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TGS SPECIAL REPORT...CHANGING POLEMICS IN SPORTS WAGERING DEBATE
by Bruce Marshall, Goldsheet.com Editor


As Alex Trebek (or, for oldtimers, Art Fleming) might have offered as an answer in the “What is now in the rear-view-mirror” category on Jeopardy, we can apparently include the days of professional sports leagues and the NCAA basing any opposition to sports wagering around the supposed evils of the endeavor. And for that we can probably thank NBA Commissioner Adam Silver.

Silver’s well-publicized recent op-ed piece in the New York Times set in motion a change in the framework of the sports betting debate that has been centered recently upon New Jersey’s challenge to PASPA (Professional and Amateur Sports Protection Act), a 1992 law which allowed select states (Nevada, Oregon, Delaware, and Montana, but not New Jersey) to be “grandfathered” by the feds to accept sports wagers. We have made note of the Garden State and its challenge to PASPA on these pages throughout this football season. Silver’s NYT comments on Nov. 13, however, would completely reshuffle the deck on the debate.

“Times have changed since PASPA was enacted,” wrote Silver in his NYT op-ed. “Gambling has increasingly become a popular and accepted form of entertainment in the United States. Most states offer lotteries. Over half of them have legal casinos. Three have approved some form of Internet gambling, with others poised to follow.

“In light of these domestic and global trends, the laws on sports betting should be changed. Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards. Without a comprehensive federal solution, state measures such as New Jersey’s recent initiative will be both unlawful and bad public policy.

“But I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.”


Silver’s commentary echoed across the sports wagering landscape like a sonic boom. But more subtle hints of a changing debate could be found in the oral arguments in US District Court. Especially those presented by lawyers on behalf of the leagues and the NCAA in their recent successful attempt to persuade Judge Michael Shipp to issue a permanent injunction against New Jersey’s latest challenge to PASPA in early November.

The change? The leagues were no longer arguing against sports betting per se. Rather, they were arguing against the way New Jersey wanted to legalize it--without state regulation.

The distinctions from prior resistance are noteworthy, because Silver has let the genie out of the bottle, and effectively said what most keen observers of this storyline have suspected for years. The professional leagues want in on what is estimated to be a multi-billion dollar (many multi billions) black market in sports wagering.

What the leagues haven’t figured out yet is how to properly monetize the sports wagering process. Which is a main reason why Adam Silver and the NBA were opposed to New Jersey’s new interpretation of PASPA, and the state’s ongoing attempts to circumvent that federal law. Simply, none of the recent Garden State plans were going to put money in the pockets of the NBA, NFL, MLB, or NHL, and their opposition was expected.

But the pro leagues were already in the early stages of positioning themselves for a potential significant windfall.

Within the past month, the NBA has announced an investment in FanDuel, a fantasy sports betting website whose commercials now challenge beer and car companies for most frequent on televised football and basketball events. During its past season, Major League Baseball also began co-sponsoring a daily contest on its website in conjunction with DraftKings, another fantasy betting site. (How the fantasy betting sites have been able to dance around existing federal sports gaming laws might be a topic for a future discussion).

The foray into the fantasy sports betting realm, and the quick manner in which the leagues have co-opted with entities such as FanDuel and DraftKings, signals a significant change in the debate...and one that might also suggest legalized Vegas-style sports wagering might not be too far off on the horizon.

In a recent NY Times article, Marc Edelman, a law professor at Baruch College and a close observer of these recent developments, suggested that the sports leagues are now flying dangerously nearer the flame of sports wagering. “We are dancing ever so much closer to traditional sports gambling becoming legal,” Edelman said.

The fantasy betting angle has also drawn the attention of the New Jersey racetracks, who argued recently to Judge Shipp that, short of a complete ruling in their favor, they should be allowed to offer the same fantasy league betting that the leagues do on their websites.

Meanwhile, Silver’s suggestion that Congress, and not the federal courts, be used to address new sports gaming laws might resonate more since the recent midterm elections. More specifically, the Senate’s shift to GOP control in January will effectively marginalize one of the biggest opponents of expanding sports betting, current majority leader Harry Reid (D-NV), who has fiercely defended his state’s exclusive rights. As far as our D.C. contacts know, Reid’s pending majority successor Mitch McConnell (R-KY) has not hinted at such outward hostility regarding sports wagering. Although there is no indication, at least not yet, that Congress has any interest in repealing PASPA.

What, then, of New Jersey’s prospects for appeal of the latest ruling by Judge Shipp? Like before, Shipp’s order grants final summary judgment, which, under federal law, means it is appealable to the appropriate appellate court. And the Garden State has commenced that process. New Jersey’s chances of success in the next round before the Third Circuit should be at least marginally better than they were in District Court in front of Judge Shipp, who has consistently ruled in favor of the leagues. Remember, there was a dissenting vote in the Third Circuit’s 2-1 decision in 2013 to reject New Jersey’s original challenge to PASPA. Judge Thomas Vanaskie agreed substantially with his two colleagues but differed in his interpretation of PASPA.

“PASPA attempts to implement federal policy by telling the states that they may not regulate an otherwise unregulated activity,” Vanaskie (left) wrote. “The Constitution affords Congress no such power.” Vanaskie stressed that no matter how it is read, PASPA unlawfully prevented New Jersey from pursuing a right that it enjoys through the anti- commandeering doctrine: the right to legalize sports betting.

The appeal will likely hinge upon the Third Circuit’s interpretation of a single paragraph from its opinion in the first case-- that “a state may repeal its sports wagering ban” without violating PASPA, and each state is free “to decide what the exact contours of the prohibition will be.” While New Jersey believes this “exact contours” language allows it to partially repeal its state-law prohibition against sports betting, some are not as sure.

Daniel Wallach, a partner at Becker & Poliakoff, P.A., and a leading expert on gaming law, and whose quotes appeared on these pages last week, offered his interpretation in a recent SI.com interview.

Wallach is skeptical the Third Circuit intended for its “exact contours” language to be utilized as a pathway for states to avoid the strictures of PASPA. “This language was never intended to be a loophole for states to exploit.” said Wallach, “Rather, it was a rationale expressed by the Third Circuit majority as to why PASPA did not commandeer states to maintain unwanted state-law prohibitions against sports betting on its books.”

Wallach also noted that while Judge Vanaskie previously sided with New Jersey in concluding PASPA violates the anti-commandeering doctrine, his dissenting opinion also seemed to reject New Jersey’s new partial-repeal strategy. In a footnote, Vanaskie wrote that he “fails to discern” how the Third Circuit majority opinion “leaves much room for the states to make their own policy,” making clear that “the only choice is to allow for completely unregulated sports wagering (a result that Congress did not intend to foster), or to ban sports wagering completely.” Thus, Vanaskie appears to be aligned with Judge Shipp’s “all-or-nothing” approach on just how far a repeal must go to avoid running afoul of PASPA.

Wallach concludes that this might not be a good sign for New Jersey, which will now likely be looking to the judges who previously ruled against it to side with it on the upcoming appeal. Considering Vanaskie’s footnote and the public policy considerations associated with potentially opening the floodgates for nationwide sports gambling, Wallach gave the appeal only about a 25% chance of success.

With an expedited appeal (as in New Jersey’s first challenge) underway, the next markers in this fascinating tale will probably come when written briefs are filed sometime this winter (late February-early March), with oral arguments likely scheduled by sometime in April. If this indeed is the timetable, look for the Third Circuit to issue a decision between next May and July. As always, we’ll keep you posted on the developments as they occur. Stay tuned.



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