Solicitor General in WV appears ready to oppose federal government
WSOP
Legal Sports Report

A Sports Betting Legal Challenge Coming Out Of West Virginia: The Odds Are Favorable

WV and sports betting
Editor’s note: This is the second of two articles taking a closer look at West Virginia sports betting legislation. Read Part 1 here.

West Virginia’s bill to legalize sports betting could force a challenge in federal court, much like the one New Jersey has embarked upon. The legislation goes much further than the other “stand-by” measures. It might end up with the state challenging the federal sports betting prohibition in court, should it pass.

There are a lot of reasons to think the state is positioned well to challenge federal law.

West Virginia calls out PASPA

To this end, the legislative “finding” at the beginning of the bill declares that Congress “unlawfully” enacted PASPA. It characterizes the PASPA ban on state-sanctioned sports betting as a “clear violation of the 10th Amendment of the U.S. Constitution.”

Continuing in this vein, the bill announces its clear intention in the next subsection: the “[a]uthorization of sports betting notwithstanding [the] federal prohibition” (emphasis added). The bill authorizes the West Virginia Lottery Commission to promulgate rules “establishing sports betting” at West Virginia casinos. It makes clear that the “federal government has no authority to prohibit sports betting in West Virginia” (emphasis added).

Such unequivocal language, in my view, should enable West Virginia to clear the “standing” obstacles posed by Article III of the US Constitution, as exemplified by the Interactive Media decision.

Why West Virginia would clear the judicial review hurdle

The 2011 New Jersey sports betting measure was unripe for judicial review because two additional steps that hadn’t taken place: a constitutional amendment and actual enabling legislation.

But the West Virginia sports betting bill is already at the starting gate for judicial review. That’s provided that the bill:

  • Passes the legislature
  • Is signed into law by Gov. Jim Justice
  • The lottery commission promulgates regulations for the issuance of licenses (or even goes so far as to issue sports book licenses).

Those steps, in turn, would likely be followed by “cease and desist” letters from the four major US professional sports leagues and the NCAA. (Just as in the Christie I case, the actual trigger-point for PASPA litigation would be the promulgation of regulations by a state gambling commission regarding the issuance of sportsbook licenses, rather than just the bare enactment of state legislation).

The courts in play in WV

Once these events occur (and the last one would be an automatic once the first two are achieved), the focus could quickly shift to the US District Court for the Southern District of West Virginia. That’s where any PASPA lawsuit by the sports leagues (or preemptively brought by the state) would likely be filed. That would happen perhaps as soon as April 2017, following the end of the state’s legislative session.

The judicial makeup of that court offers no hints as to whether it would be a favorable forum for the type of “federalism” arguments that would likely be advanced by West Virginia. That court is evenly divided between Republican and Democratic judicial appointees (three each).

Looking further ahead, the Fourth Circuit US Court of Appeals has long been considered one of most politically conservative federal appellate courts in the country. It has skewed decidedly more liberal in recent years, largely due to President Barack Obama’s two terms in office. (Twelve of the 19 judges on the court were appointed by Presidents from the Democratic Party. That is a significant metric for those who believe that Republican-appointed jurists are more receptive to the type of “states’ rights” argument that would be at the heart of any PASPA challenge.)

What is SCOTUS hears the NJ appeal?

Of course, the need for such litigation dissipates if the Supreme Court grants certiorari in Christie II, an increasingly likely prospect in view of the Court’s latest order calling for the views of the Solicitor General.

If cert is granted (and we will likely find out by the end of June), there would no longer be any need to achieve a “circuit split” among the lower federal circuit courts. The constitutionality of PASPA would be resolved by the Supreme Court one way or the other in Christie II.

Any decision on the merits by the Supreme Court (likely during the 2017-18 term) would thereafter bind all lower federal courts (including those in West Virginia). That would obviate the need for any future PASPA court challenges. Conversely, if certiorari is denied, the need for additional court challenges would intensify. In that scenario, West Virginia could be in position to take the baton from New Jersey.

