New Jersey’s Gamble on Legalized Sports Betting

During this Spring Term, another major federalism decision is expected as the U.S. Supreme Court determines whether a federal statute can prevent a state from repealing its own laws.  See Murphy v. Nat’l Collegiate Athletic Ass’n, No. 16-476, (formerly known as Christie v. Nat’l Collegiate Athletic Ass’n) and New Jersey Thoroughbred Horsemen’s Ass’n, Inc. v. Nat’l Collegiate Athletic Ass’n, No. 16-477.  Specifically, the Court will consider whether a state violates the Professional and Amateur Sports Protection Act (PASPA)—a federal law that prohibits states from authorizing state-sanctioned sports betting—(a) by repealing its own laws prohibiting sports betting (but not expressly authorizing sports betting) and (b) if repealing such a state law violates PASPA, whether PASPA is constitutional.  The case is a culmination of New Jersey’s eight-plus-year campaign to legalize sports betting, and has a variety of implications not only for the gaming industry, but the balance of power between the states and the federal government.

Enacted in 1992, PASPA made it illegal for states to “authorize” sports betting unless the state was one of four that already had such laws, i.e., Delaware, Montana, Nevada, and Oregon.  Twenty years later—and contrary to PASPA’s express prohibition—New Jersey enacted legislation authorizing sports betting at in-state casinos and racetracks.  The National Collegiate Athletic Association and the professional sports leagues sued the state and obtained an injunction based on PASPA that blocked New Jersey’s laws from taking effect.  On appeal, the Third Circuit affirmed the district court and upheld the constitutionality of PASPA against New Jersey’s federalism challenge.  In response, New Jersey repealed portions of its state laws that prohibited sports betting.  After another round of litigation, the Third Circuit again ruled in favor of the sports leagues, upheld the district court’s injunction, and (again) held PASPA constitutional.  The Supreme Court held oral argument on December 4, 2017.

The constitutional question before the Supreme Court is whether PASPA violates the “anti-commandeering” doctrine of the Tenth Amendment.  The anti-commandeering doctrine bars the federal government from “commandeering” states and their officers by requiring them to enforce or implement federal laws and regulations or to enact specific state laws to support federal law or policy. New Jersey and the other petitioners argue that the Third Circuit’s interpretation of PASPA unconstitutionally commandeers New Jersey’s legislative process by requiring the state to enforce, and not repeal, laws related to a federal policy against state-regulated sports betting.  Notably, the petitioners concede that the federal government, pursuant to its power under the U.S. Constitution’s Commerce Clause, could regulate sports betting itself, but Congress did not do so, preferring a method that, according to legislative history, would cost the federal government nothing.  In response, the sports leagues argue that PASPA is a valid exercise of Congress’ power under the Commerce Clause, and the anti-commandeering doctrine does not apply because PASPA does not compel states to do anything; rather, like many other federal laws, PASPA merely prohibits states from enacting laws that contradict a particular federal policy.

A holding by the Supreme Court that PASPA is unconstitutional would open the door for more states to repeal existing state laws prohibiting sports betting, and potentially to expressly legalize such betting.  Many states have legalized forms of gambling to generate revenue, and state-regulated sports betting could be attractive as an additional revenue-generating program.  Tellingly, legislation that would legalize sports betting in the event that PASPA is invalidated has already been introduced or enacted in at least 15 states.  In the broader sense, striking down PASPA could have a direct impact on the scope of Congress’ Commerce Clause power.  New Jersey’s playbook could form the basis for challenges by states to other federal regulatory schemes that conflict with state sovereignty, such as the legalization of medical and recreational marijuana, laws permitting (or prohibiting) so-called “sanctuary cities,” and even federal firearm laws.