Sports Wagering In New Jersey Suffers Another Setback

Gaming

A three-judge Third Circuit panel has affirmed an earlier District Court ruling that struck down New Jersey's Sports Wagering Law as in conflict with the federal Professional and Amateur Sports Protection Act ("PASPA"). The Sports Wagering Law permitted New Jersey authorities to license casinos and racetracks to conduct sports wagering. In contrast, PASPA prohibits states (except for Nevada, and lotteries in Delaware and Oregon) from licensing or authorizing sports wagering.

Major League Baseball, the NBA, NCAA, NFL, and NHL ("Leagues") initiated proceedings before the District Court by filing a lawsuit against various New Jersey state officials and entities, arguing that the Sports Wagering Law illegally conflicted with PASPA. The District Court agreed, and entered judgment invalidating the Sports Wagering Law. The New Jersey defendants appealed to the Third Circuit.

On appeal, the Third Circuit held that "the Sports Wagering Law is precisely what PASPA says the states may not do—a purported authorization of sports wagering. It is therefore invalidated by PASPA." The Court continued that the Sports Wagering Law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, and accordingly conflicts with PASPA and is preempted." Finally, the Court stated that it is up to Congress to either amend PASPA to permit New Jersey to authorize sports wagering or to "undo PASPA altogether," but absent such Congressional action, "it is not our place to usurp Congress' role simply because PASPA may have become an unpopular law."

One judge in the panel dissented, stating that PASPA's sports wagering ban is an impermissible requirement upon the states because PASPA was not enacted pursuant to any regulatory or deregulatory scheme.

The Third Circuit's Rulings

1. The Leagues Proved Actual Harm

   As an initial matter, the Third Circuit held that the Leagues had standing (i.e., the right) to bring the case. The issue turned on whether the Sports Wagering Law causes the Leagues an actual injury. The Court held that the Leagues established injury because "the reputational harm that results from increasingly associating the Leagues' games with gambling is fairly intuitive," pointing to findings of fact made by Congress, fan and public polling, and instances of "game-rigging."

2. PASPA is within Congress' Authority

   The Third Circuit then turned to the issue of whether PASPA's ban on sports wagering is within Congress authority under the Commerce Clause. The Commerce Clause provides Congress with the ability to pass laws on issues that substantially affect interstate commerce. Relying upon economic evidence presented by the parties, the Court held that sports wagering would substantially affect interstate commerce, because wagering and sportsboth multibillion dollar pursuitsare national economic...