Did Nebraska voters lay the groundwork earlier this month for legal sports betting? Turns out that’s a good question — and one that doesn’t have a clear answer. Voters on Nov. 3 approved a trio of referendums that legalize “any game of chance,” but sports betting is not explicitly included in the definition of a game of chance, and daily fantasy operators (many of whom are also sports betting titans) have long argued their game is one of skill.
But sources say that not only was the referendum language vague enough, but that lawmakers are prepared to include sports betting as part of the expansion when they meet next year. That shouldn’t come as a major surprise — sports betting was a discussion point in the state legislature earlier this year.
There are three tests that can be used to determine if a game is one of skill or chance. But beyond that, there are factors surrounding the Nebraska referendum that could help to make an argument either for or against if sports betting is included — or was even intended.
The object of this petition is to:
Enact a statute allowing all games of chance to be conducted by authorized gaming operators within licensed racetrack enclosures in Nebraska and establishes a Nebraska Gaming Commission to regulate such gaming in Nebraska.
–An April 2019 petition for a statutory initiative involving games of chance in Nebraska
Sports betting bill stalled during 2020 session
Prior to the voter referendum, Nebraska Sen. Justin Wayne introduced LB 990, which would have legalized sports betting and reads, in part, “It is the intent of the Legislature to recognize sports betting, fantasy sports, and various forms of poker as games of skill.” The bill was indefinitely postponed after a hearing.
Meanwhile, Nebraska is now bordered by two states with live, legal sports betting — Colorado and Iowa — and one, South Dakota, that legalized on Election Day.
Your reminder that Nebraska’s neighbors have legal sports betting, but we don’t. It’s like having a wedding reception with no booze or dancing. https://t.co/PdFC1DtJBY
— Josh Jablonski (@joshjablonski15) May 1, 2020
During the lead-up to Election Day, no daily fantasy or sports betting operator contributed to the lobbying efforts to get the referendums passed. The Winnebago tribe, which owns multiple casino properties in Nebraska, was the biggest contributor.
While both of those factors could point to lawmakers having trouble convincing their counterparts that sports betting should be included in the gambling expansion, at least one opponent of the expansion — the Nebraska Family Alliance — believes that sports betting could be included, according to the Omaha World-Herald.
“Everyone’s been saying how sports betting is a game of skill,” John Holden, an attorney and assistant professor at the Spears School of Business at Oklahoma State University, told Sports Handle. “The DOJ said that DraftKings and FanDuel have been arguing fantasy sports are a game of skill, so for me to now say, ‘Wait a second, you’ve legalized games of chance, so you want to jam sports betting into that?’ doesn’t make sense.”
Tests for games of chance vs. skill
There are three tests used to determine if games are of chance or skill. According to the Nebraska Revised Statutes, “an activity is gambling in Nebraska if its outcome is predominantly caused by chance.” More simply put, Nebraska uses the “predominant factor test,” but we thought it prudent to take a look at all three:
Predominant factor test: Using this test to determine a game of skill vs. a game of chance means a jurisdiction must determine whether the outcome of a sporting event is more about skill or chance. Many states that use this test have determined that sports betting, like some card games, are more games of skill than chance.
Material element test: With this test, a jurisdiction must determine if chance plays a relevant role in a game of skill. The test is a slippery slope in that the phrase “material element” itself is not defined. According to legal website Lexology.com, New York State altered its penal code to read: “any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon any element of chance, notwithstanding that skill of the contestants may also be a factor therein.” But the state still uses the predominant factor test in determining if a game is of skill or chance.
Any chance test: This test dictates that if there is any chance involved in a game, it is deemed a game of chance rather than skill.
WOW. Big news. Talking with @mikenewlin11 of Horseman's Park on @USC1620. He believes that a previous Nebraska Attorney General ruling on sports betting being a "game of chance" means that SPORTS BETTING is also approved for the state's horse tracks.
— John M. Bishop (@JohnBishop71) November 4, 2020
All three tests are ambiguous, at best. Prior to the referendum, multiple stakeholders argued that the referendum didn’t follow Nebraska law, which calls for initiatives to be on a single subject. The going argument is that legalizing “any game of chance” is more than a single subject. In a letter to the Secretary of State, the law firm Husch Blackwell also argued that the referendum allows for the “hidden adoption of Class III gaming,” which includes sports betting. That said, Class III gaming is never mentioned in any of the three referendums.
