HomePublicationsNewsletter ArchiveNewslettersVolume 21Issue 28Third Circuit Affirms Ruling on New Jersey Sports Wagering

On Tuesday, August 25, 2015, the United States Court of Appeals for the Third Circuit upheld a lower court ruling that found that a 2014 attempt to deregulate sports wagering in New Jersey violates federal law. The ruling follows multiple attempts by New Jersey officials to authorize sports wagering in order to provide additional gaming options in Atlantic City.

Background

In 2011, New Jersey voters approved a constitutional amendment that permitted the legislature to pass legislation authorizing sports wagering in the state. Legislators thereafter passed the Sports Wagering Act in 2012, which permitted sports wagering in casinos and horsetracks and contained a regulatory structure for the licensing and oversight of such wagering. The law was challenged by the major United States sports leagues shortly after its enactment and, thereafter as a result of an appeal to the Third Circuit, was ruled to violate the Professional and Amateur Sports Protection Act (“PASPA”). PASPA is a 1992 federal law that prohibits states from authorizing sports wagering across the country except for those states with existing sports wagering programs (Nevada, and under limited circumstances in Oregon, Delaware, and Montana), which were grandfathered into the law. In its ruling, the Third Circuit held that PASPA was constitutional and that it preempted New Jersey’s attempts to authorize sports wagering.

In response to the Third Circuit ruling, New Jersey enacted a new law in 2014 that deregulated sports wagering that occurred in casinos and horsetracks by persons over the age of 21. In addition, wagering could not occur on college sporting events occurring in New Jersey if involving a New Jersey school. The state argued that PASPA only prohibits a state from authorizing or legalizing sports wagering, and that merely issuing a tailored repeal of certain prohibitions against sports wagering does not amount to “authorization.” As before, the law was quickly challenged by major U.S. sports leagues.

In November of 2014, the District Court for the District of New Jersey ruled that “PASPA preempts the type of partial repealNew Jersey is attempting to accomplish in the 2014 Law by allowing some, but not all, types of sports wagering in New Jersey.” National Collegiate Athletic Association, et. al. v. Christie, et. al., Case No. 14-6450, Opinion, p. 24 (November 21, 2014) (emphasis in original). The state thereafter appealed to the Third Circuit.

Third Circuit Ruling

This week’s 2-1 ruling affirms the District Court holding, citing precedent that “[s]tates may not use clever drafting or mandatory construction provisions to escape the supremacy of federal law.” National Collegiate Athletic Association, et. al. v. Christie, et. al., Case No. 14-4568, Opinion, p.19 (August 25, 2015). The opinion finds that the 2014 law is merely an attempt to avoid the restrictions of PASPA despite the law’s clear intention to prohibit sports wagering.

The Third Circuit acknowledged New Jersey’s “salutary purpose in attempting to legalize sports gambling to revive its troubled casino and racetrack industries,” as well as the popular criticisms regarding PASPA’s restrictions. Id. at 14. However, it found that it was bound to PASPA’s plain language and that a change in policy would have to occur through a congressional amendment or repeal of the federal law.

The dissenting opinion, however, was not convinced that the 2014 law violated PASPA’s plain language, focusing on the lack of “authorization” or permission granted for the conduct of sports wagering. Hon. Julio M. Fuentes found that “There is no explicit grant of permission in the 2014 Law for anyentity to engage in sports wagering….I don’t see how a partial repeal of prohibitions is tantamount to ‘authorizing by law’ a sports-wagering scheme in violation of PASPA.” Id. at Dissent, p.5, 9 (emphasis in original).    

Industry Reactions

In response to the decision, American Gaming Association (“AGA”) President and CEO Geoff Freeman released a statement noting that “the AGA encourages deeper examination about the best path forward on this issue. Given that Americans are betting at least $140 billion on sports illegally each year, it’s clear that the current law is not achieving its intended result. As the AGA leads an industry-wide task force to study sports betting, we will assess the implications of the court’s decision as the gaming industry continues to develop innovative ways to provide products and experiences that meet consumers’ demands.”

At this time, New Jersey officials have not indicated whether an appeal of the Third Circuit ruling would be sought with the United States Supreme Court. The state did seek Supreme Court review of the previous decision regarding its 2012 law, but certiorari was denied.

 

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