WEEKLY FEATURE: Sports Betting Blow

The U.S. Supreme Court declined to hear New Jersey’s appeal of a lower court ruling that the state’s sports betting law violates a federal ban. But that may not be the end of it as the state legislature immediately passed a bill sponsored by the issue’s champion, Ray Lesniak (l.), legalizing sports betting that purports to skirt the PAPSA law.

State officials not giving up on sports betting

New Jersey’s legislative and legal battle to offer sports betting in Atlantic City and online came to at least a temporary end last week, when the U.S. Supreme Court declined to hear the state’s appeal of a lower-court ruling that the law authorizing the program violates the federal ban on sports betting.

But the state legislature set up another legal showdown when it legalized sports betting once again, trying to utilize a loophole in the federal law that prohibits states from “legalizing and licensing” the wager. The reformed New Jersey bill does not ask the state to seek to legalize or license sports betting, leaving it open to private interpretation.

Both houses of the New Jersey legislature passed the bill authorizing sports betting, which Governor Chris Christie signed into law in 2012.  The law sought sports betting as an additional attraction for struggling Atlantic City casinos, and a potential future earner for the state’s nascent online gaming program. Christie and New Jersey lawmakers hoped to spur a direct challenge to the 1992 Professional and Amateur Sports Protection Act (PAPSA), which banned sports betting in all but four grandfathered states—Nevada, Delaware, Oregon and Montana. But when Delaware tried to legalize full-scale, Nevada-style sports betting, the courts limited them to lottery-style, parlay betting, a much less attractive form of the wager.

New Jersey lawmakers had the chance to opt out of the act and be grandfathered in with the group of legal states, but failed to do so. The position taken in by state officials in defending the new law is that the PAPSA law itself is unconstitutional, because it permits the activity in some states but bans it in others.

In March 2009, New Jersey state Senator Raymond Lesniak filed a federal lawsuit challenging PAPSA as unconstitutional, claiming the state was giving up a projected $100 million in revenue under the sports wagering ban. Then, Lesniak introduced a bill to legalize sports wagering in Atlantic City casinos and at New Jersey racetracks. Christie signed that bill into law in August 2012.

The NFL, NBA, NHL, Major League Baseball and the NCAA filed suit in federal court to block the New Jersey law. New Jersey District Court ruled in favor of the sports leagues last year, and the 3rd U.S. Circuit Court of Appeals upheld the decision, holding that the New Jersey law violated PAPSA. One of a three-judge panel in that decision agreed with the state, holding that the federal law was unconstitutional in that it commandeered the state legislature.

Last week’s U.S. Supreme Court decision not to hear the state’s appeal closes that case. But not the issue. Lesniak soon returned with an alternative plan—ignore the feds. Lesniak is preparing a new bill to permit sports betting at New Jersey racetracks and Atlantic City casinos. His plan is to get the new plan passed and signed into law, and simply begin accepting wagers.

The bill would essentially repeal state laws that make sports betting illegal at casinos and racetracks. “This is a disappointing decision, but our fight is not over,” Lesniak said in a prepared statement.

“We are not giving up,” state Senate President Steve Sweeney told NJ BIZ.  “The economic impact that sports wagering can have on New Jersey is far too important to simply shrug our shoulders and move on. We will be working with our legal team and advocates to determine the best course of action moving forward. New Jersey has been held hostage by this unfair law and the national sports associations long enough. It’s time to bring sports wagering to New Jersey.”

Asked about the probable challenges to the new law, Lesniak likened the situation to the federal ban on marijuana, saying that the federal Department of Justice will be no more likely to go after state-sanctioned sports betting than it is to go after licensed pot sellers in the states of Colorado and Washington.

“I expect that the U.S. Justice Department will refrain from intervening, as they have with Colorado and Washington when those states legalized marijuana,” Lesniak said. “I plan on placing my first bet at Monmouth Racetrack on September 8  for the Giants to beat the spread against the Lions on Monday Night Football.”

However, the difference in this case, many analysts point out, is that state-sanctioned legal pot is not being opposed by the powerful cartel of professional and collegiate sports leagues.

“The Justice Department didn’t haul our state into court over the sports-betting law, the sports leagues did,” said an editorial in the South Jersey Times. “You know, those organizations with the hooey about the integrity of their games being undermined if someone bet on one at Caesars in AC, but not if they did the same thing at Caesars in Vegas.

“It’s illogical and unfair, but another state law means another suit from the deep-pocketed leagues.”

The editorial said the only way to get around PAPSA will be to pass a new law at the federal level—the U.S. Congress will have to remove the federal ban on sports betting. “Lesniak, Governor Chris Christie or anyone else thinking of another end run should take some ‘Let it Go’ advice from Disney’s Frozen,” said the editorial. “Instead, put more backing behind legislation from U.S. Reps. Frank LoBiondo, and Frank Pallone, expanding legal authority for sports betting beyond Nevada, Delaware, Oregon and Montana.”

In their statement reacting to the Supreme Court decision, New Jersey Reps. Frank LoBiondo and Frank Pallone, Jr. implored their colleagues in Congress to do just that:

“As New Jersey’s options for appeal in this lawsuit have been now been exhausted, we implore our colleagues in Congress to support federal legislation that will allow the state of New Jersey to implement its law and authorize legalized sports wagering. We firmly remain committed to pushing for passage of legislation which we have introduced and which would bring legal sports wagering to New Jersey.”

As for the new state bill legalizing sports betting in New Jersey, most observers expect another lengthy legal battle. Lesniak is taking the same position as in the recent federal case:

“We do not read PASPA to prohibit New Jersey from repealing its ban on sports wagering,” Lesniak wrote in his appeal in the federal lawsuit.“Under PASPA, ‘it shall be unlawful for a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact’ a sports wagering scheme.

“Nothing in these words requires that the state keep any law in place. All that is prohibited is the issuance of gambling ‘license(s)’ or the affirmative ‘authorization by law’ of gambling schemes.”

Governor Christie has not indicated whether he will support the new bill.