Steve: So, let’s talk about the biggest thing going in the world of gaming, the New Jersey sports betting case.
It’s conjecture at this point, but by all accounts the US Supreme Court was more sympathetic to NJ than the sports leagues during oral arguments on Monday. If we assume the SCOTUS sides with New Jersey, the justices could decide a full or partial repeal of PASPA. What are the arguments, legal or otherwise, for and against these options, and how would you handicap the different outcomes?
Dustin: Since I like to handicap the NJ case in sports betting terms, the line has definitely moved in New Jersey’s favor. I just wrote about the counting of justices votes, which many agree seems to be 5-4 or 6-3 in New Jersey’s favor.
None of us are consistent Supreme Court observers or constitutional law scholars. But several justices definitely seemed to think that the federal sports betting ban, PASPA, could violate states’ rights, in that it commandeers NJ into keeping its state-level ban on sports betting on the books.
There’s definitely also a possibility that SCOTUS rules more narrowly, saying that New Jersey’s “partial repeal” of its sports betting prohibition is OK under PASPA.
The important thing to remember is that a majority has to be built. While a lot of justices seemed sympathetic to NJ, we’re still not sure if five of them agree that PASPA is entirely violative of the Tenth Amendment.
Running through SCOTUS scenarios
Steve: It sounds like you’re saying we could have a few justices in favor of a partial repeal, a few in favor of a full repeal, and a few in favor of the status quo? How would that end up playing out in terms of a decision?
Dustin: I think that’s in the range of possibilities. To wit:
- The newest justice — Neil Gorsuch, placed on the court by President Donald Trump — noted at oral argument on Monday that the court tries to rule on statutory grounds rather than constitutionality, when possible.
- Justice Stephen Breyer asked Ted Olson, the attorney for NJ, if he would take a win on statutory (not constitutional) grounds. Olson said he would.
The bottom line is SCOTUS will avoid a three-part decision where there are three different camps — ie 1. PASPA is fine 2. PASPA is unconstitutional 3. NJ’s law is fine under PASPA — with no five-person majority. How they get to a final ruling will be behind the scenes over the next few months.
Steve: Pretend a bottle of saké is on the line, how do you see this playing out?
Dustin: If I have money, saké or anything else of value on the line on a straight win bet, I’m betting on them finding PASPA is unconstitutional. If that’s the case, we’re into states outside of New Jersey being able to offer sports betting.
Was NJ’s performance good, or just good inside a gaming bubble?
Chris: The consensus post-hearing is clearly that New Jersey is likely to emerge with some sort of win, but that consensus is largely formed by observers who are rooting for New Jersey. I think support for New Jersey’s partial repeal is the most likely path, but we’re all just guessing at this point.
Dustin: I definitely agree that people rooting for NJ are prone to bias, but they also didn’t always think NJ looked good in previous court appearances. That’s why I took a lot away from the media that isn’t in our bubble saying they heard the justices saying the same things.
Chris: Right, but the media not in our bubble is still drawing insights from within our bubble. So there’s some cross-contamination there.
Dustin: I can tell you from being in the pressroom on Monday, the media drew a lot of it from themselves. There are a lot of media that have permanent desks at SCOTUS. A lot of them huddled and talked over what they heard.
That’s outside of the gaming/sports betting bubble. And the permanent SCOTUS media didn’t all talk to the regular talking heads/lawyers before writing their stories.
Chris: Fair enough. I was waiting for you to pull the “I was in the pressroom” card.
Dustin: I was seated directly behind a column in the press area in the courtroom. But if I leaned over I could see the justices. It’s one of the few places in the world where public seating is sometimes better than the press.
Chris: Now we need to make a “column” emoji for Slack. The work never ends.
Dustin: There is a Chris Christie gif, already, at least. :/gifs chris christie:
Steve: I agree with Chris here. The oral arguments went well, but as we saw with the ObamaCare case that went before the Supreme Court in 2015, trying to draw conclusions based on challenging questions during oral arguments is faulty. If memory serves, the SCOTUS upholding ObamaCare was a big underdog and prevailed.
Dustin: Steve is definitely right. We’re making a lot of conclusions based on an hour of questions. But that’s the only new information we got. So we take what we can get.
What happens if NJ wins, and PASPA stands?
Chris: The interesting question, if that’s the way this goes — a narrow ruling on NJ’s law being OK under PASPA — is how willing other states will be to follow New Jersey’s blueprint.
New Jersey proposed lifting the prohibition within certain environments, and those environments are still subject to strict regulation for other reasons. So there’s the question of whether or not the state would still be regulating even if they weren’t directly regulating.
Would a casino’s license be at risk if they did something out of line with “unregulated” sports betting?
Dustin: The nuance of the case is that all New Jersey did was lift its prohibition on sports betting; there’s no actual regulation of sports wagering from the government (at least in the statute as written).
The NJ Department of Gaming Enforcement has said it’s ready to regulate sports betting. Is that in the case of a narrow win for NJ, or a full strike-down of PASPA? If it’s the former, there’s an argument that New Jersey could have problems once again. Then we’re back into PASPA, and the state “authorizing” sports betting. I think it’s kinda messy.
And I don’t know if other states would move forward like NJ does in this scenario.
Congress, the Wire Act and PASPA
Dustin: As an aside, this hypothetical narrow win for New Jersey is also the scenario that would likely create the most interest from Congress to get involved, I think.
Chris: I still don’t see what Congress possibly does. Rolling back the Wire Act seems like a tough political lift.
Dustin: I am on record saying federal regulation is a fairy tale that the NBA has talked some people into believing is a real possibility. I think a rollback of PASPA is feasible, but still a tough get/unlikely in the short term.
