New Jersey’s long-standing attempt to legalize sports betting has hit yet another bump in the road. For the third time, the Third Circuit Court of Appeals, in an opinion supported by 10 of the 12 Judges, that includes two dissents, has ruled against New Jersey finding that the state’s attempt to legalize sports betting violates federal law.
[pullquote align=”full” cite=”” link=”” color=”” class=”” size=””]Read the Third Circuit’s full opinion here.[/pullquote]
Since this battle has been going on for years, a brief background is required to put today’s decision in context.
The federal law in question, the Professional and Amateur Sports Protection Act (PASPA) is a 24-year old federal statute prohibiting states from sanctioning or sponsoring sports gambling. PASPA specifically allows sports betting in Nevada and included a provision that allowed New Jersey to legalize sports gambling if it enacted legislation to permit sports betting within one year of the PASPA’s effective date (New Jersey failed to do so).
Seeking to revive its struggling casinos, New Jersey enacted the Sports Wagering Law in 2012 (the “2012 Law”) permitting New Jersey authorities to license sports gambling in casinos and racetracks, and casinos to operate “sports pools.” Before licensing occurred, the NBA, NFL, MLB, NHL, and NCAA (the “Leagues”) brought a lawsuit against New Jersey, seeking a ruling that found the 2012 Law in violation of PASPA. That case, commonly referred to as “Christie I”, made it all the way to the Third Circuit, which ruled in favor of the Leagues finding that: (1) the 2012 Law did violate PASPA; (2) Congress had the authority to regulate sports gambling because it affects interstate commerce; (3) PASPA did not commandeer the state’s rights by forcing them to enact and enforce a federal regulatory scheme.
While the Third Circuit’s Christie I ruling was a win for the Leagues, it did provide a potential roadmap for another challenge by the state:
Under PASPA, a state may repeal its sports wagering ban, a move that will result in the expenditure of no resources or effort by any state official. On the other hand, a state may choose to keep a complete ban on sports gambling but it is left up to each state to decide how much of a law enforcement priority it wants to make of sports gambling, or what the exact contours of the prohibition will be.
Because of this, New Jersey kept fighting and enacted another law in 2014 (the “2014 Law”), partially repealing all of its state law prohibitions on sports gambling (as opposed to the 2012 Law, which authorized New Jersey authorities to license sports betting). As expected, the Leagues again filed a lawsuit seeking for the court to find the 2014 Law in violation of PASPA. The district court agreed, New Jersey appealed, and the Third Circuit – for the second time – ruled in favor of the Leagues. Seemingly out of chances, New Jersey asked the entire Third Circuit to rehear the case, a request that is very rarely granted, and to the surprise of many, the court acquiesced. When the Third Circuit agreed to rehear the case, its previous ruling on the 2014 Law was completely wiped out. That brings us to today’s opinion.
The Third Circuit’s Opinion
After lauding New Jersey’s attempts to “revive its troubled casino and racetrack industries,” the Third Circuit abruptly ruled that the 2014 Law violates PASPA.
The key is whether or not the 2014 Law “authorizes” sports betting (which would violate PASPA) or whether the act of repealing existing prohibitions on sports betting is not an “affirmative authorization” (which would not violate PASPA). The court sided with the Leagues in favor of the former.
The Third Circuit found that, even though the 2014 Law merely repeals existing New Jersey laws, it “provides authorization for conduct [sports betting] that is otherwise clearly and completely prohibited.” The court clarified its view on the repeal vs. authorize distinction and changed course from its earlier holding in Christie I:
In sum, even though the 2014 Law contains the word “repeal,” the actual impact of the law authorizes sports betting, thus violating PASPA.
Moreover, the Third Circuit found the exception in PASPA for New Jersey (that it did not take advantage of) particularly persuasive since it is “remarkably similar” to the 2014 Law, evidencing Congress’ intention that such a law would violate PASPA.
The Third Circuit was not persuaded by New Jersey’s argument that, in violation of the 10th Amendment, PASPA “commandeers” the states. In order for Congress to “commandeer” a state, it must impose a federal scheme on state officials and cannot merely invalidate contrary state laws. In Christie I, the court found that the anti-commandeering principle was not violated, because PASPA merely invalidates state laws attempting to regulate sports gambling and “does not require or coerce the states to lift a finger.” Here, the Third Circuit came to the same conclusion:
The Dissenting Opinions
As noted above, there are two dissenting opinions attacking different parts of the majority’s opinion.
First, Judge Fuentes disagreed with the majority’s interpretation that the 2014 Law is an “affirmative authorization by law.” In other words, Judge Fuentes believes that the 2014 Law strictly repeals New Jersey’s prohibition against sports betting and does not authorize the state to do anything, and therefore is not in violation of PASPA (which only prevents states from “authoriz[ing] by law” sports betting).
Second, Judge Vanaskie (who also dissented in Christie I) disagreed with the majority’s holding that PASPA does not commandeer the states. Remember that Congress is prohibited from “commandeering” the states by forcing them to implement federal programs.
In his Christie I dissent, Judge Vanaskie disagreed with the majority’s distinction and found no difference between “compelling state governments to exercise their sovereignty to enact or enforce laws on the one hand, and restricting state governments from exercising their sovereignty to enact or enforce laws on the other.” The majority in this decision, he says, confirmed his conclusion that such a distinction is “illusory”:
Hence, Judge Vanaskie again argues that the majority’s opinion does not give the states any option except to “maintain an anti-sports wagering scheme” directly in violation of the anti-commandeering principle.
What Happens Next?
New Jersey and those attempting to overturn PASPA have a few options left on the table.
First, New Jersey will appeal this decision to the U.S. Supreme Court.
N.J. @SenatorLesniak says state will appeal to the U.S. Supreme Court regarding today's sports betting ruling, but notes it is a long shot.
— David Payne Purdum (@DavidPurdum) August 9, 2016
It has 90 days, or until November 11th, to ask SCOTUS to take the case. While all SCOTUS petitions face long odds, this opinion deals with constitutional issues – one thing that SCOTUS looks for – and contains multiple dissenting opinions, demonstrating a difference in opinion among federal appeals judges.
Second, as noted in the dissent by Judge Fuentes, New Jersey could pursue the nuclear option, and completely repeal all of its sports betting laws, setting up a completely unregulated environment:
Finally, as noted by Dan Wallach (who also broke the story), other states, follow New Jersey’s example, could partially repeal their sports gambling laws and test a different federal circuit:
Today's opinion does not foreclose possibility of other partial repeal laws passing muster under PASPA. Geographic repeal could work.
— Daniel Wallach (@WALLACHLEGAL) August 9, 2016
If another state is successful, it would set up a split in federal appellate courts, making a review by the U.S. Supreme Court much more likely. Of course, Congress could repeal PASPA and implement a new law legalizing and regulating sports gambling.
Thus, while today’s decision slows down the fight for legalized sports gambling outside of Nevada, the fight is far from over.