WASHINGTON (CN) – Clearing the way for New Jersey to legalize sports gambling, the Supreme Court found Monday that Congress improperly intruded on states’ rights.
Though Congress banned most states in 1992 from enacting laws that legalize betting on sports, four states that had already set up sports lotteries — Nevada, Montana, Delaware and Oregon — all received grandfather protections from the new law.
The Professional and Amateur Sports Protection Act contained a one-year grace period for other states to pass legalize sports gambling, but New Jersey failed to do so within that window.
Instead New Jersey voters waited until 2011 to have state lawmakers legalize sports betting. The Legislature’s first effort, a constitutional amendment, proved unsuccessful, but its next maneuver was framed as a repeal. Because the state had pre-existing laws that governed its casinos and racetracks, the Legislature passed an amendment in 2014 that repealed the provisions of that barred such facilities from accepting sports bets.
Led by the NCAA, America’s four major sports leagues – the NFL, MLB, NBA and NHL – obtained an injunction from a federal judge who found that New Jersey’s law violated PASPA.
The Third Circuit kept that result in place, but the Supreme Court reversed 6-3 Monday.
“Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” the 31-page ruling states. “Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not. PASPA ‘regulate[s] state governments’ regulation’ of their citizens. The Constitution gives Congress no such power.”
Critical to this morning’s reversal is the high court’s finding finding that PASPA unconstitutionally compels state regulation in violation of what is known as the “anti-commandeering” principle.
By dictating what a state legislature may and may not do, Justice Samuel Alito wrote for the majority, the PASPA has the same practical effect “as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals.”
“A more direct affront to state sovereignty is not easy to imagine,” Alito added.
Five justices joined Alito’s opinion in full, but Justice Ruth Bader Ginsburg wrote in dissent that the majority had a duty to sever only the offending part of PASPA while leaving the rest in tact.
“The court wields an ax to cut down §3702 instead of using a scalpel to trim the statute,” Ginsburg wrote, joined in full by Justice Sonia Sotomayor and in part by Justice Stephen Breyer. “It does so apparently in the mistaken assumption that private sports-gambling schemes would become lawful in the wake of its decision.”
Ginsburg argued that PASPA represents a permissible exercised of authority to regulate commerce.
“On no rational ground can it be concluded that Congress would have preferred no statute at all if it could not prohibit states from authorizing or licensing such schemes,” she wrote. “Deleting the alleged ‘commandeering’ directions would free the statute to accomplish just what Congress legitimately sought to achieve: stopping sports-gambling regimes while making it clear that the stoppage is attributable to federal, not state, action. I therefore dissent from the court’s determination to destroy PASPA rather than salvage the statute.”
Attorneys at the law firm O’Melveny predicted massive fallout from Monday’s ruling.
“The Supreme Court’s decision just turned the world of sports gambling into not only the Wild Wild West, but the Wild Wild, North, South, and East as well,” said Chuck Baker, who along with attorney Irwin Raij co-chairs O’Melveny’s sports group.
Baker emphasized that the ruling here is distinctive because the majority struck down the entire federal framework rather than simply allowing New Jersey to go forward with sports betting.
“The impact will be near immediate,” Baker warned, pointing to the new laws on sports betting that have been adopted in Connecticut, Mississippi, New York, Pennsylvania and West Virginia.
“And that’s to say nothing of the dozen or so other states with legislation in the works,” Baker added.
Raij, the other O’Melveny attorney is himself an owner of professional baseball and football franchises. He said Monday’s ruling has set the stage for a state-by-state approach that will “place a huge onus on the leagues (and perhaps also universities)” to implement regulations while also pursuing legislative solutions at the state and federal level.
“Gaming companies are also of course going to face a huge new set of challenges — albeit these will be welcome challenges — not only as they navigate a web of differing state laws but also as they start from scratch building an industry that, until today, did not exist legally in this country,” Raij said. “Likewise, facilities operators — whether venues are municipally owned or privately held — are going to have to grapple with questions about whether to provide access to gaming and how to best obtain licensing. Suffice it to say, handicappers could make a lot of money not only betting on sports, but also betting how betting on sports is going to develop in the coming weeks and months.”
Jones Walker attorney Marc Dunbar predicted that Native American tribes could immediate benefits in the states that are working to legalize sports gambling.
“In the near term, tribes may be able to get up and running quicker than their state-regulated competitors, further skewing the sports gambling markets and highlighting the need for federal legislation,” Dunbar said in a statement.