Third Circuit Hears Arguments in N.J. Sports Gambling Case

On February 18, 2016, in SELS Blog, by Matthew Weiss

By Meg Lane*

The U.S. Court of Appeals for the Third Circuit heard oral arguments Wednesday on a controversial issue in New Jersey that has made headlines in recent months: the legalization of sports betting.[1] The hearing was for an en banc appeal featuring 12 judges who heard arguments on New Jersey’s plan to legalize sports books and offer gambling in its casinos and racetracks à la Las Vegas sports betting system.[2] A decision will likely come within six months.[3]

A major roadblock for New Jersey in their quest to capitalize on the lucrative business of sports betting is the Professional and Amateur Sports Protection Act (“PASPA”).[4] PASPA prohibits states from authorizing, sponsoring, operating or licensing sports betting, with specific grandfather exceptions for four states (Nevada, Oregon, Delaware, and Montana).[5] This case pits the state of New Jersey, which started this battle when Governor Chris Christie signed its Sports Wagering bill into law in 2014, against national sports leagues like the NFL and NCAA, who argue that PASPA prohibits New Jersey from following through on their legalization plan.[6]

After the 3rd Circuit initially upheld the district court’s ruling in favor of the sports leagues, New Jersey filed a petition for rehearing en banc on September 8; it was granted on October 14.[7] En banc hearings are rare in the Third Circuit, as the court grants only about 1/1000 of requests for them; reversals in these hearings are common, however, as six of the eight en banc cases under the current chief judge have resulted in reversals.[8] New Jersey’s counsel must convince a majority of seven judges of the legality of its sports gambling operations, as a 6-6 stalemate would result in victory for the leagues.[9] Noted sports lawyer Daniel Wallach predicts an 8-4 or 7-5 decision in favor of the leagues after evaluating Wednesday’s oral arguments.[10]

The law in question, SB 2460, was passed in 2014 in New Jersey and prohibits wagering on New Jersey college teams and on any collegiate competition occurring in New Jersey. It limits sports wagering to “persons 21 years of age or older situated at such location[s],” namely casinos and racetracks.[11]

Although it has argued in the past that PASPA is blatantly unconstitutional (an argument rejected by the Third Circuit), perhaps the crux of New Jersey’s argument now is the narrow scope of PASPA in how it applies to SB 2460.[12] New Jersey argues that while the Act prohibits states from authorizing betting, Governor Christie’s law merely “took the state out of the regulation business” and only partially repealed the state’s prohibition on sports betting – allowing it in casinos and at racetracks.[13] Its hopes are high for a victory, as a decision in the state’s favor would lead to New Jersey’s “finally hav[ing] access to this billion-dollar industry like other states do today.”[14]

Still, the complicated issue of whether a partial repeal of the state law prohibiting sports betting constitutes true “authorization” of sports betting remains to be determined in this appeal. The previous opinion from the Third Circuit on this issue held that because SB 2460 did not strike down all of sports gambling regulation in New Jersey, it violated PASPA in its blatant authorizing of “conduct that is otherwise clearly and completely legally prohibited” in certain locations in the state.[15]

The leagues – led by the NCAA – view legalized statewide sports betting as a major threat to the integrity of the game.[16] Interestingly, however, the NBA is not of this view – it now takes the stance that “legal, regulated sports betting in a transparent market better protects the integrity of the game than the massive unregulated market currently serving the U.S.”[17]The NBA hopes for a federal approach to legalizing sports betting rather than a state-by-state system, though, so it remains on the opposing side of the state of New Jersey in this case.[18]

This appeal is the latest headline in a slew of legal action related to sports betting of late. Pennsylvania passed a resolution asking Congress to repeal PASPA just last week, and other states are in the process of considering passing sports betting bills that could go into effect if the statute is indeed repealed.[19]

The impact of this decision will be felt around the nation, as it may finally bring clarity to the gray issue of sports betting legalization that has become a hot topic in the media. While the Third Circuit’s decision to hear the appeal is telling, critics seem to feel that the future holds more of the same, as they predict the court will affirm its past decision in favor of the leagues.

Perhaps after this high-stakes issue is decided, we will see more litigation in the area of Daily Fantasy Sports and online gambling, which has become a lucrative and controversial part of both the college and professional sports arenas of late.  DFS currently occupies a legal gray area that generally prevents it from subjection to traditional betting laws, but its rising popularity has brought much scrutiny regarding its categorization in this sense. If the hammer comes down on sports betting in the books, online avenues for sports gambling and fantasy sports play could be next.

For more information on this topic, see our article on an earlier appeal to the Third Circuit.


*Staff Writer, Villanova University Sports and Entertainment Law Society Blog; J.D. Candidate, May 2018, Villanova University School of Law.

[1] Joe Drape, Legal Heavyweights Enter Round 3 on New Jersey Gambling Case, N.Y. Times (Feb. 17, 2016), http://mobile.nytimes.com/2016/02/18/sports/new-jerseys-fight-to-legalize-sports-betting-continues.html?referer=&_r=1

[2] See id.

[3] See id.

[4] See id.

[5] See id.; see also http://www.onlinegamblingsites.com/law/paspa/

[6] See Drape, supra note 1.

[7] See id.

[8] See id.

[9] See id.

[10] See id.

[11] Nat’l College Athletic Ass’n v. Governor of N.J., 799 F.3d 259, 263 (3d Cir. 2015).

[12] See Drape, supra note 1.

[13] See id.

[14] David Purdum, Future of sports betting once again at stake in New Jersey, ESPN Chalk (Feb. 17, 2016), http://espn.go.com/chalk/story/_/id/14785562/chalk-previewing-latest-new-jersey-sports-betting-appeal

[15] NCAA, 799 F.3d at 265.

[16] See Purdum, supra note 14.

[17] See id.

[18] See id.

[19] See id.

 

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