PHILADELPHIA (CN) - Any potential ban on sports betting in New Jersey would violate the U.S. Constitution, according to the lead counsel representing the New Jersey Governor's Office.
Arguing at an en banc hearing at the Third Circuit on Wednesday, Theodore Olson said prohibiting sports wagering would violate the 10th Amendment because it would "conscript and commandeer states into instrumentalities of the federal government."
The hearing was the latest in New Jersey's attempts to legalize sports betting in casinos and racetracks following a legal challenge to a 2014 law by the National Football League and other sports leagues.
The legal issue stems from a missed opportunity by New Jersey to pass laws regulating sports betting more than two decades ago.
In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA) as a way to prohibit state-sanctioned sports gambling. The law exempted several states on the condition that they enact a sports gambling scheme by the end of 1993, but New Jersey missed that deadline.
The state attempted to rectify that, first in 2012 with the Sports Wagering Law, which was eventually defeated, and again in 2014 by repealing all of the state's prohibitions on gambling.
The NFL, National Collegiate Athletic Association, and other sports leagues argued that New Jersey's 2014 law was "just as unlawful as its previous attempts" to get around PASPA, and they have fought against attempts to legalize sports books in the state.
During Wednesday's oral arguments, Olson said New Jersey did not authorize state-sanctioned sports betting in the 2014 law but rather removed prohibitions against sports books in casinos and racetracks.
"Lifting a prohibition is not an authorization," he said. "PASPA either requires states to regulate sports betting or to leave them alone."
However, attorney Paul Clement, who represents the NCAA, NFL, and other sports leagues, said PASPA issued specific commands for states and that prohibitions on activities that are inconsistent with federal law "are both commonplace and constitutional."
He noted bearer bond issuances and driver's licensure as two examples of Congress prohibiting states from entering into certain activities.
"Not all partial repeals are created equal," Clement argued, claiming that a "sea of prohibitions" with carve-outs for certain gambling venues - such as those proposed in 2014 - would essentially be a state authorization of gambling.
PASPA is "more in the nature of 'thou shalt not' than 'thou shall,'" Clement said.
The effects of allowing sports gambling raised some concerns among the judges. If New Jersey's 2014 law was allowed, Olson argued, then New Jersey agencies would not take an oversight role in sports gambling.
"It would not be regulated," he said.
Ronald Riccio, who represents the New Jersey Thoroughbred Horsemen's Association, agreed and tried to calm concerns about unregulated sports books.
"It doesn't mean the Wild West of sports betting in New Jersey," Riccio said.
"The Wild East?" Judge Thomas Ambro jokingly suggested.
"It means private self-regulation, as there is in many industries," Riccio answered, noting that oil and real estate industries have self-regulatory organizations that police its members. He also noted that if self-regulation proved to be a "travesty," then the state could step in later.
But several judges were still concerned whether a regulatory apparatus would be necessary.
"There's line-drawing to be done here," said Judge Kent Jordan, who also said the key question is where such gambling would be allowed in the state.
The Third Circuit has previously ruled against sports gambling. Last August, the Philadelphia-based appeals court ruled 2-1 that the New Jersey's attempts to bring sports betting to the state were unconstitutional. In that ruling, Judge Marjorie Rendell wrote that "myriad laws" in the state already blocked sports betting.
The lone dissenter in the August ruling, Judge Julio Fuentes, wrote at the time that the state's 2014 law should be allowed to stand because it repealed the state's entire gambling scheme.
The American Gaming Association, which is not a party in the case, estimates that $140 billion is spent illegally every year on sports betting.
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