If New Jersey Really Wants To Challenge The Sports Betting Ban, Daily Fantasy Sports Is The Answer

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NJ sports betting and dfs

New Jersey has been attempting to legalize sports betting for years now. That effort, however, has never borne fruit. Two different state laws trying to circumvent federal law the have been struck down in the courts.

The latest effort is still technically alive; the New Jersey sports betting case could be appealed to the Supreme Court, although the odds of the highest court in the US taking up the matter are slim.

There is also talk of the New Jersey legislature going back to the drawing board to pass yet another law that the courts would allow to stand. Despite legal analysts taking issue with the reasoning of the U.S. Third Circuit Court of Appeals, NJ attempting another “partial repeal” of its sports betting prohibition could be the equivalent of beating one’s head against a wall.

If NJ still has the appetite for trying to get around the federal US sports betting ban — PASPA — there is an entirely different route it could take. It involves using daily fantasy sports language to offer prop bets on players; here’s how it would work, hypothetically.

Prologue: The backstory on DFS laws and PASPA

To date, the professional sports leagues that are plaintiffs in the ongoing NJ sports betting court battle have shown no desire to challenge DFS laws passed in 2016. That’s despite the fact that there is an argument that DFS is sports betting under the Professional and Amateur Sports Protection Act.

There’s a reason why the leagues won’t challenge the DFS laws: Three of them (NBA, NHL, Major League Baseball) have equity in either DraftKings or FanDuel. Nearly every NFL team also has a deal with one of the two DFS operators, but there is no known over-arching agreement with the league.

The NCAA also is a plaintiff in the NJ case. However, almost all of the eight DFS laws passed this year include a ban on fantasy contests based on college games.

So, the impetus for a PASPA challenge based on a DFS law would have to come not from simply the passage of a law, but how it is applied and enforced by the state. More on that later.

Step one: NJ passes a DFS law

Instead of passing another (third) partial repeal of its own sports betting prohibition, New Jersey could introduce a DFS bill, much like those that have gotten traction around the country.

New Jersey has already introduced such a bill, although it hasn’t gotten that far in the legislature.

Even with the existence of that bill, New Jersey — for the purposes of this hypothetical exercise — should try to introduce new legislation that would closely model a DFS bill already in existence.

DFS, or prop betting?

Why is that? The language in many of the DFS bills and laws appears to allow what is the equivalent of prop betting.

Long story short: DFS laws usually use language lifted from the UIGEA, which contains a carveout for fantasy sports.

Here is what the laws usually require for a “fantasy contest”:

  1. Involves a minimum of two athletes.
  2. Does not involve the performance of an entire team / collection of teams.
  3. Does not involve the score or point spread of a game.
  4. Outcomes must reflect “relative knowledge and skill” of participants.

I am not going to rehash the entire argument, which you can read from me and Legal Sports Report’s Chris Grove in far more detail here and here. Suffice it to say, you can envision a wide variety of prop sports bets involving athletes that could be crafted under this language.

Which state to copy for DFS?

The simplest DFS law, which requires almost no oversight and licensing, is Mississippi, which enacted a law earlier this year.

There is also no licensing fee for operators under this state’s law, creating almost no barrier to entry other than registering with the state. (Operators do have to undergo an annual third-party audit.)

Once the bill has been crafted (or copied as closely as possible), the legislature needs to pass it and the governor would sign it.

This alone would not necessarily trigger a PASPA challenge from anyone, however. Which leads to the next step.

Step two: Casinos, tracks start offering prop bets

Using the language of the now enacted New Jersey bill — which has been enacted in at least one other state — gaming interests in the state should push the envelope of the language to offer prop bets.

In reality, anyone can try to do this, so long as they register with the state, under the Mississippi model. But horse racing tracks and Atlantic City casinos are best positioned to roll prop bets out immediately.

Once this happens, the ball is in the pro leagues’ courts.

Step three: See what the leagues do

This is the biggest variable in the scenario I envision above. Do the pro sports leagues challenge what New Jersey is doing as I have outlined it?

On one hand, they want to keep DFS laws on the books, and don’t want to create problems for partners DraftKings and FanDuel.

On the other hand, if New Jersey starts offering what amounts to a form of sports betting, will it stand idly by to watch it happen? It’s a bit of a Catch-22 for them.

If they challenge the law — trying to stop New Jersey’s sports betting aspirations — but not the laws in any of the other “DFS-legal” states, then they could be accused of selective enforcement of PASPA. “Why are you trying to enforce PASPA in New Jersey, but nowhere else?” the argument would go.

(The leagues, however, might answer: “DFS isn’t gambling. Those operators and state legislatures specifically called it otherwise. So it’s not violative of PASPA, therefore, we’re not guilty of selective enforcement.” Or something like that.)

If the leagues do nothing, then they are tacitly allowing a form of unregulated sports betting that they have repeatedly said threatens the integrity of their games. (That’s not to mention that manipulating the result of two athletes’ performances is far easier than manipulating the outcome of an entire sporting event.)

The outcome of an NJ DFS law has imagined

In either scenario, New Jersey comes out ahead. In a legal challenge, NJ gains traction on the argument that the leagues are hypocritical on PASPA.

Without a legal challenge, NJ has at least gotten to authorize a form of sports betting — even if it’s not traditional single-sport spread or money-line wagering. That might not be the same in terms of revenue, but prop sports betting is something most states not named “Nevada” do not have.

Would all of this work out exactly as I’ve outlined, or is it even likely? Perhaps not. New Jersey might not care about an incremental victory against the leagues, or about offering player prop bets. It might just want the “all or nothing” of sports betting, as unlikely as that may be without a PASPA repeal by Congress.

But New Jersey has been down the road of trying to offer “real” sports betting twice before. Offering something in between fantasy sports and single-sport betting is at least a new tack that has a real chance at a different outcome than the state’s first two attempts.

For those wanting change on America’s sports betting laws, that might be at least worth a try.