Sports betting: what does NJ’s Supreme Court hearing mean for US?
The recent surprise decision by the US Supreme Court to hear New Jersey’s appeal case that its sports betting law violated the 1992 Professional and Amateur Sports Protection Act (PASPA), has given the state’s bid to revive a state statute legalising sports betting a major boost.
By Amanda McCormack
The state has been trying to legalise sports betting since a 2011 referendum voted in favour of it.
A federal appeals court ruled last year that the 2014 New Jersey statute that permits sports betting at casinos and racetracks violated the 1992 PASPA law, which prohibits sports wagering activities in all US states, with the exception of Nevada, Delaware, Montana and Oregon.
In response New Jersey Governor Chris Christie approached the Supreme Court to appeal the ruling, arguing that the federal law infringes on state sovereignty, as laid out in the US Constitution.
Verbal arguments are set to be heard in the Supreme Court’s next term which begins in October.
The development, although positive for the betting industry as the Supreme Court only opts to hear around 1% of cases, opens up a plethora of unanswered questions:
- If the Supreme Court finds in New Jersey’s favour, will the legalisation still just apply to land-based casinos and racetracks or will it expand to online?
- Will the regulation be based on a federal or state structure?
- And how will it affect other states looking to legalise sports betting?
It is most likely, says US gaming lawyer Jeff Ifrah of Ifrah Law, that if the Supreme Court finds in favour of New Jersey the legalisation of sports betting in the state will just apply to bets placed in land-based casinos and racetracks (as this is what state residents voted for and was written into a bill in 2011).
But could it influence a move to online sports betting? Even if it doesn’t, it definitely brings the possibility closer.
A positive decision could also see other states look to take the opportunity to push their own cases for legalisation, especially if PASPA is repealed.
In turn this could drastically change the US betting landscape, along with making things extremely complicated for inter-state regulations. However it is early days.
New Jersey’s fight
New Jersey has experienced a bumpy road so far on its journey to legalising sports betting.
It hit its first road block after state governor Chris Christie signed a bill into law in 2012 on the back of the state voting to offer sports betting in the state’s casinos and racetracks.
The obstruction consisted of four major professional sports leagues and the National Collegiate Athletic Association (NCAA) filing a lawsuit in August 2012 in the District Court seeking an injunction, saying the New Jersey law would violate the provisions of PASPA.
The court issued a permanent injunction against New Jersey, preventing it going forward with its plan to offer regulated sports betting at casinos and racetracks.
Subsequently, the Third Circuit Court of Appeals upheld the ruling, after which the US Supreme Court refused to hear the case.
In October 2014, Christie signed a new version of the state law to allow sports betting with additional provisions, which was known as the Sports Wagering Act of 2014.
This again saw the sports leagues take the case to court with a similar result, but the difference this time was that the Supreme Court agreed to hear the appeal.
William Hill’s response
William Hill has a shop at Monmouth Park racecourse in New Jersey, so is ready if the Supreme Court gives the go-ahead to legalise sports betting in the state.
In response to the Supreme Court’s decision to hear the case, chief executive Philip Bowcock praised the move, saying it was a “welcome development”.
The bookmaker currently has nearly 30% of Nevada's sports betting market, so the company could be seen to have a vested interest in the expansion of legal sports betting to other states.
If it can replicate that kind of revenue across the whole of the US it will be looking at significant profits, but for Bowcock, the point is that “it is time to recognise that PASPA has failed as a law. We believe it is right that all parties, including the American sports leagues, now come together and establish a new framework of regulation. That will enable sports betting to be enjoyed by millions of Americans”.
He adds: “At the same time more than 100,000 jobs could be created and billions of tax raised. William Hill is now Nevada’s leading sports betting company and we stand ready to take advantage of an opening up of the sports betting market in other states.”
AGA welcomes decision
The American Gaming Association (AGA) is also a big supporter of the New Jersey case. It launched the American Sports Betting Coalition (ASBC) in June to fight to overturn PASPA.
Earlier this year the AGA commissioned a national survey by Greenberg Quinlan Rosner (GQR) which showed that US sports consumers wanted more engagement with the sports they followed, including the legalisation of sports betting.
The survey found nearly six out of 10 Americans were in favour of ending the federal sports betting ban and allowing individual states to decide whether to offer sports betting.
On the back of this the AGA decided to adopt the following public policy principles:
- Defer to states regarding the desirability of regulating sports betting as all forms of casino wagering;
- Ensure the integrity of sports betting and sports through state licensing and regulation;
- Make all sports betting businesses transparent to law enforcement; and
- Ensure a tax regime does not undermine regulated sports betting operations’ ability to compete against illegal offshore operators.
