Photo credit: https://www.flickr.com/photos/hinnosaar/

Photo credit: https://www.flickr.com/photos/hinnosaar/

Patrick Doughty and Joshua Calo, Contributors

February 20, 2016

The legal battle over sports betting in New Jersey waged on last Wednesday before an en banc session of the Third Circuit Court of Appeals in Philadelphia.  The en banc hearing was granted last fall after the court ruled in favor of the professional sports leagues in National Collegiate Athletic Ass’n v. Governor of New Jersey,[1] commonly referred to as Christie II.

For several years, New Jersey has sought to legalize sports betting in casinos and racetracks. However, several professional sports leagues and the NCAA have twice stopped its efforts by invoking the Professional and Amateur Sports Protection Act[2] (“PASPA”), which prohibits states from “authorizing” sports gambling.  In Christie I,[3] the Third Circuit rejected New Jersey’s Constitutional challenge to PASPA, but to avoid conflict with the Tenth Amendment held that PASPA did not bar New Jersey from repealing its existing prohibitions on sports betting.  In 2014, New Jersey responded by partially repealing its prohibitions, which would have eliminated certain restrictions on sports betting at casinos or racetracks.  However, in Christie II, the Third Circuit held that this partial repeal had the same effect: authorizing sports gambling in violation of PASPA by “selectively grant[ing] permission to certain entities to engage in sports gambling.”[4]

The Moorad Sports Law Journal’s Editor-in-Chief, Patrick Doughty, and Executive Editor, Josh Calo, attended the hearing and have shared their thoughts and takeaways with the blog.[5]


Patrick Doughty:  First, I think we should acknowledge how well both sides argued their cases.  It was great watching Ted Olson and Paul Clement, two of the best lawyers in the country, present their arguments.

As for the hearing, the biggest takeaway for me was how the court opened the door to reconsidering the Tenth Amendment “anti-commandeering” issue that was decided in Christie I.  Judge Rendell said that because the Third Circuit was sitting en banc, “Christie I is now in play.”  The Tenth Amendment really became the focal point throughout the hearing (that noise you’re hearing is Con Law professors everywhere cheering).

Ted Olson, arguing for New Jersey, made it clear that the court could interpret PASPA one of two ways: 1) the federal law requires the states to pass laws that make sports gambling illegal or 2) states are merely prohibited from passing laws that “authorize” sports betting.  If it’s the former, then, Olson noted, it is a Tenth Amendment violation.  If it’s the latter, then the 2014 Law simply repeals existing laws, which is completely under the purview of New Jersey’s legislative authority.  This is a brilliant “Heads: New Jersey wins; Tails: the Leagues lose” argument.

This really wasn’t a debate over the merits of sports betting, as I think many people expected.

Josh Calo: I agree.  Not only is Christie I on the table, but I think it’s significant that several of the Judges seemed open to seriously entertaining New Jersey’s Constitutional arguments.  To me, this was really the highlight of the day for New Jersey.  The Judges spent considerable time pushing both attorneys on the anti-commandeering issue, and I think Ted Olson was very successful in highlighting the broader Tenth Amendment concerns that the court side-stepped in Christie I.

Several Judges posed questions to Paul Clement (who argued for the Leagues) that indicated some serious concerns with the Leagues’ attempt to characterize New Jersey’s partial “repeal” as an effective “authorization” of sports betting, and how this interpretation of PASPA could implicate New Jersey’s basic regulatory power.  To paraphrase some key questions:

  • Judge Ambro asked: what partial repeal would be permissible under PASPA? [Clement cited the possibility of decriminalizing bets under $1,000 between family members].
  • Judge Fuentes asked: The Leagues acknowledge that a complete repeal would not violate PASPA, but chaos would ensue. If the state stepped in to enact regulations to address the chaos, that violates PASPA?  [Clement responded: “maybe, maybe not.”]
  • Judge Hardiman asked: What if there was a complete repeal, and then New Jersey subsequently prohibited sports betting by minors. . . . The problem is what neutral principle we can apply [to distinguish whether the state’s action constitutes a permissible “repeal” or impermissible “authorization”].

So I think these types of questions demonstrate real concern with the basic idea of trying to parse out when a state effectively “authorizes” sports betting in violation of PASPA, by simply repealing existing prohibitions.

Ted Olson really capitalized on this in his rebuttal by arguing: This is the exact problem with the Leagues’ position.  What can New Jersey do?  This reading of PASPA is “vague” and amounts to “micromanaging” and “tinkering” with what New Jersey can do.

One final point on the constitutional issue is that some of the judges really focused in on the core point of the anti-commandeering doctrine — that Congress cannot pass statutes requiring the states to implement federal policies.  Some of the judges pressed the point that what Congress really wanted to do was impose a national prohibition on sports betting, but to exempt Nevada.  And Mr. Clement acknowledged that “Congress was drawing a compromise” by prohibiting states from authorizing sports betting, but grandfathering in states like Nevada that already had legalized sports betting regimes.

