On May 14, the United States Supreme Court struck down a federal law that effectively prohibited states from legalizing sports betting. The Court’s decision breaks Nevada’s monopoly on sports betting and will empower state legislatures throughout the country to authorize sports books.
In Murphy v. NCAA, the Court, in an opinion authored by Justice Alito, ruled that the Professional and Amateur Sports Protection Act (“PASPA”), which barred states from “authoriz[ing]” betting schemes on “competitive games in which amateur or professional athletes participate,” violated the anti-commandeering principle of the Tenth Amendment.
After New Jersey voters overwhelmingly supported the legalization of sports betting in a non-binding 2011 referendum, the state legislature enacted a law authorizing sports betting at racetracks and casinos. In 2012, the MLB, NHL, NBA, NFL, and the NCAA, later joined by the Department of Justice, sued New Jersey under PASPA to enjoin the state law. In 2013, the New Jersey District Court entered an injunction, which the Third Circuit upheld. In 2014, the Supreme Court refused to hear the case.
The New Jersey senate then revised the law. Instead of affirmatively authorizing sports betting, the new law simply repealed the prior-existing state ban. Then-Governor Christie signed the legislation in the fall of 2014, and in November 2014, the five sports leagues filed another lawsuit to enjoin the New Jersey law. Again, the District Court and Third Circuit ruled in favor of the leagues and found that the revised legislation violated PASPA.
However, once the case reached the Supreme Court, Justice Alito observed that PASPA forbade states from repealing any then-existing bans on the sports betting, freezing the status quo as it existed in 1992, when only Nevada law comprehensively authorized sports betting and sports books (three other states – Oregon, Delaware, and Montana – permitted limited sports “lotteries”). The Court held that PASPA “unequivocally dictates what a state legislature may and may not do” and the Court invalidated it as an unconstitutional attempt to “issue direct orders to state legislatures.”
The effects of the Court’s opinion are seismic. William Hill plans to open a sports book at the Monmouth Park racetrack in Oceanport, New Jersey by Memorial Day. Other states, including Mississippi, Pennsylvania, Washington, and West Virginia appear poised to enact similar laws in the coming weeks and months. Still others will undoubtedly follow.
Uncertainties do remain. Justice Alito’s opinion notes that the decision to legalize sports betting is “an important policy choice” that is not for the Court to make. Rather, “Congress can regulate sports gambling directly...” Senator Orrin Hatch has already announced plans to introduce federal legislation that would establish superseding regulations for the nascent sports book industry. Further, the Court’s invalidation of PASPA does not affect existing federal restrictions on interstate and internet sports betting, including the Federal Wire Act. However, Justice Alito’s opinion cryptically notes in dicta that the Federal Wire Act and other similar federal laws, “apply only if the underlying gambling is illegal under state law.” Nevertheless, the Court’s opinion has given the states the green light to authorize intrastate sports betting, and in doing so has opened the states to a multi-billion dollar a year market.