Should states be using a new tack to fight PASPA?
Legal Sports Report

The NFL’s Argument That Sports Betting Causes Harm Is Wearing Thin

NFL sports betting harm

Ed note: This is the first in a series or articles about the NFL and other pro leagues’ case against legalized sports betting.
Part two: The NFL’s Move To Las Vegas May Be The Death Knell For ‘Irreparable Harm’ Argument Against Sports Betting
Part three: Legal Sports Betting Could Happen Quickly In The US, If The NFL And Other Leagues Fall Flat On Proving ‘Harm’

The National Football League’s longstanding opposition to expanded legal sports betting has been branded (correctly) in many quarters as “hypocritical.”

The backstory on the NFL and sports betting

Critics point to the league’s endorsement of daily fantasy sports — arguably a form of sports gambling — and its scheduling of annual games in London (where sports betting is legal) — as indicative of the leagues’ hypocrisy on the issue.

The NFL’s green-lighting of the Oakland Raiders to Las Vegas is just the latest example of how the league’s publicly stated opposition is often belied by its contradictory actions.

And, of course, let’s not overlook the fact that several NFL owners have an ownership stake in a leading daily fantasy sports company — Robert Kraft and Jerry Jones are investors in DraftKings through their other businesses. One prominent NFL family — the Rooneys — owns a Florida racetrack (the Palm Beach Kennel Club), which is looking to expand its gambling footprint in Florida. The list goes on and on.

“Unclean hands” argument not a winning hand so far

But “hypocrisy” has not proven to be legally meaningful in a court of law — at least not yet.

In the litigation in the New Jersey sports betting case, New Jersey’s lawyers argued that the leagues’ embrace of DFS and hosting of games in London should prevent the leagues from enforcing the Professional and Amateur Sports Protection Act (PASPA). That’s the 1992 federal law that bans state-sanctioned sports betting.

The specific legal argument that New Jersey invoked to exploit the leagues’ hypocrisy on sports gambling was the “unclean hands” doctrine. That’s a legal principle that bars the entry of equitable relief — the leagues were seeking a permanent injunction, a form of equitable relief — where the parties seeking such relief are themselves guilty of “inequitable” or “unlawful” conduct.

The argument from New Jersey

As New Jersey argued in Christie II, “the Leagues are essentially hypocrites because they encourage and profit from sports betting” by scheduling games in London and Las Vegas, where sports gambling is legal, and by “sanction[ing] and encourage[ing] fantasy sports betting” (or DFSB™, as William Hill US CEO Joe Asher famously coined it).

Unfortunately for New Jersey, the Third Circuit U.S. Court of Appeals (the court which decided Christie II) rejected this argument. In the court’s view, the leagues’ actions did not involve the type of “unconscionable” conduct necessary for an “unclean hands” argument to succeed. Further, it was not “immediately related” to the type of sports betting that the leagues were trying to stop.

In other words, the court viewed the leagues’ association with DFS and legal sports betting as not reprehensible enough — or closely related to the type of unregulated sports betting that New Jersey was attempting to legalize — to trigger the unclean hands doctrine.

But this ruling does not necessarily foreclose future legal challenges targeting the leagues’ hypocritical stance against sports betting. The “unclean hands” argument can still be revived in other judicial settings — bolstered by some of the more recent gambling entanglements involving the leagues — perhaps finding the sweet spot in future cases.

But there is one other oft-overlooked argument that states could successfully employ to penetrate the leagues’ shaky hypocrisy fortress in a more legally meaningful (and effective) way: the doctrine of “irreparable harm.”

Lack of irreparable harm is the way to go

In my view, a more optimal approach for highlighting the leagues’ hypocrisy on sports gambling. It also strategically shifts the burden of proof onto the leagues. (That differs the “unclean hands” defense which must be proven by the state challenger to PASPA). The goal: Arguing that the leagues would not be “irreparably harmed” by state-promoted sports betting.

