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December 18, 2012

Court Hears Argument on N.J. Law Permitting Sports Betting

By: Ifrah Law

On December 18, 2012, oral arguments were heard in the federal lawsuit filed by the professional sports leagues and the NCAA against New Jersey, after the state passed a law that would legalize sports betting in the state’s casinos and racetracks. Last week, U.S. District Judge Michael Shipp ordered that oral argument would be limited to the issue of whether the sports leagues have standing to bring the suit.

The leagues filed suit in August arguing that the New Jersey law was in direct contravention of the Professional and Amateur Sports Protection Act (PASPA) of 1992, a federal statute that imposes a ban on sports betting unless the individual state had its own sports betting scheme in place between 1976 and 1990.

New Jersey has argued in court papers that the leagues have failed to allege that they will suffer a concrete injury as a result of the sports betting law. New Jersey asserts that the leagues have failed to show a particularized injury. The state has argued that given the proliferation of sports gambling, the harms that the leagues claim would flow from the new gambling law would occur in any case, regardless of the law or any relatively modest increase in legal sports betting that it may cause.

The leagues’ lawyer, Jeffrey Mishkin, started his argument today by stating that the standard for the leagues to show that they have standing is an “identifiable trifle” in how the law would affect them. Mishkin argued that the leagues do not have to prove damages or injury for standing, they only have to show that identifiable trifle.

The leagues’ arguments focused on two main points: that the leagues have standing because their games are the vehicles for the betting and that in passing PASPA Congress explicitly authorized the leagues to bring action against the states.

The leagues argued that they will suffer an injury to their reputations if there is an expansion of legalized gambling. Mishkin argued that the fact that New Jersey chose to exempt professional and collegiate sporting events held in the state, as well as collegiate sporting events held outside the state involving schools from New Jersey, from betting, as evidence that the state believes that gambling on these events can cause problems.

Mishkin argued that when Congress passed PASPA it explicitly acknowledged that the leagues would have a personal stake in gambling laws because the perception of the leagues would be adversely affected by gambling. Mishkin said that “every dropped pass” and “every missed free throw” would raise suspicion.

Ted Olson, a former United States Solicitor General arguing on behalf of New Jersey, said the state would be regulating conduct that is already occurring. Olson cited statistics showing how prevalent sports betting is in this country, both legally and illegally.

Olson said the leagues needed to demonstrate more than just the perception that the law would hurt their business; they needed to show an “actual, identifiable, particularized, concrete injury” from the law to have standing to bring the case. He emphasized that Congress cannot remove Article III standing requirements, as there needs to be a finding by the court that the injury is specific and supported by facts.

Olson argued that the leagues are already thriving amidst a huge sports gambling market and the state would be bringing the black market gambling into the light and regulating it. Olson argued that there is no evidence that gambling has hurt the leagues and pointed out the prevalence of fantasy sports, which the leagues have largely embraced. He also pointed out that the leagues are in regular contact with the Las Vegas sports books to monitor shifts in betting on their games and this cannot happen in places where sports betting is occurring on the black market.

There was extensive discussion of the 2009 Third Circuit ruling in Office of the Commissioner of Baseball v. Markell, where the court held that most of Delaware’s plan to expand its sports betting offerings violated PASPA. Delaware, a state that had a PASPA exemption because it had a betting scheme in place before PASPA’s enactment, sought to offer single game bets and bets on any professional or amateur sporting event other than NFL games. This was rebuffed by the court because these were betting schemes that were not in place at the time that PASPA went into effect. Standing was not an issue discussed by the court in its opinion in Markell, and lawyers for the league implied today that this was because standing of the leagues was so obvious that the court did not need to address it. Judge Shipp also directly asked the state how it could reconcile the state’s argument that the leagues lack standing with the Third Circuit decision.

The Department of Justice has until January 20 to intervene, if it chooses to. New Jersey regulators have stated that they will begin granting licenses to offer sports betting beginning on January 9.

Judge Shipp stated that a written decision on the standing issue would be released by Friday, December 21. It remains to be seen how the court will rule. Based on observations from court today, it seemed the judge is inclined to believe that the leagues have the sufficient “identifiable trifle” to challenge the law.

If the court does find that the leagues have standing to bring the suit, the court will proceed to hear the case on the merits and will likely have to decide the constitutionality of PASPA.