Photo credit: https://www.flickr.com/photos/design-dog/

Photo credit: https://www.flickr.com/photos/design-dog/

by Jordan Hollander, Esq.*

September 4, 2015

As summer winds down, we are fast approaching one of America’s favorite seasons.  No, I am not referring to autumn.  Rather, football season is almost here and that means, along with cookouts and fantasy draft parties, that sports betting is about to ramp up as well.  While the exact figure is impossible to calculate, it has been estimated that nearly $400 billion is wagered on sports in the United States each year.[1]  Of that, only about $4 billion, or one percent, is wagered legally in Nevada.[2]  And now, because of a recent decision by the Third Circuit Court of Appeals, sports wagering remains illegal in the State of New Jersey, which has for the past several years attempted to legalize the activity.[3]

In 2014, after losing its initial effort to overturn the Professional and Amateur Sports Protection Act,[4] the federal ban on sports betting commonly referred to as PASPA, New Jersey enacted a partial repeal of its laws prohibiting sports betting at casinos and horse racetracks in the state.[5]  This repeal was done in response to the language of the Third Circuit’s majority opinion in 2013 (“Christie I”), which upheld the constitutionality of PASPA.[6]  The majority in Christie I recognized a “false equivalence” between repeal and authorization and construed PASPA as freely permitting states to repeal their prohibitions on sports wagering.[7]  This is exactly what New Jersey attempted to do in reliance on Christie I.  However, the sports leagues successfully enjoined the implementation of the repealer, and the issue found itself back in the Third Circuit.[8]  The primary issue before the court was whether New Jersey, by partially repealing its prohibitions on sports wagering, violated PASPA by authorizing by law, sports wagering.

In a split 2-1 decision, a three-judge panel of the Third Circuit concluded that the 2014 New Jersey law partially repealing the state’s ban on sports wagering “violates PASPA because it authorizes by law sports gambling.”[9]  Even though the majority recognized the false equivalency between repeal and authorization, Judge Rendell wrote that the 2014 law must be read as “authorizing a scheme that clearly violates PASPA” as PASPA prohibits a range of state activity, the “least intrusive” of which is state authorization.[10]  Judge Rendell dismissed the wording of the law as “clever drafting,” which, even when coupled with a construction provision, cannot “escape the supremacy of federal law.”[11]  Thus, the majority held that the repealer was in fact state authorization of sports gambling in violation of PASPA.

The majority’s opinion is troubling in many respects.  The majority’s constrained logic looks past the actual wording of the law to the effect of law, ignoring the fact that all the repealer did was remove certain prohibitions against sports gambling.  In effect, the majority re-defines the word “repeal” to mean “authorization,” thus enabling a finding of a violation of PASPA.  In so re-writing the repealer, the majority makes the law do something that it plainly does not do on its face.  PASPA plainly prohibits affirmative state authorization of sports wagering.[12]  That is not what the 2014 repealer did.  All New Jersey did was remove its sports wagering ban as it applied to casinos and racetracks.  When the 2014 repealer was passed, New Jersey was doing nothing more than what Christie I explicitly permitted them to do.  The law did not authorize any person or group to conduct sports wagering at those locations nor did it provide any licensing requirements or regulatory schemes.  The majority now reads into the word “repeal” the meaning of the word “authorize,” which leads to the absurd conclusion that when a state removes legal prohibitions against a certain activity it is then granting, by law, state authorization to conduct that activity without doing anything more.  There is simply no way to reconcile the majority’s result in Christie II with that of Christie I.

Judge Fuentes dissented from the decision in Christie II.  Judge Fuentes’ decision to dissent is notable because he wrote the majority opinion in Christie I, upholding the constitutionality of PASPA, where he decried the false equivalency between repeal and authorization.  To Judge Fuentes, the majority’s logic amounts to “the same false equivalence [the Third Circuit] rejected in Christie I.”[13]  Judge Fuentes reaffirmed his prior line of thought in Christie I that “the lack of an affirmative prohibition of an activity does not mean it is affirmatively authorized by law.”[14]  Simply put, Judge Fuentes argues that it is impossible to conclude, as the majority does, that the repealer would “result[] in sports wagering pursuant to state law when there is no law in place as to several locations, no scheme created, and no state involvement.”[15]  Because he adheres to the common sense meaning of repeal and authorize, as well as the logic of Christie I, Judge Fuentes is unable to conclude that the repealer violates PASPA.

