Double or Nothing: How New Jersey Can Beat the Spread in National Collegiate Athletic Association v. Christie
Sportsbook in Las Vegas; Photo Credit: http://www.flickr.com/photos/roundnoon/
By Joseph Catuzzi, with an introduction by Matthew Cali, August 7, 2013
In continuing coverage over the fight to legalize sports gambling in the state of New Jersey, the Moorad Sports Law Journal Blog welcomes a special guest blog writer this week. Joe Catuzzi has been serving as a summer intern at the U.S. Attorney General’s Office for the District of New Jersey and offers a unique first-hand perspective on the most recent developments regarding this controversial issue.
All content provided in this blog post represent the author’s opinions. The author’s opinions are not representative of any views, beliefs, or opinions of the U.S. Attorney General’s Office for the District of New Jersey.
On June 26, 2013, the high stakes showdown over New Jersey’s efforts to legalize sports gambling continued in the United States Court of Appeals for the Third Circuit. New Jersey’s defiance of the Professional and Amateur Sports Protection Act (“PASPA”) has captivated the attention of this blog and the entire country.[1] Upon recognizing the significant impact this decision will have on states’ rights, four states (Georgia, Kansas, Virginia, and West Virginia) filed amicus curiae briefs in support of the Garden State.
The early success of the NCAA, MLB, NBA, NFL, and NHL (hereinafter leagues) in the district court will probably be short lived. Just one day before oral arguments, the Supreme Court published its decision in Shelby County, Alabama v. Attorney General, which expanded the Equal Sovereignty Doctrine. Both sides rushed to submit 28(j) letters to the court to explain how Shelby should affect the court’s analysis. Unsurprisingly during oral arguments, the Third Circuit expressed great interest in whether PASPA’s exemptions violated the Equal Sovereignty Doctrine.
After considering the astonishing growth in sports betting, it is likely that the Third Circuit will conclude that PASPA’s permanent exemptions—which were based on reliance interests—are ill suited to meet the needs of the current sports betting environment. PASPA’s exemptions for states like Nevada are not sufficiently related to stopping the spread of legal and illegal sports betting. Although PASPA stops forty-six states from placing their “seal of approval” on sports betting, theunderlying problem that PASPA targets is the act of sports betting. Accordingly, if sports betting undermines the integrity of athletic contests, then it is difficult to see why PASPA should allow Nevada to enjoy a monopoly over the thriving sports betting industry.
In states like New Jersey, organizers of illegal sports betting are promoting the same activity that Nevada currently promotes legally; but while sports betting organizers in Nevada can legally profit from this business, organizers in New Jersey cannot. Further, it has been argued that PASPA’s exemptions significantly undermine the integrity of sports. Even in 1992, members of Congress questioned, “[W]hy does Congress have the right to restrict the source of revenues for [forty-six states], but not for [four states]? This has the potential to undermine our Federal system, and this is something we should not take lightly.”[2] Analyzing PASPA under Shelby will probably show that PASPA’s exemptions violate the Equal Sovereignty Doctrine.
The Leagues Win Big in District Court
The leagues beat the odds and came out ahead in the district court with a permanent injunction against New Jersey, effectively preventing the state from legalizing sports betting. First, on December 21, 2012, the court held that the leagues had Article III standing. The court explained that the leagues demonstrated an injury-in-fact that was traceable to New Jersey’s Sports Wagering Law and a favorable decision would provide relief.
According to the court, the “Plaintiffs’ interest in protecting how [its athletic contests] are perceived by their fans [was] sufficient to create the identifiable trifle of injury necessary for purposes of standing.”[3] To support their claim of “reputational harm,” the plaintiffs introduced survey data, which presented fan opposition to legalized sports betting. The court was particularly swayed by the results of a survey from Las Vegas in which twenty-seven percent of respondents “strongly opposed” legalized sports betting.[4]
With regard to the causal connection between New Jersey’s Sports Wagering Law and the plaintiffs’ reputational harm, the court explained that the state’s approval of sports gambling alone would affect the leagues’ reputation. Indeed, “referees and players need not actually engage in gambling or game fixing in order for fans to have an increased perception that the integrity of the games is suffering due to the expansion of legalized gambling.”[5] Thus, a favorable ruling from the court—a permanent injunction—would redress the leagues’ reputational harm.