Judge Jordan, in particular, went back to this issue from Christie I — of whether PASPA amounts to a Congressional mandate for the states to implement a federal policy.  In questioning Mr. Clement, Judge Jordan notably stated: since the court is rehearing the case en banc, we can go back to fundamental anti-commandeering principles.  He directly cited Printz v. United States,[6] and New York v. United States,[7] and asked:

  • Isn’t Congress in effect saying to New Jersey [through PASPA], we want to prohibit sports betting. We don’t want to set up a regulatory regime.  You go do it, and take heat from your constituency.
  • [If New Jersey can’t repeal it’s own prohibition], isn’t the Federal Government saying [to New Jersey], you go send your government enforcement agents [to prevent sports betting], instead of us sending the FBI.

My takeaway on this point is that New Jersey really benefited from the Tenth Amendment being in play, and it probably had the stronger showing on this issue.  But overall, many of the judges seemed persuaded by Mr. Clement’s reiteration of the statutory arguments from Christie II.  So I think this case will come down to how the judges decide to construe the New Jersey statute, and how narrowly they want to decide the case.

PD:  That’s a great point and I think that is where the Leagues tipped the court in their favor.  I think the Leagues were successfully able to shift the focus away from the constitutional dilemma by making the question at issue much simpler.  The Leagues asked the court to consider “the entire body of law” after the repeal.

In essence, the Leagues are arguing that the repeal was really an affirmation “by law,” even though the only thing the New Jersey legislature did was remove laws.  By asking the court to consider if the remaining laws on the books effectively “authorized” sports betting, the focus shifted to the actual the intent of the state in repealing these specific prohibitions.  It’s a great argument because the repeals are, in fact, so specific – only in casinos, not on New Jersey college athletic competitions, etc.  And, it gives the court an easy way to avoid the Tenth Amendment implications and find for the Leagues on very narrow grounds.

However, the Leagues’ most compelling argument for why this law is an “authorization by law” is based in the Constitution of New Jersey.  This was addressed in a footnote in one of the briefs filed by the Leagues, but according to the state constitution, “all forms of gambling conducted in a casino ‘shall be determined by or pursuant to the terms of [a] law authorizing the establishment and operation thereof.’”  Therefore, the Leagues argued that the legislature is “powerless to permit any form of gambling in casinos that is not specifically authorized by law.”[8]  This seems like a pretty big trump card, but I don’t think it was really debated much at the hearing.

What interests me the most, however, is the distinction the Leagues made between a state that has no prior history of criminalizing any type of sports betting and a state that has such laws already established on the books.  Obviously, under PASPA, neither state could enact laws authorizing sports betting.  However, Judges Fuentes and Hardiman made the point that, under the Leagues’ interpretation of PASPA, the state with the blank slate could incrementally impose restrictions on sports gambling.  For example, the state could begin with a restriction on minors, then add a restriction limiting betting to casinos, etc.  But a state with current prohibitions cannot, without violating PASPA, wipe away all of their laws and then incrementally impose re-restrictions.  That seems hard to conceptualize.

JC:  Yes, that’s true.  There are certainly some troubling aspects of PASPA in the way it controls and distinguishes between different types of state action.  Unfortunately for New Jersey, here is how I see this playing out: Paul Clement very persuasively argued the basis for the Leagues to win on very narrow and case-specific grounds.  And for many of the reasons that you highlighted, I think the Judges may take that lead to avoid the difficult Constitutional and statutory issues.

In the Leagues’ brief, Mr. Clement began his argument: “This is a case of deja vu all over again. . . . [D]issatisfied with this Court’s conclusion that nothing in the Constitution allows it to violate PASPA, New Jersey has decided to ignore that decision and, once again, press ahead with its plans to authorize sports gambling in casinos and racetracks.”[9]  This was the theme that Mr. Clement emphasized throughout oral arguments, and I think he was effective in alleviating many of the Judges broader concerns with PASPA.

For example, Ted Olson argued that the reason New Jersey’s “partial repeal” does not “authorize” sports betting is because the statute is saying New Jersey is “neutral” on sports betting.  However, a line of questioning from Judge Jordan highlighted the weakness of this argument.  Judge Jordan observed, New Jersey is effectively controlling “When, Where, and How” sports betting will be permissible; and that this is the “fourth or fifth iteration of New Jersey trying to get to the same point.”  Judge Krause also pressed the question: “Isn’t this just an enlargement of licensing” — highlighting the fact that the existing prohibition is only repealed as to sports betting in state-licensed casinos and race tracks.  In my opinion, New Jersey’s weakest moment came with Judge Hardiman’s observation: If a bookie can’t open a sports gambling establishment across the street from a casino, but he could do so in a casino, isn’t that New Jersey authorizing sports betting?

