NJ Sports Betting Gets Ok From Christie – So What Happens Now?

Almost a month after vetoing a measure intended to repeal New Jersey’s sports betting laws, Governor Chris Christie’s chief law enforcement officer issued a directive likely to lead to legal sports betting at New Jersey’s casinos and racetracks.

The upshot: If casino and racetrack owners are willing to build it, sports betting will likely come to New Jersey before the 2014 NFL playoffs begin.

How did this all start?

1992: PAPSA

The Professional and Amateur Sports Betting Act of 1992 (PASPA), prohibits any state from offering sports betting unless that state had a sports betting scheme in place between 1976 and 1990. Read more about PAPSA here.

Under PASPA:

• Nevada is the only state authorized to offer single-game sports betting.
• Delaware, Oregon and Montana hold exemptions to offer limited sports betting schemes.

Under the terms of the statute, New Jersey had an option at that time to seek to offer sports betting, but declined to do so.

2011: NJ revisits the issue

In 2011, New Jersey revisited the issue when voters approved a referendum to amend the state constitution to allow for sports betting in the state’s casinos and racetracks by a 2-1 margin.

The state legislature then passed a bill legalizing sports betting in the state that was signed into law by New Jersey Governor Chris Christie.

The law allowed wagering on all major professional and collegiate sporting events, except collegiate sporting events involving New Jersey colleges, and all sporting events, professional or collegiate, taking place in the state.

Passage of the law triggered a series of events:

• In reaction to the new law, the National Collegiate Athletic Association, Major League Baseball, the National Football League, the National Basketball Association and the National Hockey League sued in federal district court in Trenton, N.J., to prevent the state from offering sports betting.
• The U.S. Department of Justice then intervened to defend the constitutionality of PASPA.
• After the district court granted summary judgment in favor of the NCAA and the professional league plaintiffs, NJ appealed to the Third Circuit Court of Appeals.
• In a 2-1 decision, the Third Circuit found that PASPA is a constitutional exercise of federal power that barred New Jersey from proceeding with sports betting in the state. In doing so, the court relied on the Supremacy Clause in its reasoning that the New Jersey sports wagering law is invalid because it direct contravenes PASPA.

A door opens for Lesniak

Curiously, the Court of Appeals also limited the reach of PASPA in a way that was itself advocated by the leagues.

The Court held that while PASPA prohibited the “authorization” of sports wagering, “nothing in the statute requires New Jersey to maintain or enforce its sports wagering prohibitions.”

That gave state Senator Raymond Lesniak an idea.

On June 23, 2014, Senator Lesniak introduced legislation stating that:

[…] sports wagering conducted at a racetrack or a casino . . . shall not be considered unlawful gambling and a person shall not be subject to criminal or civil liability under the laws of this State for participating in, or conducting, sports wagering at a racetrack or a casino.

That legislation sailed through the New Jersey legislature and was presented to the Governor for signature into law.

On August 11, 2014, however, Governor Christie vetoed the legislation.  In his veto message, Governor Christie states that the legislation was a “novel attempt” to circumvent the court’s ruling, but he would nevertheless defer to the decision of the court.

Acting NJ Attorney General issues opinion & directive

With a novel trick of his own up his sleeve, Governor Christie’s Attorney General issued a directive on September 8, 2014, advising all New Jersey law enforcement personnel, including local prosecutors, police and sheriffs that sports pools operated at NJ racetracks and casinos are exempt from criminal and civil liability for the operation of such sports pools.

In order to obtain the court’s blessing of its Directive, Governor Christie’s legal team provided a copy of the Directive to the United States District Court in Trenton, N.J. and asked the court to clarify the applicability of its injunction.

That clarification is necessary because his Acting Attorney General has opined that while the Court of Appeals may have invalidated portions of NJ’s sports wagering law, the portions repealing the prohibition against sports betting in casinos and racetracks remains valid.

So, what constitutes state sponsoring of sports wagers?

PASPA and the District Court order prohibit New Jersey from sponsoring sports betting.

Is it possible that in repealing the prohibition against offering sports betting in casinos and racetracks, New Jersey might still be running afoul of PASPA?

Unfortunately, yes.

Casinos and racetracks eligible to offer sports betting are obviously heavily regulated by the state and subject to licensing and intense regulatory oversight. The activity at such sites is also subject to taxation by the state that is specifically addressed to gambling.

Look for legal briefs from the leagues and the DOJ arguing that a repeal of sports betting laws is not enough to comply with PASPA.

In his brief to the court, Governor Christie, anticipating such opposition, argues that “merely applying laws and regulations of general applicability” such as those regulating gambling “does not constitute licensure or authorization of sports wagering.”

The brief argues by way of example: “a sign in a restaurant that said ‘no smoking on the patio’ would not constitute a State endorsement of smoking in every place other than the patio.”

Hmmm.

The next steps for NJ sports betting

Federal District Court Judge Michael Shipp will rule on Governor Christie’s request on or before October 6.

If Judge Shipp dissolves the injunction, sports betting will begin as soon as practical thereafter, maybe as early as November 1 (although some tracks appear to be pushing a more aggressive timeline).

You will need to be in a casino or racetrack to participate  – bets will not be taken online – and there will be no action on games involving NJ collegiate teams or NJ teams playing in NJ on game day.

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