In a response to the Supreme Court’s decision to hear New Jersey’s case the AGA released a statement saying: “The Professional and Amateur Sports Protection Act (PASPA) of 1992 has failed to protect sports and fans. PASPA, which is approaching its 25th anniversary, is fuelling an unregulated $150bn illegal gambling market that continues to deprive states of vital public funding for services such as law enforcement and infrastructure.
“We are pleased the Supreme Court appears to have responded favourably to our arguments as to why they should hear this important case. And we are hopeful their engagement will provide further encouragement for Congress to take the steps necessary to create a regulated sports betting marketplace in the United States.
“The gaming industry, and the American Sports Betting Coalition, is committed to working with all relevant stakeholders to build a system that protects states' rights, fans and the integrity of sports.”
Likelihood of New Jersey winning?
Ifrah thinks New Jersey has a good chance of winning the case, he told iGaming Business: “I think the likelihood for the Supreme Court to rule in New Jersey’s favour is strong. There are several promising aspects in play here.
“First, the Court’s overturn rate is high, with the percentage of cases that were affirmed last year below 20%. Second, the high court was forced to hear most of the cases they affirmed due to lower courts issuing contradictory rulings on the same issue.
“In contrast, the NJ case was struck down twice, in 2012 and in 2014, and the US 3rd Circuit Court of Appeals upheld both of those rulings. In 2015, the state also lost a special en banc hearing, with all 12 judges upholding the constitutionality of PASPA. So I don’t know why the Court would be interested in hearing this matter now, unless it’s to repeal PASPA and uphold states’ rights guaranteed by the Tenth Amendment.”
For Ifrah, there aren’t that many obstacles in the way of New Jersey winning as public opinion on gambling in the US has changed a great deal since the state set out to legalise sports betting for its residents.
“The popularity and prevalence of fantasy sports, online poker, and mobile prize-based gaming has paved the way for acceptance and interest by consumers — and even the leagues themselves.”
What next?
With all the rebuffs, this is the furthest New Jersey has got in its quest for legal sports betting.
But what happens if it is successful? Ifrah says from a legal perspective, nothing immediate. “As the case moves from certiorari to its merits stage, there will be new court filings, a brief on merits, oral arguments, responses… a final decision will not happen before 2018,” he says.
However, it is clear that a win for the state could result in a domino effect, especially seeing as other states, such as New York, Michigan and South Carolina, have already taken measures to follow in New Jersey’s footsteps.
“A win will mean the repeal [of] PASPA and allow the states to legalise betting and wagering on sporting events,” Ifrah adds.
“The states will have to pass detailed legislation and create tax and regulatory frameworks, including inter-state agreements, licensing guidelines, consumer protection and education frameworks, ethics guidelines and compliance monitoring. A lot will have to be done and it’s in states’ best interests to get started now.
“Already this year eight states have introduced sports betting bills, and several others have added (or deleted) language from existing laws which will allow them to participate in this new section of the gaming industry.”
He adds that the current legislation being discussed in the New Jersey case only caters for sports betting at casinos and racetracks.
“Our trade association is working with the states to ensure there is an online opportunity provided for consumers. Consumers want to get online and not have to physically be inside a casino to get or wager.”
Situation in other states
Ifrah ascertains that if New Jersey does win its case, the change in legal terms will be to state, rather than federal, regulation and will largely rely on regulations already in place that govern land-based casinos and racetracks.
But many hope that if PASPA is repealed nationally it will be down to individual states whether they legalise sports betting or not.
And if they could and did so successfully, would that see the end of Las Vegas as the betting capital of the US? Probably not, bookies such as William Hill, with its large Nevada presence, have backed New Jersey’s case against PASPA and do not believe Las Vegas is under threat.
However, it is worth considering how the US gambling landscape might change and how different regulations for different states would fit together and work, as at the moment this is unclear.
The potential introduction of online sports betting in the future could complicate this even further.
Lawmakers in states such as New York, Michigan and South Carolina have already introduced legislation seeking to legalise sports betting, and others are also looking to do the same.
If New Jersey sets a new precedent, it is likely others won’t want to miss the opportunity, especially when it is estimated the US illegal sports betting industry is worth US$400bn.
Whether or not the US Supreme Court sides with New Jersey remains to be seen, but many states, which haven’t already done so, may start to prepare legislation so that they are ready in the eventuality it does.
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