US Sports Betting Law Is Hazy On Exemptions Accepted By Courts

The Scope Of PASPA: Parsing The Intent Of The Federal US Sports Betting Law

Scope of PASPA sports betting

This is the second in a series of articles taking a closer look at the federal law that bans sports betting in most of the US.

Part 1: PASPA’s Problem With Selective Enforcement For US Sports Betting Could Be Larger Than First Thought

A look back at the known history of the Professional and Amateur Sports Protection Act calls into question the intent and scope of the federal law that prohibits most US sports betting.

Each Third Circuit Court of Appeals ruling on PASPA (read part one of this series here) — especially MLB v. Markell — serves as a reminder that the court believes PASPA strictly prohibits states from allowing (explicitly or implicitly) any new form of sports betting.

Simultaneously, the 1991 Senate report addresses PASPA’s origins and intent. The report indicates the law’s proponents intended to strictly prohibit the expansion of wagering into new sports.

The underpinnings of PASPA are particularly of interest as the New Jersey sports betting case has been appealed to the US Supreme CourtNew research scrutinizing actors’ ability to unfairly enforce PASPA has also shed new light on the law.

Does PASPA exempt entire states or grandfather specific betting schemes?

The explanatory rhetoric surrounding PASPA often boils down to a blithe summary that it “bans” wagering in all but 46 states, and that it “exempts” the other four states, specifically Nevada, Delaware, Oregon and Montana.

But the text of PASPA itself does not name any states. It also does not include the words “exempt,” “grandfather,” “ban,” or other related words to specify the prohibition and allowance of certain wagering schemes that we take for granted as being allowed. 

Instead, the applicability section of the law applies to types of sports betting schemes (lotteries, sweepstakes, or other betting) some of which exist in states, as opposed to applying to entire states and including all the schemes existent therein.

If entire states like Oregon and Delaware fell outside of the remit of PASPA, then Delaware would have theoretically had no problem instituting a single-game sports betting scheme in 2009. Oregon’s SportsAction NFL lottery, furthermore, would not have needed to succumb to intense pressure from a variety of groups and shut down.

PASPA’s specific prohibitions laid out in report

The bizarre result of this is that the law exempts certain sports betting schemes that were in existence between 1976 and 1990. It does so without mentioning what the specific states or the specific schemes are. One must consult the law’s accompanying 1991 Senate Judiciary Committee report to find the law’s true scope and meaning. The report is not legally binding, but it may as well be.

The Judiciary report, for example, is what perpetuated the idea of PASPA exempting schemes in Oregon and Delaware. It does not come from the text of PASPA itself. 

“Although the committee firmly believes that all such sports gambling is harmful, it has no wish to apply this new prohibition retroactively to Oregon or Delaware, which instituted sports lotteries prior to the introduction of our legislation,” the report reads.

The report nor the text of the law specify if other states that had schemes in place between 1976 or 1990 are automatically exempt or not, nor why.

What about Montana?

Neither PASPA nor the 1991 report mentions Montana. Yet, legal experts and writers refer to it as the fourth exempt state of PASPA.

Where does Montana fit in PASPA?

This is because it quickly passed a law in either 1990 or 1991 that authorized limited sports betting. Further complicating matters are the NFL and NASCAR fantasy contests the state offers currently. The state did not implement those contests until the mid-2000s; they did not run between 1976-90. 

According to the Senate report, PASPA would not outlaw schemes approved by state law prior to PASPA’s enactment. The federal government enacted the law on Oct. 28, 1992. That would apply to Nevada, Oregon and Delaware.

Montana law passed its law before the authoring of the 1991 Senate report. That means the Judiciary Committee theoretically would have been just as aware of the legality of sports betting in Montana as it was in Oregon and Delaware.

Montana was one of many states referenced by then Sen. Dennis DeConcini in the Congressional record, along with South Dakota, as potentially having contests that were exempt. 

How far does PASPA go?

The central opponent of the bill on the Judiciary Committee, Sen. Chuck Grassley, offered an amendment in June of 1992 to the bill. That would have exempted more sports betting schemes, ostensibly from other states, too. Congress did not approve that amendment.

It is also commonly held that New Jersey (and only New Jersey) was given a one-year period from when the law was enacted to pass any sports betting laws that would allow for schemes that would be grandfathered. New Jersey is never named in either the Senate report or the text of PASPA.

A different interpretation of what states had exempted schemes arose outside of legislative discussions. According to scholars I. Nelson Rose and Rebecca Bolin, “PASPA grandfathers-in sports betting policies in Nevada, Delaware, and almost a dozen other states.”

In reality, the true extent of PASPA was unknown even to its own authors.

Uncertainty in regards to Nevada’s ‘exemption’

If PASPA entirely exempts any state from its remit, it would be Nevada. But even that does not appear to be the case. 

Where courts or the government mention Nevada, they characterize the state as “exempted” and “grandfathered” from or into the law. This is the case in both the 1991 Senate report and in Third Circuit rulings.

In the 2012 Third Circuit ruling, for example, Judge Julio Fuentes remarked on Nevada’s grandfathering clause in the same breath as Delaware and Oregon. Further on, he noted that the 1991 Senate report “exempts” Nevada from PASPA.

In his “minority view” in the 1991 Senate report, Sen. Grassley also invokes both characterizations at different times:

  • That Nevada itself is exempted;
  • and that Nevada has schemes that are grandfathered.

The distinction between these two characterizations is important. If PASPA wholly exempts Nevada, then the state could enact whatever sports betting schemes it wanted to in perpetuity.

But if PASPA only grandfathered all of Nevada’s existing schemes at the time of its passage, like it appears to do with Oregon and Delaware, then Nevada’s sports betting innovation would seem to be severely limited by the law.

Senate report clarifies nature of Nevada’s PASPA exemption

The key passage from the report reads:

“Neither has the committee any desire to threaten the economy of Nevada, which over many decades has come to depend on legalized private gambling, including sports gambling, as an essential industry, or to prohibit lawful sports gambling schemes in other States the were in operation when the legislation was introduced. Therefore, it provides an exemption for those sports gambling operations which are already permitted under state law.”

This clearly indicates that PASPA’s intent is to exempt operations already approved and enacted via state law. It did not exempt entire states from its remit in the future.

This would seem to agree with the decision in Markell. That decision wouldn’t even allow a form of betting that derived from an already “grandfathered” form of betting in the state of Delaware.

The New Jersey sports betting law challenged in court says it won’t authorize sports betting. But the Third Circuit came down harshly on the reality. It ruled that instituting that law would allow for a form of sports betting not previously allowed in the state.

Furthermore, the Senate report says PASPA was not intended to prevent Nevada, Oregon or Delaware from expanding their sports betting schemes into other sports that currently didn’t have wagering.

There’s a huge catch, though. If the states wanted to expand, they had to do so by passing state legislation in the yearlong period between the time the Senate report was authored (late-1991) and the time the bill was enacted.

Thus, PASPA really does prohibit states from expanding wagering into new sports after 1992. 

Friday on Legal Sports Report: Understanding PASPA’s true intent expands the scope of selective enforcement arguments

Will Green
- Will formerly worked as a writer and producer at Sports Illustrated, where he covered the sports gambling and daily fantasy sports industries, and moderated several panels with industry experts on the future of gaming in America. He is now a contributor at SI, as well as Fortune.com, Legal Sports Report, and many other destinations. His weaknesses are wine, coffee and college football.