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U.S. Supreme Court Favors Legal Sports Betting for NJ; New Tax Bill Waiting a Vote in Legislature

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By JOHN BRENNAN


(MAY 14, 2018)--New Jersey's seven-year effort to bring legal sports betting to the state's casinos and racetracks has become a reality after Monday's U.S. Supreme Court ruling that the federal government cannot stand in the way.

Dennis Drazin, the operator of the Monmouth Park racetrack, said he expected to offer sports betting "within two weeks" unless the Legislature or other elected officials asks him to wait. Operators of Meadowlands Racetrack, Freehold Raceway and most Atlantic City casinos likely will seek to be up and running for the college football and National Football League seasons this fall.

But the ruling also has major national implications, because it struck down in its entirety the Professional and Amateur Sports Protection Act of 1992, known as PASPA. That law – sponsored by former U.S. Sen. Bill Bradley of New Jersey, who was a New York Knicks basketball star – allowed Nevada to keep its extensive sports betting operations while allowing a handful of states to continue limited gambling options. The vast majority of states, including New Jersey, were barred from offering legal sports betting.

 

PASPA was highly unusual in U.S. history because the federal government banned an activity while not presiding over enforcement. That left the law potentially vulnerable to charges of "commandeering" – an impermissible encroachment by Congress over a state's rights.

The court's conservative majority ruled precisely on that issue, with liberal Justice Elena Kagan joining them. Colleague Stephen Breyer affirmed in part and dissented in part.

"Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own," Justice Samuel Alito – who grew up near Trenton – wrote in his majority opinion. "Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution."

"There is simply no way to understand the provision prohibiting state authorization as anything other than a direct command to the States," Alito added. "And that is exactly what the anti-commandeering rule does not allow. ... A more direct affront to state sovereignty is not easy to imagine."

Justice Ginsburg wrote that any "infirmity" of PASPA could be solved by just striking down a specific provision rather than the entire law.

"The Court wields an ax … instead of using a scalpel to trim the statute," Ginsburg wrote.

 

The Democrat-controlled New Jersey Legislature set the stage for a statewide referendum in 2011 on changing the state Constitution to permit such gambling in spite of the federal prohibition. Nearly 70 percent of voters approved. Gov. Chris Christie signed such a bill into law in 2012, and the NCAA, NFL and three other sports organizations promptly sued to stop the state.

The leagues prevailed in the U.S. District Court and Third Circuit Court of Appeals, and the U.S. Supreme Court declined to take up the initial case.

But with a 2-1 split decision at the Third Circuit, and the majority's suggestion that the state might be able to craft a different sports betting law that would pass Constitutional muster, supporters continued the fight. The new version passed in 2014 repealed most of the state's betting laws while leaving the window open for the casinos and tracks to run their own private betting operations.

The state lost again in 2015, but the second 2-1 decision by the Third Circuit had an unexpected twist: the dissenter in the case was the same judge – Julio Fuentes – who had written the majority opinion in the first case. He concluded that New Jersey had successfully bypassed the federal ban on state involvement in the gambling.

But fellow judges Maryanne Trump Barry (sister of President Donald Trump) and Marjorie Rendell (wife of former Pennsylvania Gov. Ed Rendell) disagreed, saying that while the second law was "clever," it still amounted to "de facto authorization" of sports betting by the state.

The nation's top court again was asked to take the case, and it took the unusual step in January 2017 of seeking an advisory opinion from the U.S. solicitor general on the necessity of addressing the issue. When staff at that office recommended that the court need not take up the matter, it seemed like a longshot that the court would step in.

But four months later, the court did just that – raising hopes among sports-betting advocates that the conservative majority would accept their arguments. Those sentiments were further raised last December at oral arguments in Washington, D.C.

 

The original sports betting law was passed as part of a bipartisan effort to aid the ailing horse racing and casino industries in the state by luring new patrons to their sites with expanded wagering options. The Legislature now may consider – given the cultural change in the use of technology – whether to permit residents and visitors to the state to place sports bets online rather than venturing to the three tracks or to the Atlantic City casinos.

A bill pending in Trenton would place an 8 percent tax on betting at tracks and casinos and a 12.5 percent tax on online sports betting.

Joe Asher, the chief executive for the U.S. arm of British bookmaker William Hill's operation, said Monday that it's conceivable that there could be twice as much money wagered in New Jersey on sports betting as the $5 billion wagered annually in Nevada. At approximately a 5 percent winning margin, that would mean $500 million in gross revenue.

Dennis Drazin, who operates Monmouth Park for the state's thoroughbred horsemen, has estimated that about 10 percent of the speculated $10 billion in wagers would come from his site.

There is no debate that tens of billions of dollars is wagered with illegal bookmakers annually across the United States – although some experts question the $150 billion estimate provided by the American Gaming Association.

 

Several states, including Pennsylvania and West Virginia, already have passed sports betting laws in anticipation of a favorable court ruling. Delaware – the only state aside from Nevada already allowed to offer multiple-bet "parlay wagers" on NFL games – also is expected to be an early adopter.

But many states – including Hawaii, Utah and Southern states that continue to bar casinos – may never warm to the idea of authorizing bets to be placed on sporting events.

 

The saga lasted long enough that the plaintiffs' sentiments have evolved significantly. NBA Commissioner Adam Silver – whose league was one of those suing New Jersey – in 2014 declared that he would support federal oversight of legal sports betting.

Others involved in the suit also suggested the same, and for the past several years, numerous sports franchises have become formal partners of providers of daily fantasy sports – contests where customers pay an "entry fee" and pick athletes from a variety of teams that they believe will have the most successful performances. Entry fees can run up to $5,000 or more, and there have been contests with prizes of as much as $1 million.

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