The Supreme Court Takes Up Sports Betting

Did Washington overstep its authority by ordering New Jersey to keep a prohibition on the books?


The Supreme Court Takes Up Sports Betting

What the American public wants it usually gets, and it wants to bet on sports. Even though it’s illegal almost everywhere but Nevada, the best guess is that $150 billion annually is wagered nationwide. Pressure to claim some of that bonanza comes from casinos and racetracks, but also from owners of sports teams and revenue-starved states—all casting covetous eyes on untaxed and unshared money.

Standing in the way of legalization is Papsa, the federal Professional and Amateur Sports Protection Act of 1992, which prohibits states from “authorizing” sports betting. (A grandfather clause exempts Nevada and makes a few other limited exceptions.) In the wake of the Pete Rose scandal, the sports industry enthusiastically supported federal action to stop gambling’s expansion.

On Monday the U.S. Supreme Court hears a challenge to Papsa, Christie v. National College Athletic Association. New Jersey would like to permit sports gambling and argues that Papsa constitutes a federal “commandeering” of state resources in violation of the 10th Amendment. 

Papsa included a partial exception for New Jersey, which had legalized casinos in Atlantic City in a 1976 referendum. Congress gave the Garden State a year in which to change its law without falling afoul of Papsa, but the deadline passed with no action. Recently, however, with casinos in decline and the state treasury depleted, lawmakers in Trenton rethought their position. In 2012 they passed a law to exempt casinos and racetracks from the longstanding ban on sports gambling and set up a regulatory system for their operation.

Five sports leagues, including Major League Baseball, promptly sued, claiming the new law violated Papsa. The Third U.S. Circuit Court of Appeals ruled against the state, holding that there was no commandeering because Papsa did not force the state to do anything other than refrain from authorizing sports gambling and setting up a legal structure to regulate it.

The state tried again in 2014. But this time, instead of setting up a regulatory structure, it merely repealed the prohibition insofar as it applied to casinos and racetracks. The leagues sued again, and the Third Circuit again agreed. There was no unconstitutional commandeering, the judges wrote, because Papsa merely prohibited “authorization,” and in this case repeal amounted to the same thing. The Supreme Court had declined to review the earlier decision but accepted this time.

New Jersey argues that under prior precedents the 10th Amendment bars Congress from forcing states to regulate or criminalize private activity, and that preventing a state from repealing an existing law is as much a commandeering as mandating that it pass a new one.

The case’s outcome may have implications for other policy questions, such as marijuana legalization, gun control and “sanctuary cities.” A ruling in New Jersey’s favor could stimulate further state legislation in response to the massive level of nominally illegal sports betting. So much money is at stake that there are strong financial incentives for gambling interests and state governments to bring betting into the open—that is, to make it taxable. Even if New Jersey loses, Congress may take control of the gambling regulatory agenda.

Legalization of sports betting, whether decided by Congress or by states, would pose countless policy issues. Will wagering be limited to casinos and betting parlors or allowed online? How is the revenue split among gambling enterprises, the leagues and state and federal law enforcement and tax collectors—and, for that matter, the players? How are those decisions made and reviewed and revised over time? Who will police this newly legal business to keep it honest? Will excessive regulation drive much of the betting back into the shadows? Will betting become legal only on professional games or college sports as well? May players bet? Even on games in which they participate? Against their own teams? How about owners? Game officials? League and team employees? If so, will there be disclosure requirements for insiders’ bets?

Messrs. Slocombe and Vincent, retired lawyers, were partners in the firm Caplin & Drysdale. Mr. Vincent was commissioner of Major League Baseball, 1989-92.

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