What Happens if New Jersey Loses the Supreme Court Sports Betting Case?By Brett Smiley | Published: May 8, 2018 at 8:30 am
The prevailing belief is that the United States Supreme Court — sometime before the end of its term in June — will rule in favor of New Jersey and eliminate Congress’ 1992 law banning full-fledged sports wagering outside Nevada.
The optimism stems from several places, including the overall tenor of oral argument in Murphy v NCAA (nee Christie v NCAA) that seemed to favor the state’s position against the that of the sports leagues, which have long supported the ban. Another source of optimism is enthusiasm for the liberation of numerous states to sanction an accepted, if not celebrated activity, that now exists only partly in the shadows. These are unreliable guideposts.
All sides, now including (most of) the very leagues that oppose New Jersey in the high court, publicly recognize legal sports betting in the United States as an inevitability. But if the Supreme Court (SCOTUS) leaves intact the Professional and Amateur Sports Protection Act (better known as PASPA), the inevitable will come later than sooner, perhaps much later.
In a political climate where Congress can’t easily agree on a spot for lunch, how much faith can one have in the passage a bill legalizing sports wagering?
If New Jersey Loses the Supreme Court Sports Betting Case, How Long Will it Take to Legalize Sports Betting in the U.S. Take and How Might That Happen?
Here is the backdrop for the pickle that Congress may inherit:
First, if PASPA stands, numerous domestic and foreign companies, state lawmakers, racetrack and casino owners, sports betting enthusiasts and others will collectively groan. The sports leagues, foremost the NBA and Major League Baseball, will smile, having absorbed only the expense of legal fees and roughly six months of bankrolling a lobbying effort spanning more than 20 states to promote their preferred sports betting legislation.
Such preferred legislation is the kind that would grant them a “betting right and integrity fee” of 1 percent on all sports bets in every state, as well as the right to control sportsbook data. Nevada, whose sports betting framework was grandfathered in by PASPA, grants the leagues neither of these things. And as of this writing, only West Virginia had passed a bill in 2018 legalizing sports betting if/when federal law changes, and it made no concession for the leagues. Pennsylvania made it legal in the fall of 2017.
Add it all up and there’s widespread recognition that PASPA was poorly conceived and is behind the times; that it has failed to accomplish its stated purpose of stamping out sports betting, and it is contrary to the desires of both the majority of U.S. citizens and the 20-something states that are looking to tax and regulate an already widespread activity.
The NBA and MLB have declared they want a “federal solution” to sports betting — because another try from Congress is the surest path to securing a direct cut of the action and other lucrative fees from the sale of data.
So Where Would That Leave Sports Betting?
The starting point for a possible federal framework on sports betting would be New Jersey Representative Frank Pallone’s GAME Act (Gaming Accountability and Modernization Enhancement Act), which would allow states to offer legal sports betting and online sports wagering. It would create a framework for states to “opt-in” to sports betting at their discretion.
Introduced as a discussion draft in May 2017, Pallone (D-NJ 6th) and his staff solicited feedback from stakeholders before formally introducing the measure on the day of Christie v NCAA oral argument, Dec. 4, 4017.
“The GAME Act would be a good starting point, but the real key for us is educating our colleagues,” Dina Titus (D-NV 1st District), U.S. Representative for the district that includes Las Vegas, told Sports Handle. “They know very little about gaming, which is a complex issue, and so most of them, if you asked them what PASPA was, I suspect would give you a blank look.”
Titus said there isn’t much talk of gaming in Congress because “even in states that have gaming, there is just a small part of their whole economic picture and it doesn’t exist statewide often like it does here in Nevada. It’s a riverboat here, an Indian casino there, and so they’re just not as concerned about it or as attuned to the nuances of the policy.”
But that has dramatically changed at the state level since the turn of 2018. While some states are dialed in much better to policy nuances and how sports betting works at an operational level, there has, at least, been an unprecedented amount of legitimate discussion about it.
A Possible Shift in Control and the Reality of our Times
Without going down the rabbit hole of political polling, there are strong signs that the House of Representatives will turn blue come the November midterm elections. If Pallone wins re-election (he defeated his Republican challenger by a 64 to 36 percent margin in 2016), he would become chairman of the Energy and Commerce Committee, thus wielding a lot of power over hearings and attention on the GAME Act or a like-minded bill. Pallone, who did not respond to a request for comment for this story, is in wait-and-see about SCOTUS at this time.
Furthermore, while gaming and sports wagering certainly has opponents, it’s not a partisan or a red-vs.-blue-state issue. In fact, dark-red Mississippi may be among the first movers in a post-PASPA world, having altered its state constitution in 2017 to effectively permit sports betting.