One final point I think is telling.  New Jersey really hung its hat on language from Christie I, that “[n]othing in [PASPA’s] words requires that the states keep any law in place,”[10] — and as Mr. Olson urged at the very conclusion of his rebuttal, “New Jersey took [Christie I] on its word.”  But as you said earlier, Judge Rendell, who authored Christie II, was the one who acknowledged that “Christie I is now in play because we are sitting en banc.”  In the same breath, Judge Rendell flatly stated to Mr. Olson: “New Jersey can’t dictate to federal courts how to read a federal statute.”

For the Judges who believe that New Jersey’s partial repeal is, in the words of Mr. Clement, “authorization in sheep’s clothing,” this demonstrates an attractive option.  Uphold Christie I’s core holding that PASPA does not violate the 10th Amendment, but qualify the interpretation that “[n]othing in [PASPA’s] words requires that the states keep any law in place.”  This would allow the Court find that under these very unique circumstances, New Jersey’s partial repeal constitutes an authorization of sports betting in violation of PASPA, and that such an interpretation of PASPA does not violate the 10th Amendment.

I think this is the most likely outcome.  It would permit the Judges to reach a very narrow consensus, avoid the serious Constitutional concerns associated with PASPA, and save for another day the thorny question of under what precise circumstances does PASPA permit a state to partially repeal its existing prohibition on sports betting.

PD:  Yes, I think you are probably right.  I don’t see the court upholding the 2014 law, but think it will decide the case on very narrow grounds.

Also, as a final point on this, you can’t have a gambling article without talking about the giant elephant in the room — Daily Fantasy Sports.  No one wanted to or was able to talk about it and it was only mentioned once, but the court’s decision may be important to whether state legislatures can indeed pass regulations governing DFS.  Attorneys General have already considered DFS gambling and thus, it would seem, PASPA would construe any regulation of DFS to be authorizing sports gambling.

It is unclear if the professional leagues would challenge any of the DFS regulatory laws, considering how deeply invested or connected most are to the daily fantasy industry.  But, as Christie II points out, relief under PASPA is general and not specific to one particular party.[11]  Therefore, if the NCAA, which has become more vocal in its opposition to Daily Fantasy, files a suit, DFS could be in jeopardy across all sports.


 

[1] 799 F.3d 259 (3d Cir. 2015) [hereinafter “Christie II”].

[2] 28 U.S.C. §§ 3702‒3704 (2012)

[3] 730 F.3d 208 (3d Cir. 2013) [hereinafter “Christie I”].

[4] For additional background surrounding the litigation of Christie I and Christie II, see Joshua M. Peles, Note, NCAA v. N.J.:  New Jersey Rolls the Dice on a Tenth Amendment Challenge to the Professional and Amateur Sports Protection Act 22 Moorad Sports L.J. 149 (2015), Patrick Doughty, Comment, Pound for Pound:  A Legal Analysis of the Gambling, Alcohol, and Taxation Issues the NFL Must Weigh as it Expands to London, 22 Moorad Sports L.J. 593, 596 (2015), Amelia Curotto, Note, Hanging on by a “Tail”:  New Jersey’s 2014 Effort to Legalize Sports Gambling Stays Alive in the Third Circuit, 23 Moorad Sports L.J. (forthcoming May 2016), Jordan Hollander, Update on New Jersey’s Efforts to Implement Sports Gambling, Moorad Sports L.J. Blog (June 22, 2014), http://lawweb2009.law.villanova.edu/sportslaw/?p=2871, and Jordan Hollander, Third Circuit Strikes Down NJ Sports Wagering Again, Appeal Likely, Moorad Sports L.J. Blog (Sept. 4, 2015), http://lawweb2009.law.villanova.edu/sportslaw/?p=2922.

[5] Because official transcripts of the oral arguments have yet to be released, representations of the Judges’ or attorneys’ statements at oral arguments are based on the authors’ notes and recollections.  They should not be considered direct quotation.

[6] 521 U.S. 898 (1997) (holding that provision of federal firearm statute requiring state law enforcement officers to implement statute’s background check requirement violated Tenth Amendment).

[7] 505 U.S. 144 (1992) (holding that provision of federal radioactive waste disposal statute requiring states to either arrange for disposal of radioactive waste or “take title” of such waste compelled states to enforce federal regulatory program in violation of Tenth Amendment).

[8] Response Brief of Plaintiffs-Appellees at 20 n.1, NCAA v. Gov. of N.J., Nos. 14-4546, 14-14568, 14-4569 (3d Cir. filed Feb. 13, 2015) [hereinafter Leagues’ Response Brief, Christie II].

[9] Leagues’ Response Brief, Christie II, supra note 8, at 13-14 (emphasis added).

[10] Christie I, 730 F.3d 208, 232 (3d Cir. 2013) (emphasis added).

[11] Christie II, 799 F.3d at 268.  “PASPA does not limit its prohibition to sports gambling involving entities who actually bring suit.  PASPA provides that “[a] civil action to enjoin a violation of section 3702 . . . may be commenced . . . by a professional sports organization or amateur sports organization whose competitive game is alleged to be the basis of such violation.’”  Id.

 

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