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September 17, 2013

Divided Appeals Court Overturns N.J. Sports Betting Law: Is Supreme Court Next Stop?

By: Ifrah Law

Today the U.S. Court of Appeals for the Third Circuit affirmed a district court decision from New Jersey invalidating New Jersey’s sports betting law. The decision marks a setback in New Jersey’s efforts to implement sports betting in the state, but the case is very likely to be appealed to the Supreme Court where it could meet a different fate. Also, to the extent that online gaming, including poker, appears to be expanding on a state by state basis, the Third Circuit decision may be a setback to the approach for sports betting, and may be an invitation for federal legislators to revisit the federal statute held to bar New Jersey’s desire to permit sports betting. The full text of the opinion is available here.

The Professional and Amateur Sports Betting Act of 1992 (PASPA), prohibits any state from offering sports betting unless that state had a sports betting scheme in place between 1976 and 1990. Under the law Delaware, Oregon and Montana were granted limited sports betting schemes and Nevada is the only state authorized to offer single-game sports betting. Under the terms of the statute, New Jersey had an option at that time to seek to offer sports betting, but declined to do so.

In 2011, New Jersey revisited the issue and voters approved a referendum by a 2-1 margin to amend the state constitution to allow for sports betting in the state’s casinos and racetracks. The state legislature then passed a bill legalizing sports betting in the state and it was signed into law by New Jersey Governor Chris Christie (R). The New Jersey law would allow wagering on all major professional and collegiate sporting events, except collegiate sporting events involving New Jersey colleges, and all sporting events, professional or collegiate, taking place in the state.

In reaction to the new law, the National Collegiate Athletic Association, Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League sued in federal district to prevent the state from offering sports betting. The U.S. Department of Justice then intervened to defend the constitutionality of PASPA. After the district court granted summary judgment in favor of the NCAA and the professional league plaintiffs, the state appealed to the Third Circuit Court of Appeals.

In a 2-1 decision issued today, the Third Circuit found that the leagues had standing to bring the case and that PASPA is a constitutional exercise of federal power that barred New Jersey from proceeding with sports betting in the state. The Third Circuit found that the leagues were able to meet the constitutional standard for standing to assert a challenge to New Jersey’s law, but stated that it was “hesitant to conclude that the Leagues may rely solely on the existence of the Sports Wagering Law to show injury.” The decision also found that PASPA was constitutional and that the anti-commandeering principle did not apply because PASPA serves to invalidate contrary state laws and not to directly regulate the states. In doing so, the court relied on the Supremacy Clause in its reasoning that the New Jersey sports wagering law is invalid because it is in direct contravention with PASPA.

The Third Circuit decision was by no means by consensus. In a dissent containing powerful language, Judge Thomas Vanaskie noted that there is clear precedent that the federal government cannot direct state legislatures to enact legislation or state official to implement federal policy. The leagues and the Department of Justice had argued that in those cases required the state was required to take affirmative steps to enact legislation and PASPA does not. The dissent noted that nothing in those cases, “limited the principles of federalism upon which those cases relied to situations in which Congress directed affirmative activity on the part of the states.” The nature of the anti-commandeering principle and if it requires the state to take affirmative steps will be a key part of any appeal from New Jersey.

New Jersey will now likely either petition for an en banc review in the Third Circuit or file a petition to have the Supreme Court review the case. New Jersey has 45 days to seek an en banc review in the Third Circuit. If New Jersey files a petition with the Supreme Court it will have 90 days from today to appeal the decision. The Supreme Court hears a very small percentage of the cases appealed to it, but due to the interesting and complex constitutional issues raised in this case it seems relatively likely that this case will be heard. The Supreme Court has never addressed the constitutionality of PASPA.

Today’s decision from the Third Circuit marks a setback in New Jersey’s efforts to legalize sports betting, but this case is far from over. The dissenting opinion on a key issue provides a very strong basis for review and shows that the court struggled in forming its opinion on the issue. In addition to the continuing fight in the courts, the Third Circuit decision may also spark new federal legislative efforts to permit some form of limited licensed sports betting beyond the few states now permitted to offer it. We will continue to follow this case and provide updates here.