In 1992, Congress enacted the Professional and Amateur Sports Protection Act (“PASPA”) to prohibit state-sanctioned sports gambling. In 2011, the New Jersey Legislature held a referendum asking New Jersey voters whether sports gambling should be permitted, and sixty-four percent (64%) voted in favor of amending the New Jersey Constitution to permit sports gambling. The constitutional amendment provided:

It shall also be lawful for the Legislature to authorize by law wagering at casinos or gambling houses in Atlantic City on the results of any professional, college, or amateur sport or athletic event, except that wagering shall not be permitted on a college sport or athletic event that takes place in New Jersey or on a sport or athletic event in which any New Jersey college team participates regardless of where the event takes place….

The amendment permitted the New Jersey Legislature to authorize by law sports wagering at casinos or gambling houses in Atlantic City, except that wagering was not permitted on New Jersey college teams or on any collegiate event occurring in New Jersey. After voters approved the sports-wagering constitutional amendment, the New Jersey Legislature enacted the Sports Wagering Act in 2012 (“2012 Law”), which provided for regulated sports wagering at New Jersey’s casinos and racetracks. The 2012 Law established a comprehensive regulatory scheme, requiring licenses for operators and individual employees, extensive documentation, minimum cash reserves, and Division of Gaming Enforcement access to security and surveillance systems.

In 2012, the NCAA, NFL, NBA, NHL, and MLB (“Leagues”) sued to enjoin the 2012 Law as violative of PASPA. New Jersey did not dispute that the 2012 Law violated PASPA, but urged, instead, that PASPA was unconstitutional under the anti-commandeering doctrine. The District Court held that PASPA was constitutional and enjoined implementation of the 2012 Law. New Jersey appealed, and the Third Circuit affirmed.

In 2014, the New Jersey Legislature passed SB 2460 (“2014 Law”), which provides in part:

any rules and regulations that may require or authorize any State agency to license, authorize, permit or otherwise take action to allow any person to engage in the placement or acceptance of any wager on any professional, collegiate, or amateur sport contest or athletic event, or that prohibit participation in or operation of a pool that accepts such wagers, are repealed to the extent they apply or may be construed to apply at a casino or gambling house operating in this State in Atlantic City or a running or harness horse racetrack in this State, to the placement and acceptance of wagers on professional, collegiate, or amateur sport contests or athletic events….

The 2014 Law specifically prohibits wagering on New Jersey college teams’ competitions and on any collegiate competition occurring in New Jersey, and it limited sports wagering to persons 21 years of age or older situated at such locations, namely casinos and racetracks.

In 2014, the Leagues filed suit to enjoin New Jersey from giving effect to the 2014 Law. The District Court held the 2014 Law violates PASPA, granted summary judgment in favor of the Leagues and issued a permanent injunction against the Governor of New Jersey, the Director of the New Jersey Division of Gaming Enforcement, and the Executive Director of the New Jersey Racing Commission. The issue presented to the Third Circuit was whether the 2014 Law violates federal law.

On appeal, New Jersey argued the 2014 Law complies with PASPA and is consistent with Christie I because the New Jersey Legislature effected a repealer as Christie I specifically permitted. The Leagues urge the 2014 Law violates PASPA because it authorizes and licenses sports gambling. The United States submitted an amicus brief in support of the Leagues arguing the 2014 Law impermissibly licenses sports wagering by confining the repeal of gambling prohibitions to licensed gambling facilities and thus, in effect, enlarging the terms of existing gaming licenses.

Per the Court, the 2014 Law authorizes casinos and racetracks to operate sports gambling while other laws prohibit sports gambling by all other entities. Without the 2014 Law, the sports gambling prohibitions would apply to casinos and racetracks. New Jersey urges that the 2014 Law does not provide authority for sports gambling because the Third Circuit previously held that “[t]he right to do that which is not prohibited derives not from the authority of the state but from the inherent rights of the people” and that “[w]e do not see how having no law in place governing sports wagering is the same as authorizing it by law.” But this is not a situation where there are no laws governing sports gambling in New Jersey. Absent the 2014 Law, New Jersey’s myriad of laws prohibiting sports gambling would apply to the casinos and racetracks. Thus, the 2014 Law provides the authorization for conduct that is otherwise clearly and completely legally prohibited.

Second, per the Court, the 2014 Law authorizes sports gambling by selectively dictating where sports gambling may occur, who may place bets in such gambling, and which athletic contests are permissible subjects for such gambling. Under the 2014 Law, New Jersey’s sports gambling prohibitions are specifically removed from casinos, gambling houses, and horse racetracks as long as the bettors are people age 21 or over, and as long as there are no bets on either New Jersey college teams or collegiate competitions occurring in New Jersey. The 2014 Law allows casinos and racetracks and their patrons to engage, under enumerated circumstances, in conduct that other businesses and their patrons cannot do. That selectiveness constitutes specific permission and empowerment. While artfully couched in terms of a repealer, the 2014 Law essentially provides that, notwithstanding any other prohibition by law, casinos and racetracks shall hereafter be permitted to have sports gambling. The Third Circuit concluded this action is not a repeal, but an authorization.

Finally, per the Court, the exception in PASPA for New Jersey, which New Jersey did not take advantage of before the one-year time limit expired, is remarkably similar to the 2014 Law. The exception states that PASPA does not apply to “a betting, gambling, or wagering scheme…conducted exclusively in casinos…, but only to the extent that…any commercial casino gaming scheme was in operation…throughout the 10-year period” before PASPA was enacted. In order to avoid rendering the New Jersey exception surplusage, the Third Circuit must read the 2014 Law as authorizing a scheme that clearly violates PASPA.

Under PASPA, it is unlawful for a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact sports gambling. The Third Circuit concluded that the 2014 Law violates PASPA because it authorizes by law sports gambling.

For any questions, feel free to contact Christian Dennie at cdennie@bgsfirm.com.