Reaction in New Jersey to the court’s decision was as expected.  New Jersey State Senator Ray Lesniak, a long-time proponent of legalized sports wagering, plans to push forward and ask the Third Circuit for a rehearing en banc and petition to the Supreme Court for review if necessary.  “This is too valuable to the state of New Jersey, to casinos, and to racetracks for us not to go all the way,” he was quoted as saying.[16]  The New Jersey Horse Racing Association, a party in the lawsuit, is also expected to seek review en banc.[17]  Joe Asher, the CEO of William Hill US, a prominent race and sports book based in Nevada, commented:

It’s pretty clear to me that this matter is far from over.  I remain convinced that legal sports betting will come to New Jersey.  It’s a matter of when, not if.  There’s a massive illegal sports betting market that exists, not only in New Jersey, but all across the country.  That serves to benefit only the criminals who operate it.  The sooner that market comes out of the shadows and into the sunlight, the better off we will be.[18]

While petitions for hearing en banc are infrequently granted, and petitions for cert to the Supreme Court even less so, politicians in New Jersey and legal scholars remain cautiously optimistic.  Daniel Wallach, a gaming and sports law attorney with Becker & Poliakoff in Fort Lauderdale, Florida, stated that “[t]his is an exceptionally important case.  I think New Jersey has a pretty good shot.”[19]

Since both Judge Rendell and Judge Barry are senior circuit judges, they would not be permitted to vote on whether or not to re-hear the case en banc.  However, both would be permitted, if they so choose, to sit on the case en banc if the active judges of the circuit grant review.[20]  It is likely that both Judge Fuentes and Judge Thomas Vanaskie, who dissented in Christie I and who would have held PASPA unconstitutional under the anti-commandeering doctrine, would vote for rehearing en banc.  Thus, it would only require the votes of six other active judges (assuming Judge Fuentes and Judge Vanaskie vote yes) to grant the hearing.  The parties have fourteen days from the date of the decision to file their request.  The key to whether en banc review is granted will be Judge Fuentes.

While New Jersey and other gaming jurisdictions in the United States await the resolution of this case, one reality is clear and that is that the status quo surrounding sports betting in the United States has failed and something needs to be addressed.  New Jersey United States Representatives Frank LoBiondo, who represents Atlantic City in Congress, and Frank Pallone, whose district includes Monmouth Park Racetrack, have recently introduced legislation to review and alter PASPA, as has Arizona Senator John McCain.[21]  The nation’s attitude towards sports gambling has shifted immensely since the passage of PASPA.  As Matt Youmans of the Las Vegas Journal-Review recently noted, sports wagering and odds making are routinely covered by ESPN, and both CBS and FOX Sports have dedicated gaming divisions.[22]  NBA Commissioner Adam Silver has openly called for a re-examination of PASPA and the legalization of sports betting.[23]  Meanwhile, the NFL, as well as other sports leagues, are hopping on the bandwagon of daily fantasy sports wagering, which is an unregulated area of gaming of questionable legality.[24]

Despite all of this, ninety-nine percent of all sports gambling in this country is done illegally, in the shadows, beyond the protection of the law.  One of the primary justifications of prohibiting sports gambling is that PASPA protects the integrity of the game.  While this may have been true at some point in time, it cannot truly be taken at face value now.  As Joe Asher noted above, the current system benefits the criminals, those who operate beyond the reach of the law.  State authorization and regulation would bring much needed transparency to this $400 billion a year enterprise.  It is long past the time for the proponents of PASPA to take their heads out of the sand and work with the states to create a workable solution and bring this market out of the shadows and into the sunlight of transparency.


*Jordan Hollander, Esq., holds a J.D., summa cum laude, from Rutgers-Camden School of Law and recently completed a clerkship with the Honorable Francis J. Vernoia, P.J. Cr., New Jersey Superior Court.  Mr. Hollander presently attends the William S. Boyd School of Law at the University of Nevada, Las Vegas, where he is pursing a LLM in Gaming Law and Regulation.

