Reading The Signals From The Supreme Court That US Sports Betting Ban May Be Unconstitutional

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SCOTUS signals sports betting

Editor’s note: Christopher Soriano is a gaming attorney for Duane Morris LLP who attended oral arguments for the New Jersey sports betting case — Christie vs. NCAA — on Monday.

Handicapping the outcome of a US Supreme Court case based only on the oral arguments is, at best, an inexact science.

But the general sense after Monday’s Supreme Court oral argument in Christie v. National Collegiate Athletic Association was that New Jersey’s case had gone very well, and that a majority of the court is likely leaning to a determination that PASPA is unconstitutional.

That result, of course, would wipe the Professional and Amateur Sports Protection Act off the books – and PASPA is the one hurdle stopping states outside of Nevada from authorizing and regulating full scale sports betting.

But the tone of a Supreme Court oral argument can give some clues as to where the Court might be heading, and it was evident to many at the Dec. 4 oral argument that a majority of the court is seriously considering finding that PASPA is unconstitutional.

PASPA is an unusual law

By way of background, the unique feature of PASPA could be what leads to its undoing, as it is a most unusual law.

PASPA does not in and of itself prohibit sports betting. It instead prohibits a state from, among other things, licensing or authorizing sports betting by law. Ordinarily, and as was discussed quite a bit by the Supreme Court, when Congress seeks to regulate conduct, it regulates the conduct of individuals – for example, by making things federal crimes. States are regulated by Congress as well when they are “market participants.”

In other words, if a state is buying or selling a product in commerce, the state is subject to the same federal laws that individuals would be subject to.

Finally, there are a whole host of federal programs that seek to induce states to act in certain ways. But those programs give states a choice – typically, if a state acts in a way Congress wants, the state is entitled to funding. A state could decline funding for a program and instead act in a different manner.

This is often known as the “carrot and stick approach,” and one big example is education funding. When Congress offers the states funding for education programs, that funding typically requires the state to implement a specific policy. Again, the state could decline and not receive the funding.

PASPA is very different from any of these approaches. It clearly regulates the conduct of states in their role as states in that PASPA says that a legislature may not license or authorize sports betting by law.

Moreover, in that context, the state is not participating in the market – it is not buying or selling anything, it is regulating.

Does PASPA commandeer?

Finally, there is no funding tied to PASPA. Thus, the question arises as to whether PASPA impermissibly “commandeers” the state, a violation of the Tenth Amendment to the US Constitution and principles of federalism.

Two arguments have been offered as to why PASPA is not commandeering: that the state has a choice, and that Congress has “preempted” regulation of sports betting. Both of these topics were examined during the argument.

Preemption is the concept that a state cannot pass laws contrary to those passed by Congress. There are two types of preemption: what is known as express preemption and field preemption.

In express preemption, Congress explicitly says that a law it is passing is specifically meant to preempt state laws on the same topic. Field preemption arises when Congress has regulated a field so pervasively as to not leave any room for the states. For example, the courts have held that the National Labor Relations Act preempts state law because the National Labor Relations Act is such a pervasive regulatory scheme.

Preemption was a hot top topic in SCOTUS

Preemption was discussed quite a bit at the beginning of the argument, with several justices questioning New Jersey’s lawyer as to why PASPA was not simply a form of preemption. The argument offered by New Jersey was that where preemption exists, it is to further a federal regulatory scheme, such as labor relations and airlines.

Here, however, there is no federal regulatory scheme – PASPA simply says states cannot license or authorize sports betting, but does not establish any federal authorization or regulation of sports betting that would be consistent with preemption.

The leagues tried to argue that the federal statutes governing wagering, such as the Wire Act, constitute a regulatory scheme that should support preemption. This argument, however, did not appear to convince more than one or two members of the nine member Court.

There was a lot of discussion of “commandeering,” and on this topic a majority of the court appeared to signal that they believed that PASPA had serious commandeering problems.

A state is commandeered when the state has no choice but to enforce a federal program. The logic behind this principle is that it deprives the citizens of a state of the right to have a legislature that is accountable to the citizens of the state.

Signals from the court on PASPA

Some of the signals from the Court were more subtle than others. For example, Justice Anthony Kennedy, conventionally considered a “swing” vote, commented on PASPA:

“It leaves in place a state law that the state does not want, so the citizens of the State of New Jersey are bound to obey a law that the state doesn’t want but that the federal government compels the state to have. That seems commandeering.”

The Deputy Solicitor General argued that PASPA does give the states a choice and therefore does not commandeer the states. He argued that states are free to repeal all of their prohibitions on sports wagering – leading to a completely unregulated sports betting industry in the state.

Chief Justice John Roberts was incredulous:

“You have no problem if there’s no prohibition at all and anybody can engage in any kind of gambling they want, a 12-year-old can come into the casino and – you’re not serious about that…That’s not a real choice.”

Justice Samuel Alito asked the attorney for the leagues why, if Congress wanted to prohibit sports betting, it simply did not go ahead and prohibit it, rather than affect how states legislate.

And Justice Stephen Breyer, who conventional wisdom suggested might not be sympathetic to the state’s position, closely questioned the leagues and the United States about how Congress can tell a state legislature that it cannot legislate. The tone of Justice Breyer’s questioning strongly suggested a hostility to PASPA.

Predicting the outcome of Christie vs. NCAA

While predicting the outcome of an argument is very difficult, based on the language and tone of the questions it appears that at least five justices are sympathetic to New Jersey’s position.

Justice Clarence Thomas did not ask any questions during the argument; however, he typically favors state power in state/federal disputes and may be a likely vote for New Jersey as well. If a majority of the court determines that PASPA is unconstitutional, then the federal prohibition on government regulated sports betting will be gone, and states will be free to set their own policies when it comes to sports betting.

Another possible outcome is that the court determines that New Jersey’s “partial repeal” complies with PASPA. If that were to happen, it would lead to an unusual result: PASPA would remain constitutional and on the books, but New Jersey’s casinos and racetracks would be permitted to offer sports wagering, with a big exception: that sports wagering could not be licensed or authorized by law.

From a policy perspective, this is probably a less desirable alternative. However, if the Court wants to avoid making a constitutional pronouncement, then finding that the partial repeal fits within PASPA would not only permit New Jersey to have sports betting, it would also be a likely impetus to amend PASPA – the theory being that regulated sports betting might be a better alternative to “partial repeals.”

The only certainty is that the Supreme Court will decide the case before the end of June 2018. Everything else at this time is an educated guess. But the picture looked better for New Jersey when the hour of arguments ended than it did when it started.