On the other side of a potential House of Representatives flip is the possibility that Congress grinds to a near-complete halt, especially if there’s a Democratic-led impeachment effort of President Donald Trump. And at any time another shoe may drop in Special Counsel Robert Mueller’s investigation of Russian meddling in the 2016 election.
“But it doesn’t matter who’s in the majority” Titus said, explaining that educating members on policy would be key.
New Jersey Representative Leonard Lance (R-NJ 7th District) told Sports Handle that he is optimistic that SCOTUS will rule in New Jersey’s favor and that it would then be up to the states to decide on sports betting, but he said he would support federal legislation if it becomes necessary.
“I’m most concerned about the American economy and national security, issues like North Korea,” Lance said. “I don’t believe [sports wagering] rises to the level of existential threat of North Korea, but certainly we can work on several issues at the same time.”
Asked if a piece of sports wagering legislation might originate in another committee, Lance and Titus separately agreed that Pallone and Energy and Commerce would keep jurisdiction on the issue, but both also pointed to the Judiciary Committee as one other possibility.
Meanwhile, on the Lobbying Front
The NBA and MLB have already weighed in on the GAME Act and probably continue to press the same main points upon certain members of Congress. And a victory in the Supreme Court may inspire the leagues to back away from their state-level “spirit of compromise” reduction of the ask for a 1 percent integrity fee to a quarter of a percent, same as the federal excise tax levied upon Nevada sports wagers right now.
The state-level lobbying represents a hedge against a SCOTUS loss. A win would give the pro leagues the opportunity to breathe, reset, and then aggressively lobby members of Congress to address a legislative wish list. One group already looking to facilitate relations between the gaming world and the leagues is the American Gaming Association (AGA).
“The fastest way to bring [sports betting] to market is through a partnership,” said AGA President Geoff Freeman in an interview with CDC Newswire. “We’re working with the leagues to see if there’s a deal to be had.”
The contours of such a deal are so far unclear, with states taking divergent approaches to sports betting legislation, but none of them overly impressed with the “integrity fee.”
In a phone interview with Sports Handle, Sara Slane, Senior Vice President of Public Affairs at the AGA, pointed to the bigger picture — the very fact that the leagues are at the table discussing legal sports betting, period. Or if not at the table, discussing it at annual meetings as the NFL owners did in March.
“I think people have lost sight of the fact that you have Major League Baseball, and you have the PGA, and obviously, NBA, who are all right now advocating for sports betting, which is certainly a shift from where we were, a year ago, two years ago, three years ago,” Slane said.
While this is true, opponents of the so-called “integrity fee” view it purely as greed and more importantly, contrary to everyone’s desire to shift the black market into legal markets. Because operators in the illegal market pay no such fee, nor state taxes, nor lofty licensure fees and so on, they can offer patrons better odds and an overall more competitive product. MLB has made it clear that it supports only one kind of legislation: the kind that pays it an “integrity fee.”
“There’s about $150 billion in illegal sports wagers made annually,” Titus explained. “It has no consumer protections for the industry or the player, it’s ripe for manipulation, it fuels other illicit activities, and I think it jeopardizes those sports leagues, which is why they’ve gotten on board. I think you can make a good argument, and the more states that tip [in favor of legal sports betting], the more pressure on Congress to take action.”
Hurdles and Speed Bumps
Now back to Nevada, which has operated for decades with little federal intervention beyond the excise tax. What might a federal solution mean for the Silver State?
Titus, fellow Nevada lawmakers and lobbyists for the likes of MGM, Penn National Gaming and other major national players eager for expanded legal sports betting, will all be vocal and involved. But would Congress once again make a legislative exemption for Nevada on league-friendly provisions that currently don’t impact their licensed sportsbooks?
And then there’s powerful Native American groups such as the National Indian Gaming Association, which are so far lukewarm to the idea of introducing sports wagering. Put simply, it’s a much lower margin game compared to slot machines, and it’s also unfamiliar territory.
“Generally speaking, the more alignment that we can have with the stakeholders who are involved and will be impacted by sports betting, the better off everyone will be,” said Slane.
The next possible date for the release of the court’s decision is May 14. If PASPA stands and New Jersey also does not win on statutory grounds in a narrow ruling, the Garden State will have only $8 million in legal fees to show for its nearly decade-long effort. But it will have substantially loosened the jar and brought all sides to the table.
Perhaps West Virginia makes a legal run at PASPA after setting the table this year for sports betting and leading 18 states with an amicus brief (“friends of the court”) filing in support of New Jersey’s bid to overturn PASPA.
“I think the fact that you had a third of the United States propose legislation on sports betting, and you get a couple states that actually enacted it, speaks to the acceptance of sports betting and the popularity of it,” Slane said.
“So I think if you are a sports bettor, you should absolutely be optimistic that there’s momentum for legalized, regulated sports betting, unlike there’s ever been in the past. Obviously a lot of it is hinging on what happens with the court.”