The leagues cashed in on their second victory on February 28, 2013, when the court ruled that PASPA was constitutional. Specifically, the court held that PASPA (1) is a rationale exercise of Congress’ powers under the Commerce Clause, (2) does not violate the Tenth Amendment’s Anti-Commandeering Principle, and (3) does not violate the Equal Sovereignty Doctrine. The court, however, did “not find good cause” to expand the Equal Sovereignty Doctrine for New Jersey.[6] This conclusion now appears to be inappropriate given the Supreme Court’s opinion in Shelby.
Double or Nothing: Summary of the Third Circuit Oral Arguments
On June 26, 2013, the Third Circuit held oral arguments on the leagues’ standing and constitutionality of PASPA. Arguing on behalf of New Jersey, Theodore Olson attacked the leagues’ standing, asserting that their injuries were speculative and conjectural. The court questioned Olson about several high profile sports gambling scandals that undoubtedly rocked the integrity of the leagues’ sports. Olson, however, quickly noted that each example listed by the court involved the leagues’ own players or referees.
In response, Paul Clement, representing the leagues, argued that leagues “have a legitimate interest in controlling the extent to which [athletic contests] are going to be sporting events as opposed to betting events.”[7] At a more basic level, Clement argued that the leagues have a legal entitlement to protect their product, which is inevitably affected when a state places its “seal of approval” on betting on the leagues’ contests. In other words, legitimizing sports gambling would completely alter fans’ perception of the games.
The court did not appear to be persuaded by the State’s argument that PASPA violates theTenth Amendment’s Anti-Commandeering Principle. Olson argued that requiring New Jersey to “enforce the law on the books” and allowing illegal activity (sports betting) to take place in the state violates the Anti-Commandeering Principle. Yet, the court responded by stating, “I’m not sure that that’s commandeering.”[8] On the other hand, the leagues and the Department of Justice (“DOJ”) asserted that PASPA does not affirmatively require New Jersey to do anything. Rather, PASPA only prevents New Jersey from legalizing sports gambling.
Shelby appeared to have a significant impact in the arguments, as the court expressed great interest in whether PASPA violates the Equal Sovereignty Doctrine. The state asserted that PASPA’s exemptions are not sufficiently related to the broader problem targeted by PASPA: sports betting. Yet, the DOJ asserted that Congress was not required to create a “perfect” statute and properly considered the reliance interests of certain states (e.g. Nevada).[9] The DOJ also emphasized that the problem targeted by PASPA is the legalization of sports betting, not the mere act of legal sports betting. Thus, it appears that whether PASPA violates the Equal Sovereignty Doctrine will depend on how the court interprets PASPA’s purpose and the problem it targets.
Equal Sovereignty Will Allow New Jersey to Beat the Spread: Betting on Sports is an All or Nothing Deal
PASPA’s exemptions most likely violate the Equal Sovereignty Doctrine. Considering the Supreme Court’s recent guidance in Shelby, the district court did not properly analyze New Jersey’s Equal Sovereignty argument. Indeed, Justice Ginsburg’s suggestion that the Court’s expansion of the Equal Sovereignty Doctrine in Shelby could lead to the invalidation of PASPA is quite timely.[10]
In Shelby, the Supreme Court stated, “The fundamental principle of equal sovereignty remains highly pertinent in assessing subsequent disparate treatment of States.”[11] Thus, the district court should not have dismissed the state’s Equal Sovereignty argument on the basis that New Jersey was an original colony. The Supreme Court also made it clear that that “equal sovereignty requires a showing that a statute’s disparate geographic coverage is sufficiently related to the problem that it targets.”[12] Further, any disparate treatment of states must make “sense in light of current conditions.”[13] As a result, courts should not blindly presume the validity of permanent grandfathering clauses that are decades old.
