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    New Jersey’s Battle for Sports Betting by: Griffin Finan

    Posted by Griffin Finan November 2, 2012

    Griffin Finan of Ifrah Law breaks down the lawsuit that could decide the future of sports betting in America.

    The four major American professional sports leagues and the NCAA are suing the state of New Jersey over a newly passed state law that would legalize sports betting within the state’s borders. (VIEW the complaint here.) The sports organizations are arguing, in a federal trial court, that the state law violates federal law and should not be allowed to take effect. Right now, it is supposed to go into effect starting on January 9, 2013, when the state plans to issue gambling licenses.

    The New Jersey law would permit bets to be taken in the state on all major professional sporting and college athletic events. Collegiate sporting events involving New Jersey colleges, and all sporting events, professional or collegiate, taking place in the state are excluded from betting. (This would include the 2014 Super Bowl, which is scheduled to be held at MetLife stadium in East Rutherford, New Jersey.)

    BACKGROUND: When and How Sports Betting Became Illegal in America

    The leagues have argued that the state law violates the Professional and Amateur Sports Protection Act (PASPA), a 1992 federal statute that imposes a broad ban on sports betting. PASPA prohibits states from authorizing sports betting, with the exception of states that had their own sports betting schemes in place between 1976 and 1990. Four states – Nevada, Oregon, Montana, and Delaware – were granted an exemption because they had a sports betting scheme in place at the time, but only Nevada allows direct betting on sporting events.

    New Jersey is not one of the four exempted states. At the time that PASPA was passed, New Jersey had a one-year window to secure an exemption by legalizing sports betting in the state, but the state legislature failed to act. The legislature was influenced by the strong opposition of Bill Bradley, then a U.S. senator from the state and a former NBA all-star, who was influential in getting PASPA passed in Congress. At the time, Sen. Bradley said that legal sports betting would “turn athletes into roulette chips.”

    LITIGATION: What New Jersey Plans to Argue

    Leagues lack standing.

    In the current lawsuit, New Jersey has made some strong arguments that may win the case for the state. First, the state argues that the sports leagues lack standing to challenge the law in federal court. Standing essentially involves the question of whether the sports leagues are being harmed or will imminently be harmed by the law. New Jersey has argued that the leagues will suffer no harm from the law because sports gambling is already rampant and an additional legal market for gambling will have no impact on the leagues. New Jersey points out that the sports betting industry is estimated to be worth $380 billion annually, with over $3 billion wagered in Nevada casinos last year alone. Other estimates place the amount of money wagered illegally each year on sporting events in the U.S. as high as $500 billion.

    The standing argument is solid and could win the suit for New Jersey before the merits of the case are even considered.

    PASPA is unconstitutional.

    If the state does not win on the standing argument, it could also win on a contention that PASPA is unconstitutional. New Jersey can argue that PASPA violates the Tenth Amendment to the U.S. Constitution, which reserves those rights to the states that are not delegated to the federal government. A state’s decision on how to generate revenue has consistently been viewed by federal courts as a power of the state that the federal government may not overturn.

    PASPA may also be vulnerable to a challenge based on its unequal treatment of different states, since four states are permitted some form of sports gambling and the other 46 states and the District of Columbia are not.

    Current Status of the Case and Deadlines

    The judge in the case is currently reviewing motions to decide the case and a request from the sports leagues to issue an injunction to stop New Jersey from implementing the law until the court decides the case. All motions in the case, expert reports, and rebuttals are due to the court by December 5. Oral arguments on the merits of the positions will be held on December 18.

    The court has ordered that the heads of the NCAA and the four major sports leagues be subjected to depositions before November 19, barring any delays. The court has also ordered the leagues to produce a decade’s worth of documents showing the potential impact that sports betting and fantasy sports have on the leagues. An agreement between the parties will keep some information obtained through the discovery process confidential.

    Barring the issuance of an injunction against the law or a final court ruling in favor of the leagues, New Jersey officials have stated that they plan to begin issuing licenses on January 9, 2013. The day after New Jersey announced that it planned to issue licenses, the NCAA responded by relocating six championship events scheduled to be held in New Jersey next year. The Division I Metro Atlantic Athletic Conference has also stated that it will take its championship events out of New Jersey because of the new law.

    IMPACT: What happens if New Jersey triumphs?

    If New Jersey wins the lawsuit, the last remaining hurdle to legalized sports gambling in that state – and probably in all states that wish to legalize it – will be removed. Other states looking at new ways to generate revenue will be tempted by the revenue that could potentially be generated from legalizing sports betting. In court papers, New Jersey cites a study which concluded that legalizing sports gambling in New Jersey would generate as much as $120 million each year and add thousands of jobs in the state. New Jersey officials hope that sports gambling could stimulate growth in tourism to the state, which will pump money into the state’s economy.

    Online sports betting would still be illegal under the federal Wire Act, which prohibits the interstate transfer of money for betting on sports. The Department of Justice issued an opinion last December that clarified its views on the Wire Act as it relates to online gaming, but it reaffirmed that the Wire Act applies to sports betting. It would take new federal legislation to allow for money to travel across state lines to be used for sports gambling, and this does not appear likely to happen anytime soon. However, if a state wanted to create a purely intrastate system of online sports gambling, that would be legal.

    Any final decision in this case could be appealed to the U.S. Court of Appeals for the Third Circuit. Any decision from the Third Circuit could be appealed to the Supreme Court, but the Supreme Court does not have to hear the appeal. PASPA has been challenged before and upheld by the Third Circuit, but it was challenged on different grounds than the issues presented in this case and those previous decisions will likely have no bearing on any appeal is this case.

    The stakes of the litigation surrounding the New Jersey sports gambling law are quite large. It is no exaggeration to say that in the coming months the courts could decide the future of sports gambling in the nation.

    Griffin Finan is an Associate at Ifrah PLLC, a Washington D.C.-based law firm specializing in iGaming and Internet advertising and marketing. Ifrah Law maintains its own blog, Crime In The Suite. Follow Griffin Finan on Twitter: @G_Finan.

    QuadJacks - Friday, November 2, 2012

    About Griffin Finan

    Griffin Finan is an Associate at Ifrah, PLLC, a Washington, D.C. based boutique law firm specializing in iGaming, Internet advertising and marketing, white collar criminal defense and government contracts. Griffin’s practice focuses on iGaming, regulated sports betting, fantasy sports, and white-collar criminal defense. Griffin has counseled clients on a range of issues including compliance with state and federal gaming laws, structuring fantasy sports games, litigation related to gaming issues, and representing individuals in white-collar criminal defenses cases related to gambling. Ifrah Law maintains its own blog, Crime In The Suites. Follow Griffin Finan on Twitter: @G_Finan. Follow Ifrah Law on Twitter: @IfrahLaw.

    View all post by Griffin Finan

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