West Virginia’s prior support of New Jersey offers strong hints

West Virginia enjoys one unique advantage over other states in pressing any PASPA challenge in court. It has been at the cutting edge of the constitutional debate surrounding PASPA since 2013. In that year, it filed amicus curiae briefs with the Third Circuit and Supreme Court. In both, it supported New Jersey’s efforts in the Christie I case. The state did likewise at both judicial levels in Christie II.

WV’s solicitor general and sports betting

In each court filing, the voice was West Virginia’s Solicitor General, Elbert Lin. He consistently hammered home the point that PASPA violated principles of federalism. In particular, he argued it violated the Tenth Amendment anti-commandeering doctrine by dictating how states regulate their own citizens:

West Virginia’s initial amicus curiae brief — filed with the Third Circuit in the Christie I case — provides a preview of the legal arguments that West Virginia would likely raise in its own hypothetical PASPA challenge. Lin authored the brief, which three states joined: Georgia, Kansas, and Virginia). It asserts that there are two bases for challenging the constitutionality of PASPA:

  • The anti-commandeering doctrine
  • The related principle of equal sovereignty.

In Lin’s own words

Lin frames the issue thusly:

This case raises serious questions about how the federal government may regulate States and their citizens. The District Court’s narrow construction of the anti-commandeering doctrine and refusal to recognize the equal sovereignty doctrine are at odds with numerous Supreme Court cases and, if upheld, would threaten to undermine our system of dual sovereignty.

The District Court would permit Congress both to pass laws that shift political blame and accountability to the States, in direct contravention of the anti-commandeering doctrine, and to intentionally discriminate among the States even when Congress is not targeting a specific local problem. It was wrong and must be reversed. . . . .

As the Supreme Court has often explained, the point of the anti-commandeering doctrine is to ensure that Congress does not avoid responsibility by forcing the States to implement federal policy rather than doing so itself. That concern applies whether Congress compels States to act or prohibits them from doing so. . . .

A federal law that prohibits State action—particularly one restricting or conditioning a State’s ability to issue licenses—could result in precisely the sort of misplaced blame that the anti-commandeering doctrine aims to prevent.

(Amicus Brief, at pp. 4-5 & 11)

No federal regulation of sports betting

Lin also highlights the absence of any federal regulatory regime for sports betting. On that basis, he argues that there are limits to the federal preemption of state laws. Congress has not adopted a federal regulatory or deregulatory scheme in this area. Therefore, Lin argues, a blanket federal prohibition — such as PASPA — would not preempt state law:

The preemptive force of federal law does not authorize Congress to prohibit State action whenever and however it desires. If Congress enacts a federal regime for which it takes clear responsibility, it may expressly preempt contrary State action to protect that regime. But if Congress simply prohibits State action in the absence of an existing federal scheme, it is unlawfully commandeering the States to enact federal policy. . . .

The critical prerequisite to preemption is that the federal government have established a “preempted sphere” for which it is clearly accountable. Thus, when Congress has imposed a federal regulatory scheme, it may expressly preempt State laws in protection of that scheme by prohibiting State laws that would impose inconsistent rules. . . .

But when Congress has adopted no federal scheme, there is no basis for preempting State law. Prohibiting State laws in that circumstance is not preemption to preserve an existing federal scheme; it is the forcing of States to create a de facto federal regime, and it shifts political accountability entirely to the States. That is commandeering.

(Id., at p. 5 & 21-22)

Equal sovereignty

On the issue of “equal sovereignty” (which focuses on the preferential treatment accorded to Nevada and the other grandfathered states under PASPA, a key argument which has largely been abandoned in Christie II), Lin writes:

[A]ll the States enjoy equal sovereignty. Although distinctions can be made, there must be a specific problem, and the distinctions must be sufficiently related to the geographic scope of that problem. Otherwise, Congress could pick economic winners and losers among the States based on nothing more than pure favoritism, historic tradition, political expediency, or geographic convenience. . . .

