Going Nuclear: New Jersey's Last-Ditch Option for Legalizing Sports Betting

Mon, Feb 20, 2017
by CapperTek

 The U.S. Supreme Court’s recent invitation for the Solicitor General to weigh on New Jersey’s sports betting case may give new life to the Garden State’s efforts to expand its gambling portfolio.  But in the event that the Court ultimately decides not to hear New Jersey’s case, it is worth examining what a last-ditch effort at legalizing sports betting could look like in New Jersey and potentially across the U.S.

Background

New Jersey already has come up short on its first wager on sports betting. In 2012, New Jersey’s Sports Wagering Law authorized sports wagering at casinos and racetracks within the state. The NCAA, NBA, NFL, NHL and MLB brought suit under the federal Professional and Amateur Sports Protection Act (PASPA) and successfully convinced the Third Circuit to invalidate the state law (Christie I). Despite ruling that authorizing sports betting contravenes PASPA, the Third Circuit, in dicta, stated that, while PASPA restricts the authorization of sports betting, it does not restrict repealing laws that criminalize sports betting.

In 2014, New Jersey attempted to call the Third Circuit’s bluff by enacting legislation that repealed restrictions on gambling as it pertained to casinos and racetracks. The NCAA and the professional sports leagues again challenged the law, arguing that by carving out casinos and racetracks the partial repeal is akin to authorization and thus a violation of PASPA. The Third Circuit agreed and again struck down the law under PASPA (Christie II) and the case is now awaiting the Supreme Court’s decision on whether to grant certiorari.

The “Nuclear Option”

In 2016, New Jersey lawmakers doubled down on their efforts to legalize sports betting by introducing the so-called “nuclear option.” The so-called “nuclear option” reads as follows: “The provisions of this act, P.L.2014, c.62 (C.5:12A-7 et al.), as amended, are not intended and shall not be construed as causing the State to sponsor, operate, advertise, promote, license or authorize by law or compact the placement or acceptance of any wager on any professional, collegiate, or amateur sport contest or athletic event but, rather, are intended and shall be construed to remove and repeal all State laws and regulations prohibiting and regulating the placement and acceptance [of wagers].”

Unlike the 2014 law that partially repealed restrictions, the nuclear option is a complete repeal.  If passed, the pending legislation would create a world where any person could place a wager and any person could operate a sports book that accepts wagers.

The legislation still remains a longshot for passage, but its potential highlights the paradoxical outcome that may unfold. While experts believe that the nuclear option clearly does not run counter to PASPA, it still would not be the result New Jersey is hoping for. New Jersey wants to legalize sports betting, but it also wants to regulate sports betting.  But any attempts to do the latter—e.g., by providing consumer protections for sports bettors or collecting special taxes from sportsbook operators—may be seen as a violation of PASPA.  New Jersey’s best hope is that the Supreme Court intervenes to save its partial repeal, and the Trump Administration might help achieve that result.

Other States Are Lining Up to Place Bets

Many states are lining up to make a similar wager as New Jersey. In Maryland, legislators have proposed a bill that would give the State Lottery and Gaming Control Commission the power to regulate and license sports betting at casinos and racetracks.  In New York and Michigan, legislators have pushed for bills that authorize and regulate sports betting in casinos and racetracks.  In addition, the Attorney Generals of Arizona, Louisiana, Mississippi, West Virginia and Wisconsin have submitted an amicus brief in support of New Jersey in Christie II.  But if Christie II is unsuccessful, these states may have to exercise their own version of the “nuclear option,” especially if New Jersey moves forward with such a law.

Alternative Bets

Given the number of other states interested in legalizing sports betting, PASPA challenges could arise outside of the Third Circuit, which would in turn create splits that call for U.S. Supreme Court review. And the momentum is changing–NBA Commissioner Adam Silver and MLB Commissioner Rob Manfred have changed their tune when it comes to sports betting, envisioning a world where the leagues could profit off of a sports betting market that already exists illegally. Given the recent momentum in favor of legal sports betting and the potential impact of the Trump Administration, Congress could repeal PASPA and remove the issue from the judiciary.  In the end, it is unclear whether New Jersey will successfully create a sports betting scheme in its borders—or what that scheme will look like.  But it is clear that the eyes of sports bettors and regulators alike are focused on the ultimate fate of New Jersey’s gamble on sports betting.