It’s easy to see how sports betting could be included under any of the tests, since none provide a concrete method to classify a game of chance vs. skill. The first two tests leave lots of room for interpretation by using words like “more” and “relevant.”
Several states have adopted a standard that is more strict than both the predominant factor and material element tests. The standard regards contests to be illegal “if they involve any chance whatsoever, even a modicum of chance,” writes Marc Edelman, a law professor at Fordham Law School. At least four states have adopted the rigorous standards, according to Edelman, including Arkansas, Iowa, and Tennessee.
So, will sports betting be legal in Nebraska? Two opinions
So, what happens next? Holden and Partner & Director of Government Affairs Brendan Bussmann of Global Market Advisors (and a Nebraska native) have opposing takes on what, exactly, voters passed and what happens next.
“The first reason I am skeptical of the measures moving the needle on sports betting is that they do not appear to mention sports betting anywhere within,” said Holden. “Including within Ballot Measure 430 and 431 (both use the same definition) where they ‘define’ game of chance and specifically enumerate games of chance. (‘Game of chance means any game which has the elements of chance, prize, and consideration, including any wager on a slot machine, table game, counter game, or card game. Game of chance does not include any game the operation of which is prohibited at a casino by federal law.’). This would be an easy place for the authors to have clearly stated that sports betting is meant to be included.
“I have also not seen any Nebraska politician ( or author of the ballot measures) indicate that sports betting was intended to be included. If the text of the measure is unclear a court would be likely to look to what the intent of the drafters was.”
But Bussmann says those in his home state complicated the issue enough to create a path to legal sports betting.
“At best, these initiatives created further vagueness in the law and it will be up to the courts as well as the Unicameral [Legislature] to figure out what’s next and how this works,” Bussmann said. “It almost is the case of you have to pass it, before you know what is in it. This is obvious from the comments [earlier this month] by the lawyer that led the effort on behalf of the Horsemen as well as the intentional vagueness in the ballot language. The challenge will be to see if you can get enough votes this next session to put the lipstick on a pig including on how sports betting will be crafted in the state of Nebraska.”
Muddy waters and court cases
Holden also argues that single-game sports betting likely does not fit within the definition of “game of chance,” and cites legal situations during which the NFL and the Department of Justice argued that sports betting is a game of skill. In addition, Holden points to a pair of Nebraska court decisions that could be applied to this case.
In State ex rel. Spire v. Strawberries, the court in 1991 wrote, “In defining these elements, this court has held that a game of chance is one in which the result as to success or failure depends less on the skill and experience of the player than on purely fortuitous or accidental circumstances incidental to the game or the manner of playing it or on the device or apparatus with which it is played.” In that case, the court took its definition from a 1982 case that defined game of chance as “a game of chance is one in which the winner is determined by mere luck and not by skill; the predominant nature of the game, i.e., skill or chance, determines its classification,” according to Holden.
Nebraska's legalization of gambling may or may not include sports betting as the language differentiates between a game of chance and a game of skill. If sports betting is a game of skill, I'm the dumbest son of…. Ah, crap. Just figured it out. #imadumbass
— Matthew Hanna (@Hanner82) November 4, 2020
Regardless of the existing interpretations, Bussmann still believes that sports not only can, but will be legalized in Nebraska.
“John’s point on games of skill is valid which is what they have done for several sessions to try and get DFS allowed in the state. They have failed more because they knew the bill would be vetoed by the Governor and used the argument of skill to try and move the ball down the field and past the limited scope that allowed for the lottery and charitable gaming that was passed by voters in 1992.”
But Bussmann said many in Nebraska have plans to move forward on the idea of legalizing sports betting under the umbrella provided by the referendum.
“In speaking with several Nebraska lawyers, in addition to the Husch Blackwell letter, they believe that the petitions offer a wide enough opening (semi-truck wide) to allow for sports betting and that they did this so that the Horsemen could have everything, including the ability to have online gaming.”