[1] See Joe Asher, Why Chris Christie is Right About Sports Betting, US News (June 26, 2012, 9:15 AM), http://www.usnews.com/opinion/articles/2012/06/26/why-chris-christie-is-right-about-sports-betting.  This estimate dates from 1999, when the National Gaming Impact Study Commission released its report.  The amount wagered on sports today likely greatly exceeds their estimates.

[2] See Howard Stutz, How Would Legalizing U.S. Sports Betting Change Nevada’s Industry?, Las Vegas Review-Jounal (Feb. 21, 2015, 8:07 PM), http://www.reviewjournal.com/columns-blogs/inside-gaming/how-would-legalizing-us-sports-betting-change-nevada-s-industry.

[3] The purpose of this blog post is to provide an update on New Jersey’s efforts to implement legal sports gambling.  For a more complete history of New Jersey’s constitutional challenge to PASPA, see Jordan Hollander, New Jersey and Sports Gambling: Perfect Together? A Look at Two Challenges to the Professional and Amateur Sports Protection Act and New Jersey’s Effort to Implement Sports Gambling, 18 Gaming L. Rev. & Econ. 799 (2014).

[4] Professional and Amateur Sports Protection Act, 28 U.S.C. §§ 3701–3704 (2012).

[5] N.J. Stat. Ann. § 5:12A-7 (West 2014); see Brent Johnson, Christie Signs Law Allowing Sports Betting in N.J., NJ.com (Oct. 17, 2014, updated Oct. 27, 2014), http://www.nj.com/politics/index.ssf/2014/10/chris_christie_signs_law_allowing_for_sports_betting_in_nj.html.

[6] See NCAA v. Governor of N.J., 730 F.3d 208 (3d Cir. 2013) (hereinafter “Christie I”).

[7] See id. at 233 (“In short, Appellants’ attempt to read into PASPA a requirement that the states must affirmatively keep a ban on sports gambling in their books rests on a false equivalence between repeal and authorization and reads the term ‘by law’ out of the statute, ignoring the fundamental canon that, as between two plausible statutory constructions, we ought to prefer the one that does not raise a series of constitutional problems.”).

[8] See NCAA v. Governor of N.J., — F.3d —, 2015 U.S. App. LEXIS 14955 (3d Cir. Aug. 25, 2015) (hereinafter “Christie II”)

[9] Christie II, 2015 U.S. App. LEXIS 14955, at *15.  The majority of the panel included Senior Third Circuit Judge Marjorie Rendell, the author of Christie II, and Senior Third Circuit Judge Maryanne Trump Barry.  Judge Julio Fuentes, who was the author of the majority opinion in Christie I, dissented here.

[10] Id. at *18-21.

[11] Id. at *20.

[12] PASPA makes it unlawful for a “governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact” sports wagering.  28 U.S.C. § 3702.

[13] Christie II, 2015 U.S. App. LEXIS 14955, at *24 (Fuentes, J., dissenting).

[14] Id. at *27 (Fuentes, J., dissenting).

[15] Id. at *32 (Fuentes, J., dissenting).

[16] See Brent Johnson, What’s next in N.J.’s sports betting bid after court rejects plan?, Star-Ledger (N.J.) (Aug. 27, 2015, 10:00 a.m.), http://www.nj.com/politics/index.ssf/2015/08/whats_next_in_njs_sports_betting_bid_after_court_r.html.

[17] See id.

[18] Telephone Interview with Joe Asher, CEO, William Hill US (Aug. 25 2015).

[19] See Johnson, supra note 16.

[20] See 28 U.S.C. § 46(c) (procedures for en banc hearings by U.S. Courts of Appeals).  Judge Rendell would further be permitted to participate en banc as she was in active service during the briefing and oral argument of this case, and only took senior status on July 1, 2015.

[21] See Johnson, supra note 16.

[22] See Matt Youmans, ‘Taboo’ tag no longer applies to sports betting, Las Vegas Review-Journal (Aug. 27, 2015, 11:35 p.m.), http://www.reviewjournal.com/columns-blogs/matt-youmans/taboo-tag-no-longer-applies-sports-betting.

[23] See Adam Silver, Legalize and Regulate Sports Betting, N.Y. Times (Nov. 13, 2014), http://www.nytimes.com/2014/11/14/opinion/nba-commissioner-adam-silver-legalize-sports-betting.html?_r=0.

[24] See Youmans, supra note 22.

 

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