A law that prohibits sports betting in all but four U.S. states is being challenged in New Jersey, but legal experts believe the effort faces an uphill battle in federal court there.
The Professional and Amateur Sports Protection Act (PASPA) was enacted in 1992 after Congress, through a series of public hearings the year before, concluded sports betting was “a national problem”. Then-U.S. Sen. Bill Bradley, a New Jersey Democrat and former professional basketball player, hatched PASPA amid a groundswell of concern from the country’s politically powerful sports leagues over game integrity and problem gambling.
Before PASPA took effect on Jan. 1, 1993, however, Montana, Delaware, Nevada and Oregon had lawfully offered sports wagering - or had enacted legislation permitting it - and were therefore exempt from the law. States that had operated casino gambling for the 10-year period preceding PASPA’s effective date were also given a one-year window during which to usher in sports betting regulation if they so chose.
That window, of course, was devised with Atlantic City’s gambling millions in mind. Although a sports betting bill was subsequently drafted in the New Jersey Legislature, the National Football League launched an effective lobbying campaign that kept the bill from ever reaching a vote.
With New Jersey having missed its opportunity, Nevada, which now boasts 177 licensed sports books, was left with a de facto monopoly on sports betting.
By and large, PASPA has remained out of the headlines until recently when Delaware announced plans - then enacted legislation - to add sports betting and casino-style table games to its racetrack slot parlors.
Given that Delaware and New Jersey share a border in the densely populated Northeast, heated political discourse over unfair competition has ensued in the Garden State.
In the last five years, N.J. Assemblyman Jeff Van Drew, who chairs the Assembly’s Committee on Tourism and Gaming, has pushed at least three bills seeking the legalization of sports betting at Atlantic City’s casinos.
All of which flopped.
Now, with Atlantic City suffering beneath the weight of the recession, a partial smoking ban and increased competition from racinos in key feeder markets like New York and Pennsylvania, a cohort of New Jersey politicians and trade associations are arguing that it’s time PASPA was overturned.
In March, the Interactive Media and Entertainment Gaming Association - an Internet gambling lobbying group better known by its acronym, IMEGA - was joined by New Jersey’s standardbred and thoroughbred horse breeders in a lawsuit asserting that PASPA should be struck down as unconstitutional.
“This federal law deprives the state of New Jersey of over $100 million of yearly revenues, as well as depriving our casinos, racetracks and Internet operators of over $500 million of gross income,” state Sen. Raymond J. Lesniak, who is also party to the suit, said in a press briefing earlier this year.
Patrick T. O’Brien, a gaming attorney with Greenberg Traurig in Florida, told Casino Journal the lawsuit follows a similar but ultimately unsuccessful challenge launched against PASPA two years ago. The plaintiff in that suit, a New Jersey resident named James Flagler, argued that because gambling - more specifically, sports betting - is not mentioned in the U.S. Constitution the decision on whether to allow it falls not to the federal government but to the states. Flagler’s argument relied on the 10th Amendment, which reserves to the states all powers the Constitution does not expressly grant to the federal government. O’Brien said a U.S. District Court in New Jersey dismissed the case because Flagler lacked “standing” - which in legal terms means he could not show injury.
But the odds look a little better this time around, O’Brien said.
IMEGA, Lesniak and the breeders associations are arguing that Congress is not uniformly exercising its constitutionally granted power to regulate interstate commerce. PASPA, they assert, creates an inconsistent, discriminatory environment under which four states get to reap the economic benefits of sports betting at the expense of the remaining 46.
“PASPA allows Nevada, Delaware, Oregon and Montana to have a cartel on sports betting in general in the United States,” the group says pointedly in a 39-page court filing.
The filing, called a complaint and demand for declaratory relief, accuses the U.S. attorney general and the U.S. attorney for the District of New Jersey, who are listed as defendants, of eight other constitutional violations.
O’Brien thinks the arguments presented in the complaint are sound enough to prevail, but said that some of the parties may have difficulty gaining standing - just as in the Flagler case.
“The difficulty with the present suit is that it was filed by Senator Lesniak, IMEGA and two state horse racing associations,” he said. “Neither the state senator nor IMEGA would have standing to sue, but it is possible that horse racing associations could. That will be determined by the court.”
Joseph M. Brennan Jr., the chairman of IMEGA, told Casino Journal that his association will worry about standing when it has to. “Let’s let the judge rule, and then we’ll see,” he said.
Looking ahead, O’Brien believes that for the lawsuit to succeed it will eventually require backing from the state government. Although Gov. Jon S. Corzine in July petitioned the court to join the lawsuit, he did so as an individual - a move O’Brien explains is “not good enough”.
“Generally speaking, it is usually the state attorney general who can bring a suit of behalf of a state and no one else,” he said. “Although it’s possible that one or more of the present plaintiffs will be granted standing, what New Jersey really needs to do is to have the state attorney general file to have the state join in the suit as a plaintiff. If that happens I have little doubt that the statute will be declared unconstitutional.”
Even were the state government to get on board, the case is unlikely to be decided in District Court, Paul S. Hugel, a gaming attorney with Clayman & Rosenberg in New York, says.
“[District] judges are generally loathe to strike down an act of Congress as unconstitutional,” he said, adding that the case will likely head to the U.S. Court of Appeals for the 3rd Circuit for a decision.
“It is impossible to predict how the District Court will ultimately rule on the complaint,” Hugel said, “but in my opinion the plaintiffs have raised some serious constitutional issues. Hopefully, the District Court judge will put this case on the fast track and it will get before the 3rd Circuit quickly.”
Before District Judge Garret E. Brown rules on the complaint he must first decide whether to allow Corzine, who faces re-election this year, to intervene.
That decision was expected last month.