“Distinctions can be justified in some cases,” but only if they are tailored to “local” problems. . . . Congress may discriminate among States if the “statute’s disparate geographic coverage is sufficiently related to the problem it targets.” . . . But Congress may not limit car manufacturing to Michigan, cigarette manufacturing to Virginia, or seafood processing to Massachusetts based on nothing more than pure favoritism, historic tradition, political expediency, or geographic convenience.

(Id. at pp. 11 & 25)

Presumably, West Virginia would advance similar arguments in its own PASPA challenge. Those would be augmented, undoubtedly, by the nearly five years of briefing in Christie I and Christie II.

In those two cases, a cadre of preeminent lawyers represented the state of New Jersey. That includes a renowned appellate attorney Ted Olson, a former US Solicitor General. He developed the intricate and complex constitutional arguments that would logically provide the foundation for any future PASPA challenge.

These nuanced arguments have been “road-tested” and developed at the highest levels of sophistication. Other states can easily re. In other words, West Virginia would not be starting from square one.

Expense would not be an issue in WV 

Another advantage that West Virginia would enjoy relative to other state challengers is the potential involvement of Lin.

His expertise on the issue could minimize — or even eliminate — the need to hire outside counsel at a significant cost savings to the state.

By contrast, New Jersey has spent over $5 million to date litigating its own PASPA challenge. Those expenditures came over the course of two separate lawsuits spanning five years, including:

  • Two appeals
  • One en banc rehearing
  • Two Supreme Court petitions

The involvement of Lin, the state’s chief appellate lawyer and considered a rising star in conservative legal circles, would enable West Virginia to effectively manage and control the cost of any PASPA litigation. The state in the midst of a severe budgetary crisis. There is an estimated $500 million estimated shortfall for 2017. Therefore, the state would have to manage the cost of a legal challenge.

Declining WV casino revenues, regional competition may spur action

Perhaps the most significant factor behind West Virginia’s newfound desire for legalized sports betting has been the general decline in casino revenues.

The state’s gaming revenues have declined nearly 18 percent over the past decade. The reason: It’s primarily due to increased competition from new casinos in Pennsylvania, Ohio and Maryland. The recent opening of Maryland’s MGM National Harbor may further exacerbate this problem. It is one of a growing number of casinos relatively close to the Hollywood Casino at Charles Town Races. (That is the largest of West Virginia’s four casinos.)

One Maryland-based casino industry analyst said he believes that regional competition will cause revenue at the Hollywood Casino to decline by as much as 40 percent.

The need to increase gaming revenues — and corresponding tax collections — is certainly one of the motivations behind HB 2751.

Job creation, population also issues

Additionally, job creation (one of the many arguments advanced by proponents of expanded legal sports betting) is an especially acute issue in West Virginia. The state has lost population each year since 2013. WV is one of only eight states to lose population over the past year. According to the latest US census figures, West Virginia is losing population faster than any other state in the country.

Highlighting both of these points, HB 2751 asserts that “West Virginia would benefit financially from sports betting, as increased revenues would be generated and numerous jobs would be preserved and created for state residents as a result of sports betting activities at licensed casino gaming facilities.”

This is the same rationale New Jersey used to justify its push for sports betting back in 2012. But West Virginia’s economic circumstances may be even more dire, with:

  • A nearly half-billion dollar budgetary shortfall;
  • A steady decline in gaming revenues (which will likely get even worse due to competition from neighboring states);
  • An unending population exodus.

These factors could vey well push West Virginia to the front of the line of prospective PASPA challengers. Of course, it also helps having one of the foremost PASPA litigators already on the payroll.

Sign Up For The Grove Report – US Online Gambling Industry Insights Delivered To Your Inbox:
Daniel Wallach
- Wallach, of Becker & Poliakoff, is a leading U.S. authority on gaming law and sports law, and has counseled professional sports teams, fantasy sports operators, casinos, racetracks, sports betting companies, and other gaming industry participants on a wide spectrum of gaming-related matters.