Anthony Kennedy, Clarence Thomas, Elena Kagan, Neil Gorsuch, and Chief Justice John Roberts.

Justice Stephen Breyer wrote an opinion which straddled the line, as he jointly concurred and dissented.

Justices Ruth Bader Ginsburg and Sonia Sotomayor were the only full dissenters on the Court, siding entirely with the leagues.

Upon learning that his seven-year fight to bring sports betting to New Jersey had finally succeeded, Christie took to Twitter for a bit of understandable boasting:

“A great day for the rights of states and their people to make their own decisions.

New Jersey citizens wanted sports gambling and the federal Gov’t had no right to tell them no.

The Supreme Court agrees with us today. I am proud to have fought for the rights of the people of New Jersey.”

And with that, New Jersey had officially slayed the dragon of PASPA, securing freedom for any other state interested in offering regulated sportsbooks.

The Big Picture

Is sports betting legal across the country now?

That’s the big question on everybody’s mind, but all the Court did was strike down PASPA – it didn’t write new laws.

For now, individual states will have to address the sports betting issue on their own, either through ballot referendums or passing laws through the legislature.

Naturally, New Jersey will be first in line, having spent most of the last decade preparing to launch the industry.

Major casinos like the Borgata have already constructed sports bar areas that can be easily converted into full-fledged sportsbooks. And worldwide bookmakers like William Hill – the leading sportsbook operator in both the U.K. and Nevada – are forging partnerships with local casinos and racetracks.

As for your own state, I’ll tackle that topic two questions down.

OK, so when does New Jersey’s regulated market go live?

Immediately after the ruling came down, the Monmouth Park Racetrack in Oceanport announced an ambitious plan to begin accepting wagers by Memorial Day (May 24).

That would’ve been only two weeks after the Court decision, but the plan was slowed by the introduction of yet another sports betting bill.

Senate Bill 2602 will disallow any entity that accepts wagers before regulations are finalized from obtaining a license. Thankfully, the bill is expected to be ushered through the legislature with great haste, and June 7 has been targeted as the date for passage and signing.

As a result, punters in New Jersey will have to wait another three weeks or so to fire their first legal bets.

But don’t worry, as Monmouth Park’s partner William Hill has a foundation in place for immediate launch, per William Hill US chief executive officer Joe Asher:

“Operationally, the sportsbook is built out, with just a little bit of additional equipment to be brought in.

We need to hire and train front-line employees and get our arms wrapped around any regulations that are going to be put in place.”

And what about other states, will the legal sports betting movement spread?

It most definitely will, especially given New Jersey’s ongoing success with online gambling.

The state has offered regulated online casinos and poker rooms since 2013, generating nearly $250 million in tax revenue over that span. This thriving new industry has sparked a wave of interest in iGaming from regional neighbors like Pennsylvania, which passed a law making the Keystone State the fourth to regulate online gambling (along with New Jersey, Nevada, and Delaware).

If and when New Jersey experiences similar economic benefits from taxing sportsbooks, you can bet your bottom dollar that other states will make the move.

In fact, several states have already passed laws preparing for the possibility of PASPA repeal.

You can follow along with the legislative progress here using this handy Sports Betting Bill Tracker from Legal Sports Report.

But as of mid-May, the following five states have already authorized legal sports betting in the event PASPA fell:

  • Connecticut
  • Mississippi
  • New York
  • Pennsylvania
  • West Virginia

The legwork is most complete in those states, so with PASPA now erased from the federal statutes, expect a flurry of movement there in the year to come.

Connecticut is currently considering a bill to study the sports betting issue.

And in the following 14 states, anticipatory post-PASPA legislation is currently being debated:

  • California
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maryland
  • Michigan
  • Missouri
  • Ohio
  • Oklahoma
  • Rhode Island
  • South Carolina

That makes 20 states that have agreed to, or are at least considering, sports betting regulation.

And remember, this debate only rose to prominence on the national level last year when the Court decided to hear the case. Now that PASPA is dead and gone, expect even more local leaders to explore the idea of bringing sportsbooks – and their lucrative tax revenue – to their state.

What about online sportsbooks, will those be included in New Jersey’s sports betting bill?

They certainly will, as New Jersey recognizes the cash cow that online gaming can become.

The most recent bill, SB-2602, contains clear language authorizing both “online sports pools” and “internet sports pool operators.”

Leaving aside the dense legal language there, yes indeed, residents of and visitors to New Jersey will be able to bet on sports via the internet.

The Golden Nugget in Atlantic City – which operates the state’s leading online gaming licensing group – isn’t wasting any time on that front. Just two days after the Court’s ruling came in, the Golden Nugget announced a partnership with the Kentucky-based Churchill Downs Inc. to launch a sportsbook website.

In a press release, Churchill Downs’ chief executive officer Bill Carstanjen promised to bring the company’s wealth of experience in the horseracing sector to New Jersey’s first online sportsbook:

“We have the unique opportunity to leverage our knowledge and experience operating the largest legal online horse racing wagering business in the U.S. as we enter the iGaming and sports betting markets.”

A tentative launch date of early 2019 has been announced, but within a year’s time, bettors in New Jersey will have a sportsbook in the palm of their hands.

And will I be able to bet sports online in other states down the road?

That all depends on how those states approach iGaming regulation.

It’s been slow going since 2013, when Nevada, New Jersey, and Delaware went live with online casinos and poker rooms. Despite the soaring success of New Jersey, and acceptable performance in Nevada and Delaware, states aren’t exactly lining up to legalize online gambling.

California has been at it for 10 years and counting, introducing and debating dozens of bills over that time, only to see them all stall out. New York has made similar repeat efforts, but nothing ever seems to stick.

Late last year, Pennsylvania finally got over the hump, becoming the fourth state to enact iGaming regulations. That law is still in its infancy, however, and no sites have launched there as of yet. But by the end of the year, Pennsylvania will have online casinos and poker rooms just like New Jersey.

Thus, it stands to reason that Pennsylvania will also embrace online sportsbooks. They’ve passed a law there promising as much, predicated on PASPA being repealed. Now that the day has finally arrived, Pennsylvania is a veritable shoe-in.

Other than that, however, this will be an incremental process. States can elect to pass sports betting laws without referencing iGaming, and vice-versa. Obviously, the two go together like peanut butter and jelly, but expecting state legislatures to apply common sense isn’t always the best idea.

For now, it’s best to take a wait-and-see approach.

If your state is listed above as having passed a post-PASPA bill, they’ll likely add an online component to those efforts at some point down the road.

If lawmakers there are still considering sports betting, the idea of legalizing all forms of online gambling may just be a bridge too far.

And if they’re not listed at all, don’t hold your breath. Conservative-leaning states like Utah, Arizona, Texas, and Maine are historically averse to any form of gambling, so they’ll likely stick to the status quo.

Conclusion

Whenever a longstanding federal law is struck down, ordinary citizens are left wondering how the reform will affect their daily life. If you’re interested in the sports betting debate, one way or another, I hope this FAQ page left you with a better grasp on the what PASPA was, why it was repealed, and what will happen next.

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