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THIRD CIRCUIT HALTS SPORTS WAGERING IN NEW JERSEY
On August 9, 2016, the United States Court of Appeals for the Third Circuit, sitting en banc, released its much-anticipated decision in NCAA v. Governor of New Jersey. The Third Circuit ruled, in a 10-2 vote, that New Jersey's latest effort to implement sports wagering in the state violated a federal statute known as the Professional and Amateur Sports Protection Act ("PASPA"). PASPA is a law that prohibits most states from authorizing by law sports wagering (Nevada, Delaware, Montana, and Oregon have varying levels of exemptions from PASPA). The decision affirmed a lower court ruling that New Jersey violated PASPA by partially repealing its sports wagering prohibitions.
In 2011, New Jersey voters approved a constitutional amendment to permit sports wagering in the state, a move largely seen as an attempt to support the struggling casino and horse racing industries in the Garden State. However, the National Football League, the National Hockey League, Major League Baseball, the National Basketball Association, and the National Collegiate Athletic Association sued to enjoin the state, arguing that it was violating PASPA. A Federal District Court judge agreed and struck down the law, a decision that was affirmed in a 2-1 vote by a panel of the Third Circuit ("Christie I"). The dissenting judge, Judge Thomas Vanaskie, would have struck down PASPA as unconstitutional under the 10th Amendment. New Jersey sought review by the United States Supreme Court, but the petition was denied. Importantly, the decision in Christie I, in an effort to construe PASPA in a constitutional manner, said that New Jersey could repeal, in whole or in part, its prohibitions on sports wagering without violating PASPA.
Following the decision in Christie I, New Jersey passed a law in 2014 partially repealing its prohibitions on sports wagering in certain locations in the state, namely licensed casinos and horse tracks. The various sports leagues again sued to prevent sports wagering from happening in the state, and the District Court again sided with the leagues, holding that the partial repeal amounted to an authorization by law of sports wagering in violation of PASPA. A panel of the Third Circuit, in a 2-1 vote, affirmed ("Christie II"). Interestingly, the dissenting judge in Christie II, Judge Julio Fuentes, was the author of Christie I. Judge Fuentes would have held that New Jersey did not violate PASPA when it partially repealed its sports betting prohibitions because by definition, a repeal removes a law from the books, so sports betting would not have taken place in New Jersey pursuant to any law. New Jersey sought an en banc review of the Christie II decision before the entire Third Circuit, a request that is granted in less than one percent of cases. However, recognizing the tension between the decisions in Christie I and Christie II, the Third Circuit granted en banc review.
Sitting en banc, ten judges of the Third Circuit agreed with the holding in Christie II that the state's partial repeal of its sports wagering prohibitions was tantamount to affirmatively authorizing sports wagering by law at New Jersey casinos and racetracks. The majority noted that some partial repeals of sports wagering prohibitions would not violate PASPA, but declined to draw that line. Judge Fuentes again dissented, largely restating his position that the state's partial repeal did not violate PASPA. Judge Vanaskie dissented separately to note his continued position that PASPA violates the 10th Amendment.
New Jersey may seek Supreme Court review, and other parties to the suit, including the New Jersey Thoroughbred Horsemen's Association, Inc., have indicated that they will seek such review, though the Supreme Court has already declined once to hear this case. New Jersey does have other options to consider to implement sports wagering in the state. The state could attempt another partial repeal, as the majority noted, to try and define the permissible line under PASPA. Alternatively, New Jersey could wholly repeal its prohibitions on sports wagering, an option that state lawmakers are considering. Such an action could force Congress' hands to amend or repeal PASPA.
Going forward, casino and racetrack operators should monitor both state and legislative developments regarding PASPA and sports wagering, as well as the likely appeal to the United States Supreme Court. For more information, please contact Nicholas R. Amato, of counsel, chair of the firm's Casino & Gaming Law Practice Group, at [email protected] or 973-535-7136 or Jordan Scot Flynn Hollander, associate with the firm's Casino & Gaming Law Practice Groups, at [email protected] or 973-387-7808.
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