“Irreparable harm” is a legal concept that arises in the context of a motion for preliminary injunction. It’s a litigation device where one party (usually the plaintiff) asks the court — typically at the beginning of the lawsuit — to preserve the status quo for the duration of the case. That’s accomplished by entering an order enjoining (preventing) the other party — usually the defendant — from engaging in the conduct that is directly at issue in the litigation.

“Irreparable harm” refers to the harm that might occur if the preliminary injunction is not granted. It has been described as the type of harm that cannot be redressed adequately by money damages.

A preliminary injunction?

A party seeking a preliminary injunction (or a temporary restraining order, which often precedes a request for a preliminary injunction) must prove immediate and actual “irreparable harm.” It must also show that it would be “substantially likely to succeed” on the merits if the case were to proceed to a final judgment.

(The plaintiff must also show that the harm it would suffer without an injunction “outweighs” the harm that the defendant would incur if a preliminary injunction were entered, and that it would be “in the public interest” to impose such relief).

A preliminary injunction is considered an extraordinary remedy under the law because it temporarily provides the moving party with virtually all of the relief that it seeks before the actual merits of the case have been fully litigated. Such a ruling also represents a key turning point in any litigation because it “signals” the court’s views on the merits of a lawsuit at a relatively early stage of the case.

This is because, as noted, the party requesting the entry of a preliminary injunction must establish — in addition to showing “irreparable harm” — that it is “substantially likely to prevail” on the merits of the lawsuit. Thus, in ruling on a motion for preliminary injunction, the court is essentially “telegraphing” how it would likely decide the case — long before a trial has occurred.  For this reason, the outcome of a motion for a preliminary injunction (or a temporary restraining order) can be a game-changer — for both sides.  

Application to New Jersey

This remedial device has proven to be a powerful tool for the major US sports leagues in blocking New Jersey’s efforts to legalize sports betting.

In the recent Christie II case, the leagues were able to obtain a temporary restraining order (which is similar to a preliminary injunction). The successfully argued that their “irreparable harm” stemmed from “the negative effect” that state-sanctioned sports gambling “would have upon the perception of the[ir] games and their relationship with their fans.” In doing so, they cited the Third Circuit’s recognition in Christie I that “there is a proven ‘stigmatizing effect’ of having sporting contests associated with gambling.”

The leagues claimed that this “stigmatizing effect . . . is by its very nature irreparable.” The district court agreed, and granted the leagues’ motion for a temporary restraining order. That was later converted into a permanent injunction when the district court entered final summary judgment in favor of the leagues.

Changing the game for NJ sports betting?

But consider the alternative for a moment. What if New Jersey had been able to successfully negate the element of “irreparable harm” and thereby avoid a TRO or preliminary injunction?

In that scenario, New Jersey would have been able to offer sports betting at its casinos and racetracks right away without having to wait for the final resolution of the case on the merits. This would have been a historic achievement, resulting in New Jersey becoming the first state outside of Nevada to offer single-game sports betting — at least for the duration of the lawsuit.  

Avoiding a preliminary injunction would have also enabled New Jersey to take fact discovery in the case. That would include the depositions of the sports league commissioners, in an effort to bolster its “unclean hands” defense and other potential arguments entered on the leagues’ hypocritical stance on sports betting.

For example, New Jersey’s lawyers could have examined the various commissioners or their surrogates about the leagues’ licensing of their “real-time” data to overseas sports betting operators. That arrangement highlights the leagues’ participation in — and direct benefit from — the wagering that takes place on their games.

Additionally, New Jersey could have explored the leagues’ “selective enforcement” of PASPA. To wit, they fail to object to state DFS laws which arguably violate PASPA (see here and here for my analysis of that issue), while steadfastly opposing New Jersey’s efforts to legalize sports betting.

Avoiding a preliminary injunction — through rebutting the element of “irreparable harm” — might have presented New Jersey with an avenue for ultimately overcoming PASPA.

Next: How the leagues’ recent statements and actions undermine the idea of “irreparable harm.”

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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.