Sports Betting Myth Busters: All Of New Jersey Could Have Been Exempt From PASPA’s Ban

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Editor’s Note: The US Supreme Court is currently deliberating the constitutionality of the partial federal sports betting ban embodied in the Professional and Amateur Sports Protection Act (PASPA). In a three-part series, Legal Sports Report takes a “myth buster” approach and probes several oft-mentioned aspects of PASPA. 

This second installment in the series explores whether New Jersey — or just Atlantic City — actually had a one-year window to opt in under PASPA’s grandfather clause. Part one of the series is here; part three here.

The US Supreme Court sports betting case could have been avoided.

Or so we have been told.

“Congress included in PASPA exceptions for state-sponsored sports wagering in Nevada and sports lotteries in Oregon and Delaware, and also an exception for New Jersey but only if New Jersey were to enact a sports gambling scheme within one year of PASPA’s enactment,” wrote the US Court of Appeals for the Third Circuit in August 2016. “New Jersey did not do so, and thus the PASPA exception expired.”

The Third Circuit’s 2016 decision is the ruling currently under review at the Supreme Court.

Did the entire state of New Jersey — from the Philadelphia suburbs in the south the to the northern part of the state just outside of New York City — miss its chance to opt in unilaterally as a grandfathered state under PASPA’s carve-out?

The answer is “yes,” according to nine out of 12 Third Circuit appellate judges who ruled against Gov. Chris Christie two years ago.

But PASPA’s text — as well as archived Congressional testimony and court filings from lawyers representing the five sports leagues in the current Supreme Court case—reveal a different answer, one of a narrowly tailored exemption that would have only attached to a single municipality in the Garden State: Atlantic City.

PASPA is silent on ‘New Jersey’

Here is what the “carve-out” cited by the Third Circuit court actually says (emphasis added):

[PASPA’s ban] shall not apply to…

(3) a betting, gambling, or wagering scheme, other than a lottery described in paragraph (1), conducted exclusively in casinos located in a municipality, but only to the extent that—

(A) such scheme or a similar scheme was authorized, not later than one year after the effective date of this chapter, to be operated in that municipality; and

(B) any commercial casino gaming scheme was in operation in such municipality throughout the 10-year period ending on such effective date pursuant to a comprehensive system of State regulation authorized by that State’s constitution and applicable solely to such municipality

Note the words and phrases emphasized in bold. An unnamed “municipality” is repeatedly referenced. The law also makes reference to “casinos,” but not “racetracks.”

And note that “New Jersey” is not mentioned at all.

The lawyer for the NCAA, NBA, NHL, NFL and Major League Baseball in the current Supreme Court case even flagged this peculiarity in his most recent court filing.

“New Jersey was given until one year after [PASPA’s] effective date to authorize … sports-gambling schemes to be conducted exclusively in casinos in Atlantic City,” wrote league attorney Paul Clement in an October 2016 brief.

Digging into PASPA history

If Congress intended for the entire state of New Jersey to have a one-year window to opt in for grandfathered status under PASPA, why didn’t lawmakers simply say so?

There are a few breadcrumbs that provide clues.

In a January 2, 1994, New York Times story headlined “How Politics Nipped a Sports Betting Bill,” Joseph Sullivan reported on why the carve-out never came to fruition. Spoiler alert: Donald Trump makes an appearance. 

Sullivan’s article also alluded to Atlantic City. 

At the time, only Atlantic City would have qualified under PASPA’s requirements. Indeed, Atlantic City was the only municipality with casinos that had operated under a state regulatory scheme during the prior decade. 

Transcripts from the Congressional Record indicate that US Rep. William Hughes from New Jersey penned the narrow one-year carve-out for his constituents, a district that included Atlantic City.

Rep. Hughes also had some soothsayer-worthy words about the motivation for the potential exemption he authored, words that remain prescient today given the pending Supreme Court case that will decide the future of expanded legalized sports betting in his state and, perhaps, the nation.

“This is not a vote in favor or [sic] legalizing sports betting in New Jersey,” said Rep. Hughes on the House floor, according to the transcript. “Only the voters or [sic] New Jersey can do that.

“This bill would simply give them the chance to decide this issue on their own, and not have the Federal Government decide it for them.”

New Jersey’s partial carve-out remains important

Although the one-year time window has long since expired, Congress’ recognition of “a comprehensive system of State regulation” is meaningful today, as it shows the value legislators placed on well-grounded regulatory frameworks that have existed for decades in Atlantic City and Nevada.

Sports league executives have recognized the value too.

After the NFL’s gave its stamp of approval on the Oakland Raiders’ move to Las Vegas, league commissioner Roger Goodell described the Nevada sports betting regulatory environment as something that “could be beneficial.” 

Major League Baseball’s top executive, Rob Manfred, addressed the topic too.

“If there’s going to be a change in the regulatory structure with respects to sports gambling, we needed to be in a position to meaningfully engage and shape, try to shape what the new regulatory scheme looks like,” said Manfred in July 2017 comments first reported by the Associated Press.

NBA Commissioner Adam Silver flagged the issue as well.

“Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards,” wrote Silver in a 2014 New York Times op-ed.

And whenever Congress holds a hearing about a possible federal role in sports wagering regulation, lawmakers can point to a phrase buried deep in PASPA’s text — “a comprehensive system of State regulation” — as an aspirational standard post-PASPA.