TGS SPECIAL REPORT...WHAT NEXT FOR NEW JERSEY?
by Bruce Marshall, Goldsheet.com Editor
Readers of these pages know that we at TGS have been keeping a close watch on developments in New Jersey regarding the Garden State's attempt to legalize Las Vegas-style sports betting. That attempt took another detour in August when the state's latest bid was rejected for a third time by the U.S. Third Circuit Court in Philadelphia. The question now is if the latest roadblock is going to completely stall New Jersey's attempts, or will the Garden State come up with yet another alternative that might change its luck in federal court (or, better yet, in Congress)?
To refresh memories, a quick review of the New Jersey storyline (extensive TGS chronicling of the subject can be accessed on our website homepage at www.goldsheet.com) might be in order. More than five years ago, Gov. Chris Christie and various pols decided that they wanted in on full-scale sports betting action that could help prop up the sagging economy (and casino business) within the state. In 2011, New Jersey voters approved a referendum to allow sports betting in hopes the state could legitimize what is currently a black market industry, tapping into billions in annual bets to produce a new source of revenue for the state budget, Atlantic City, and the horse racing industry. The State Legislature then passed a law legalizing sports betting, and Christie signed it in January 2012.
Christie went so far as to begin the process of issuing sports gaming licenses and proclaimed the state would begin to accept bets at its various casinos and race tracks, but knew he would encounter trouble along the way. Not that Christie wasn't prepared for his legal challenge to the 1992 Professional and Amateur Sports Protection Act ("PASPA"), when select states (Nevada, Oregon, Delaware, and Montana) were "grandfathered" by federal law to accept sports wagers, though only in Nevada's case would it include single-game wagering; it was parlay cards only for the other states. (Indian casinos were not included.) To no one's surprise, the pro sports leagues would block Christie in U.S. District Court ("Christie I"), and when the US Supreme Court denied to hear the case, New Jersey appeared to have hit a roadblock.
Only it hadn't. In 2014, Christie decided to endorse a new measure introduced by State Senator Raymond Lesniak (right) that would circumvent an apparent loophole in federal law and allow the state to repeal its long prohibitions on sports gaming. By removing itself from licensing and regulating the sports wagering activities, New Jersey, according to the Lesniak proposal, would not be in conflict with PASPA, and could allow privately-run sportsbooks to operate in the state.
Of course, the sports leagues challenged once more and in the Federal District Court were awarded an injunction for a second time by the same judge, Michael Shipp. Again, as in its original challenge, New Jersey would appeal to the Third Circuit, and in late August of 2015 was defeated for a second time by the same 2-1 vote in the US Court of Appeals, effectively saying the latest New Jersey attempt ("Christie II") still ran afoul of PASPA. (The two votes against New Jersey were cast, rather surprisingly, by judges Marjorie Rendell, whose husband, former Pennsylvania Governor Ed Rendell, has been a big gaming proponent and brought casino wagering to the Keystone State, and Maryanne Trump Barry, sister of none other than Donald Trump). Game over for New Jersey?
Not quite. In October of 2015, Christie and the Garden State would finally, and somewhat surprisingly, score their first significant court victory. In a rather unexpected move, the same United States Court of Appeals for the Third Circuit motioned for an "en banc" rehearing.
"This is extraordinarily rare," Daniel Wallach, a sports and gambling lawyer told the New York Times last year regarding the en banc announcement. "It's the judicial equivalent of winning the lottery. The pendulum has swung the other way. New Jersey needs only to win once. I believe they are on the path to victory."
The en banc brings at least 12 of the 23 circuit judges to the panel instead of only three, and is considered a rarity, as it forces a majority of judges to question a legal decision made by their fellow bench mates and ultimately voids earlier interpretations. Thus, while granting the rehearing, the Third Circuit also vacated its August 2015 verdict in favor of the leagues.
Though legal observers have noted that New Jersey unquestionably scored a significant procedural victory in getting the court to order rehearing en banc (because the Third Circuit rarely grants en banc consideration; only one of 2,402 appeals in 2014 and two of 2,715 appeals in 2013 were considered by the court sitting en banc), in the end the status quo remained. The Garden State was rejected for a third time, this time by a 9-3 count en banc, in August.
Thus, the Third Circuit would appear to be a permanent blockade for New Jersey, unless by luck of the draw it could get two of the dissenting justices on a three-person panel. Otherwise, the Third Circuit seems to have made it clear that it is going to move the goal posts as needed and uphold PASPA no matter how convoluted its reasoning might be.
New Jersey, however, does not seem inclined to let this matter go away. By now, its persistence is well-documented. Another new bill was just introduced in early November by Democratic State Assemblymen Ralph Caputo and John Burzichelli, which would effectively repeal all of the state's sports betting laws.
The new bill would remove all restrictions on sports betting, anywhere in the state, by anyone, at any time. Officials said the state could then move to reintroduce some restrictions without violating the language of PASPA, according to the Associated Press.
