Federal court rejects New Jersey bid to legalize sports gambling
New Jersey's latest attempt to legalize Las Vegas-style sports betting was again struck down by a federal court on Tuesday, a decision that could leave lawmakers in the state to consider a so-called "nuclear option."
A 12-judge panel of the U.S. Third Circuit Court of Appeals ruled 10 to 2 to uphold a lower court decision that New Jersey's law — which would have allowed racetracks and Atlantic City casinos to offer sports gambling — violated the Professional and Amateur Sports Protection Act (PASPA) of 1992.
The setback may bring an end to the state’s years of trying to legalize sports betting, although New Jersey lawmakers are left with a few routes to pursue: petition the U.S. Supreme Court to take up the case, attempt to pass another bill that finally complies with PASPA or legalize sports betting outright with no oversight by state authorities.
Sports and gambling attorney Daniel Wallach said passing a bill that authorizes unregulated gambling "is the nuclear option," one that first piqued the interest of lawmakers the last time Third Circuit ruled on the state's previous version of the gambling law in 2014.
In that ruling, the judges wrote PASPA does not "prohibit New Jersey from repealing its ban on sports wagering,” but instead forbids the state from regulating such betting. The appeals panel on Tuesday declared the state’s amended law in 2014 was a “de facto authorization” of sports betting even though that law stipulated that the state would not be involved in regulating the gambling.
New Jersey would get no tax revenue as anybody within the state would be able to bet on whatever he or she wanted legally if lawmakers were to move to legalize sports wagering outright. No state allows such betting. Nor would full legalization of sports betting help the state's foundering racetracks and casinos, the impetus behind New Jersey's push to allow sports wagering.
"This could become the ultimate game of chicken," Wallach, a partner at the firm Becker & Poliakoff, told USA TODAY Sports. "New Jersey could force the hand of the NFL, NBA and Congress and make them all confront PASPA to lift the ban on sports betting in most states. Nobody wants unregulated sports betting. It will come down to if the New Jersey lawmakers have the onions to attempt something like that."
State Sen. Ray Lesniak has been one of the top advocates in New Jersey's attempts to offer sports betting didn't rule it out in an email to USA TODAY Sports.
"It all depends on there being sufficient support from the public," Lesniak said in an email. "That remains to be seen."
The court on Tuesday found that while it will not specifically define what sort of steps the state could have taken on a change in gambling regulations, “It is sufficient to conclude that the 2014 law overstepped [the line].”
NBA Commissioner Adam Silver has offered support for federal oversight that would allow the 46 states to join Nevada and three others in offering some form of sports betting.
Most sports leagues and franchises already have formed partnerships with daily fantasy sports sites, where competitors pay an entry fee with an opportunity to win up to thousands of dollars by choosing the most effective players from a variety of teams. States have since differed on whether such contests amount to sports betting in just a slightly different form.
The pushback from New Jersey disputing the constitutionality of the federal sports betting law that prevents the state from mirroring Nevada’s sports betting offerings dates back six years. The argument has been against the PASPA, which grandfathered in Nevada – and three other states, in limited form –while otherwise making sports betting illegal in the U.S.
The effort gained momentum in 2011 when Governor Christie reversed his opposition to suing the federal government while the state legislature managed to get a statewide ballot question to the voters that November.
The referendum passed easily, and by early 2012 the state has its own sports betting law allowing for the Las Vegas-style betting in the Atlantic City casinos and state racetracks.
But before the betting began, the NFL, NCAA and three other sports organizations sued the state in federal court. U.S. District Court Judge Michael Shipp ruled in favor of the leagues in February 2013, writing that the state should seek a repeal by getting Congress to change its sports betting ban.
Although a U.S. 3rd Circuit Court of Appeals panel again ruled against the state later in 2013, one of the three judges dissented on the grounds of the 1992 federal law impermissibly “commandeering” the state into doing its bidding. The majority ruling also noted that the state could repeal its sports betting laws “in whole or in part” – thus not being a commandeering issue.
Those two windows encouraged state officials to take a crack at a new sports betting bill that attempted to meet the parameters of the majority’s ruling, with that bill becoming law in October 2014. But Shipp found a month later that the new version – which voided many of the state sports betting prohibitions - also ran afoul of federal law.
Meanwhile, a second 3rd Circuit panel – this time including Maryanne Trump Barry, the sister of the Presidential candidate – last August ruled in the leagues’ favor. But in an unusual twist, there again was a dissenting vote – and this time it was Judge Julio Fuentes, who had authored the majority ruling in the first case. Fuentes concluded that the state had followed his pathway toward following federal law.
But the two other judges disagreed, saying that the state’s second sports betting law, “while artfully couched,” essentially was an “authorization” of sports betting at the tracks and casinos because only those sites were exempt from the ban.
The uniqueness of the judicial votes induced the 3rd Circuit in October to vacate the latter ruling pending an appearance by attorneys for each side before a dozen of the Circuit’s judges in an “en banc” hearing.
That hearing took place in February in a Philadelphia courthouse, with most of the judges asking questions of each side about how – or if - a state could write a law that resulted in sports betting in the state without violating the 1992 federal law. Several legal experts in the courthouse expressed skepticism that the state had met its heavy burden of proving such a decades-old law unconstitutional.
Lesniak however, said he believes the state will for a second time ask the U.S. Supreme Court to hear the case because there was a dissenting opinion both times the case went before a three-judge panel in the 3rd Circuit. The two dissenters were the only judges on Tuesday to side with the state.
"It's a long shot, but we can't throw in the towel now," said Lesniak.
John Brennan writes for The (Bergen County, N.J.) Record, a member of the USA TODAY Sports Network.