A True Underdog Story: How New Jersey Can Shape the Future of American Sports Gambling

By: Alan Heisman

Sports gambling is an extremely lucrative industry—and it is growing at a rapid pace. In 2016, the Nevada State Gambling Control Board reported $4.5 billion in profits from legal sports wagering. Nevada, however, is the only state currently allowed to profit off of state-sanctioned sports betting under the Professional and Amatuer Sports Protection Act (“PASPA”). PASPA is a federal law passed by Congress in 1992 that effectively banned sports betting nationwide with the exception of state-sponsored sports betting in Nevada and sports lotteries in Oregon, Montana, and Delaware.

With the goal of joining these states in profiting from state-sanctioned sports betting, the New Jersey State Legislature passed the Sports Wagering Act of 2012 (“2012 Law”), which legalized certain types of sports gambling in the state. In response to the passage of the 2012 Law, five major American sports leagues (the NCAA, NFL, MLB, NHL, and NBA, together, the “Leagues”) filed a lawsuit in 2012 to enjoin the 2012 Law for violating PASPA. The Third Circuit Court ruled in favor of the Leagues in National Collegiate Athletic Ass’n v. Governor of New Jersey.

In 2014, New Jersey Governor Christie signed into law Senate Bill 2460 (the “2014 Law”). The major difference between the 2012 Law and the 2014 Law is that new law did not affirmatively legalize sports betting. Instead, the 2014 Law repealed existing prohibitions on sports betting, at least as they applied to New Jersey casinos and racetracks. The Leagues sued New Jersey for violating PASPA again in the District Court for the District of New Jersey. Once again, the Leagues won.

After denying certiorari after the 2012 case, the Supreme Court of the United States unexpectedly decided to hear the case regarding the 2014 Law. The central issue in the upcoming Supreme Court case is whether PASPA violates the anti-commandeering doctrine. In the past, the Supreme Court has held that federal laws violate the anti-commandeering doctrine when they force states to take action. In this instance however, PASPA is doing the opposite: PAPSA forces New Jersey to take no action. The action/inaction distinction is likely to decide the case.

New Jersey has a strong argument that the consequences of the forced inaction are the same as those the anti-commandeering doctrine was designed to protect against. By allowing PASPA to stand, officials will be prevented from being responsive to the local electorate’s preferences. PAPSA compels officials to maintain state-law prohibitions from which New Jersey citizens have repeatedly expressed a desire to withdraw. Because PASPA requires these prohibitions to be maintained as a matter of state law, New Jersey officials are put in the position of taking the blame from the public for the continued existence of the prohibitions and their many defects, thereby shielding federal officials from their political costs.

On the other hand, PASPA does not put New Jersey in a situation where it is forced to absorb the costs of implementing a federal program or take the blame for a federal program’s burdensomeness and for its defects. New Jersey has a sufficient choice: whether and to what degree to enforce its sports gambling prohibitions, and what penalties to attach to them, remain questions for New Jersey.

Both the Leagues and New Jersey have valid arguments. That the Supreme Court decided to hear the case this time around suggests that they may agree, and their impending decision will certainly change the future of American sports gambling.