The bill makes clear that New Jersey is removing every prohibition or regulation of sports betting--something the federal government acknowledged the state has the power to do, supporters told the AP. However, the bill as stands would also mean that children could place bets, as well as allowing anyone to open their own sports book. That's why the state would likely have to add "limited restrictions" afterward, as envisioned by the judge (Thomas Vanaskie) who issued a dissenting opinion that sided with New Jersey.
"There have got to be things added to this," Assemblyman Caputo told the AP. "A lot brighter people than me have worked on this and they haven't found the ultimate answer yet."
Many observers nonetheless believe this "tactical nuclear" option is unlikely to move the needle, because to have a chance it would need to get a sizable majority of New Jersey lawmakers on the same page to pass a full repeal...which many Garden State pols might not have the stomach to do. If the bill could be advanced, however, it would at least make the sports leagues somewhat nervous. Entirely unregulated sports betting taking place in the US is likely worse in their minds than the current environment. That would perhaps give New Jersey a chance to negotiate with the leagues on some tenable path forward for sports betting in the state.
Some suggest the Garden State would be better off with a full repeal, but limiting the betting to Internet only. The state would thus have some control over potential licensees, because the licensees would have to demonstrate they could keep betting within state lines. Which would have the effect of limiting the field of entities to those with previous experience in online or mobile sports betting. It would also have the effect of putting the Wire Act (used often by the government as precedent for blocking sports gaming, though its intent is to prevent transmission over state lines, not within a state) front and center when the expected legal challenge to such a statute would come.
There's more. As it did after "Christie I" was rejected by the Third Circuit in 2013, New Jersey decided in October to also give it another go with the US Supreme Court, which declined to hear the Garden State's case a couple of years ago. This time, however, a different set of forces are massing in New Jersey's corner. Five states--Arizona, Louisiana, Mississippi, West Virginia, and Wisconsin-along with the American Gaming Association filed amicus briefs with the Supreme Court in support of the Garden State's efforts to offer legalized, Vegas-style sports betting at its casinos and racetracks.
Though Mississippi is the only one of the quintet that has expressed its desire to legalize sports betting within it jurisdiction, the other states, as expressed in a brief filed by West Virginia Attorney General Patrick Morrissey (right), are concerned that the Third Circuit had set a precedent on how Congress regulates industries.
"The concern of Amici States--the States of West Virginia, Arizona, Louisiana, Mississippi, and Wisconsin--is not what Congress regulates but how it does so. Even where it has Article I authority to act, Congress may not force the States to act as the vehicle for implementing federal policy and thereby shift to the States political accountability for its actions. Such coercion is unconstitutional commandeering," said the Morrissey brief, which further argued that the Third Circuit usurped the rights of the state by maintaining the federal ban on sports betting.
"In upholding the Professional and Amateur Sports Protection Act ("PASPA")...the Third Circuit radically expanded the doctrine of federal preemption by holding that Congress may forbid the States from repealing their existing laws without affirmatively setting forth a federal regulatory or deregulatory scheme," the brief concluded.
The US Supreme Court's decision whether to take the New Jersey case is expected sometime early in 2017. Of course, the Supreme Court accepts only a tiny percentage of cases and has already denied hearing the Garden State appeal before, so we wouldn't advise New Jersey to hold its breath.
But it might not have to, because, as has been suggested before by at least some of the sports leagues (the NBA, as articulated by Commissioner Adam Silver in particular), the best way to enact change is to go right back to Congress and have it make new law by changing or amending PASPA. Even New Jersey's possible enactment of its full repeal is likely designed to get Congress to react. Herein the participation of the influential American Gaming Association will be crucial.
The AGA has begun forming a coalition and is planning to lobby Congress in 2017 to lift the federal ban on sports betting. AGA president and CEO Geoff Freeman has said President-elect Trump will have sports betting legislation on his desk during his term.
"As President-elect Donald Trump has acknowledged, illegal sports betting is a thriving industry," Freeman said in a statement to ESPN. "The 24-year-old federal ban -- which is breathing life into a $150 billion illegal sports betting market -- threatens the integrity of games, presents fundamental questions about states' sovereignty to define their own laws and combat crime within their borders, and prevents fans from engaging with the sports they enjoy in a safe, legal way. The United States Supreme Court should consider New Jersey's important claims and allow all states to address the serious problems associated with illegal sports betting."
As for Trump, he was once quoted that legalizing sports betting in New Jersey is vital to "putting the bookies out of business." Thus, if the Supreme Court doesn't intervene, there is at least more hope of getting legislation advanced in the new administration.
Lastly, the appetite to repeal and modify PASPA might also get a new friend very soon, that being the NFL, whose problems with declining TV ratings have been addressed within a variety of forums (including TGS) this autumn. The bottom-line conscious NFL is likely to be hearing from disgruntled advertisers very soon about a possible solution to the declining ratings...relaxed sports gaming laws. Which will likely include a not-so-gentle suggestion to the NFL that if it wants its viewership to spike upward again, perhaps it should lobby for a repeal or restructure of PASPA. (That's one obvious answer to the NFL's ratings issue that we have hinted at on these pages earlier this fall).
As always, when developments warrant on this storyline, we'll be there to comment and analyze. Stay tuned.
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