Chris: Rolling back just PASPA but not the Wire Act would be an epic missed opportunity. It’s interesting to me how little discussion there is of the Wire Act in all of this.
Steve: Probably becuase Nevada offers sports betting under its PASPA exemption despite the Wire Act.
Chris: Sure, but sports betting companies have no problem being HQ’ed in Nevada
Dustin: Agreed on the Wire Act. Would be great to get rid of that too. It’s messy from a logistics standpoint if you’re a sportsbook operator and trying to avoid possible issues with the Wire Act. I am guessing some legal opinions have already been drafted on the operator side.
Chris: What’s going to happen if they’re forced to open in every state they want to operate? And forced to set lines in each state? And forced to have a payment nexus in each state?
Steve: I could be wrong, but isn’t it only the wagering aspect of it that can’t go interstate?
Chris: No, think about the Department of Justice OLC opinion. What states wanted to know then is if payment processing crossing state lines for online lottery was a problem. The Wire act covers “information assisting in the placement of bets or wagers.”
And also “or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers”
Dustin: We need our own RAWA, that’s the opposite of the one trying to ban online gambling: Repeal America’s Wire Act.
Steve: But that (the OLC opinion) would be the case for online sports wagering, brick and mortar would be much the same as you have in Nevada.
Chris: Would it though? If I get my data for my PA sportsbook from Nevada, I might have an issue.
Dustin: But, let’s say you’re William Hill. You set a line in Nevada. You want to use that line in New Jersey. How does that work? What if you want to move the line? You’re transmitting sports betting info, no?
Chris: Right, these are some of the questions that are fuzzy. :/gifs fuzzy:
Steve: Yes, because it would be an enforcement issue. I think you’re rightly looking at all the possible hiccups, but overlooking how it would be enforced, interpreted.
I think the answer is, a SCOTUS victory effectively authorizes states to legalize sports betting, therefore any possible contradictions or ambiguity in the Wire Act would follow suit.
Chris: I am not as optimistic as Steve. PASPA is PASPA, and the Wire Act is the Wire Act.
Dustin: The funny thing about SCOTUS — despite Chief Justice John Roberts making reference to a full repeal and 12-year-olds betting on sports — they’re not always super concerned with the real world application of its finding. It is going to say whether NJ’s law is ok under PASPA, or if PASPA is constitutional. The Wire Act still exists and is a problem to contend with.
Do sportsbooks/casinos/tracks have a way to make the world ok where PASPA is gone but Wire Act still exists? That’s what we’ll find out if NJ wins.
Chris: Yes. See Nevada. Hence, no conflict. It may be awkward as hell. But no fundamental conflict.
Ready to go on sports betting or no?
Chris: Everyone is focused on PASPA, and that makes sense, but I think sometimes it’s presented as “If PASPA drops we’re ready to go!” when it might be more complicated than that.
Dustin: I mean, we’ve obviously seen operators mold federal law to what they want and succeed — see daily fantasy sports. But it’s obviously a different calculation legally for massive gaming corporations.
Chris: Yes, they have a different risk calculus. Nevada casinos and legal weed is a good example. Not a perfect analogue, but it makes the point.
Steve: From a common sense point of view, it would be utterly ridiculous to fight for a PASPA repeal and then be like, “oh hey, this other law also prevents us from doing this.”
Chris: What’s this “common sense” you speak of. I know not of it.
Steve: It’s the same common sense that gave us the 2011 OLC opinion.
Dustin: I think the point is real that there are other things to worry about. But William Hill, whose name is already on the racebook at Monmouth Park, says it’s ready to go quickly if NJ wins. At least they have already gone through some of this calculus, if that’s true.
MGM would probably go quickly too.
Chris: I think realistically Atlantic City casinos will trip over themselves to get this live. I’m not sure I can think of a casino that will say “ehhh … not for us”
Dustin: Definitely agree. You let a couple of your competitors put a sportsbook in and all of the sudden you are losing marketshare. Difficult to envision people sitting out.
Chris: But I want to back up and ask: Will other states really be comfortable with a partial repeal?
New Jersey has a pretty chummy relationship with its gambling industry. Pennsylvania, not so much.
Dustin: I think we’re talking almost no states following NJ’s lead on a partial repeal, if that’s how it goes down. Other states are going to be comfortable only if PASPA is gone and they can regulate it.
Steve: Agree. A partial repeal will be an online gambling slow slog. A state would have to have a solid reason to go forward with it.
Dustin: In reality, it’s not what NJ wants either. That’s why they went full bore for PASPA being stricken down.
Chris: Can you charge a license fee if you don’t regulate?
Dustin: That’s the thing I was alluding to before. Can you tax sports betting revenue with the partial repeal? I think that’s problematic.
Chris: You can still tax a business I imagine.
Dustin: You can maybe just increase tax somewhere else? NJ can be like, you’re getting this for free, so other stuff has to be more expensive. That’s total spitballing on my part.
Chris: I never discount the ability of states to get creative with taxation. Partial repeal creates the Vegas of the East.
Maybe NJ is fine with that after all. Now if they just had an actual airport. (In Atlantic City, I mean.)
Dustin: Anyway, Monday could have gone substantially worse for New Jersey, I think. It’s like the all-time biggest sports bet, and you have to wait months to see if your ticket cashes.
Chris: I protest this metaphor on the grounds that I don’t like it.
Steve: He’s jet-lagged.
Dustin: :/gifs like it:
ESPN’s David Purdum and I are going to pass a new law and open a soccer-only sportsbook in New Jersey if they lose in the next iteration of the case, and see if anyone can sue us.
Steve: Only pay out in saké imo.