Here, PASPA’s targeted goals are (1) stopping the spread of legal sports betting and (2) protecting the integrity of athletic contests. Although PASPA’s “targeted goals” are known, the Equal Sovereignty analysis will ultimately depend on how the court interprets the “problem” that PASPA targets. On the one hand, the district court explained that the “problem” targeted by PASPA is focused upon states who place their “seal of approval” on sports betting. Accordingly, “the exceptions in PASPA are not meant to eradicate the problem, but merely to contain it.”[14] Under this narrow interpretation, PASPA would not violate the Equal Sovereignty Doctrine because PASPA’s exemptions are sufficiently related to the problem it targets (i.e. state approval of sports betting).
During oral arguments, however, the court stated, “Congress has made a statement in PASPA. They say sports betting’s bad.”[15] If the “problem” targeted by PASPA is the act of sports betting, then PASPA would violate the Equal Sovereignty Doctrine. PASPA’s exemptions would not be sufficiently related to the problem it targets because the exemptions created a multi-billion dollar legal sports betting monopoly in Nevada. In fact, Nevada’s legal sports betting market has grown drastically from $1.5 billion to $2.9 billion during PASPA’s twenty year history,.[16] Additionally, Nevada’s thriving legal sports betting industry indirectly fuels illegal sports betting in states like New Jersey and Pennsylvania. For instance, National media outlets regularly publish sports betting “point spreads” from Las Vegas casinos. These publicized point spreads facilitate illegal sports betting across the country, essentially allowing gamblers to establish their sports bets no matter where they live.
While granting states like Nevada an exemption based on a reliance interest might have been reasonable and sensible in 1992, the drastic change in the sports betting environment during the past twenty years has revealed that the exemptions are actually eroding the integrity of sports. Thus, it is likely that the court will rule that PASPA violates the Equal Sovereignty Doctrine.
[1] See Sara Hoffman, Setting the Stakes, Moorad Sports Law Blog (Jan. 17, 2013), http://lawweb2009.law.villanova.edu/sportslaw/?p=1461; Francis Baker & Elisabeth Ulmer, Despite NCAA Protests, New Jersey Likely to Succeed in Legalizing Sports Gambling, Moorad Sports L.J. Blog (Oct. 6, 2012), http://lawweb2009.law.villanova.edu/sportslaw/?p=837. PASPA effectively outlawed sports betting nationwide, excluding a few states. 28 U.S.C. § 3701
[2] 138 Cong. Rec. S7274-02, available at 1992 WL 116822.
[3] Nat’l Collegiate Athletic Ass’n v. Christie, No. 12-4947, 2012 WL 6698684 at *5 (D.N.J. Dec. 21, 2012).
[4] See id. at *6 (“The 2007 NBA Las Vegas/Gambling Survey draws an undisputed direct link between legalized gambling and harm to the Leagues.”).
[5] Id. at *8.
[6] Nat’l Collegiate Athletic Ass’n v. Christie, No. 12-4947, 2013 WL 772679 at *23 (D.N.J. Feb. 28, 2013).
[7] Transcript of Oral Argument at 35, Nat’l Collegiate Athletic Ass’n v. Governor of N.J. (2013) (No.13-1713).
[8] Id. at 16.
[9] Id. at 58.
[10] See Shelby Cnty., Ala. v. Holder, 133 S. Ct. 2612, 2649 (2013) (Ginsburg, J., dissenting) (listing statutes that could be affected by “Court’s expansion of equal sovereignty”).
[11] Id. at 2649 (emphasis added).
[12] Id. at 2622 (emphasis added).
[13] Id. at 2629 (emphasis added).
[14] Nat’l Collegiate Athletic Ass’n v. Christie, No. 12-4947, 2013 WL 772679 at *21 (D.N.J. Feb. 28, 2013) (emphasis added).
[15] Transcript of Oral Argument at 42, Nat’l Collegiate Athletic Ass’n v. Governor of N.J. (2013) (No.13-1713).
[16] Brief for Appellant at 30, Nat’l Collegiate Athletic Ass’n v. Governor of N.J. (2013) (No. 13-1714).
