Federal court ruling on New Jersey statute will help define sports gambling fight
As chairman of the state House Gaming Oversight Committee, Rep. John Payne keeps a wary eye on Pennsylvania's 12 casinos.
Yet he isn't ignoring what is happening on the east bank of the Delaware River, where New Jersey officials are trying to legalize sports betting.
If they are successful, it could have a sweeping impact on casinos nationwide, including in Pennsylvania. The state introduced slots and then table games over the past 11 years in an effort to keep gamblers — and the resulting tax windfall — in the state.
“If the courts rule sports betting is legal,” said Payne (R-Dauphin County), “it's something that we will (examine).”
The U.S. Third Circuit Court of Appeals in Philadelphia is expected to rule by the end of the month on New Jersey's latest challenge to the federally enacted Professional and Amateur Sports Protection Act.
The court, which has contemplated the issue since hearing final arguments in March, is composed of three judges:
• Marjorie O. Rendell, wife of former Pennsylvania Gov. Ed Rendell
• Julio M. Fuentes, who wrote the majority opinion in 2013 when the court first ruled 2-1 that New Jersey's sports wagering law was preempted by PASPA
• Maryanne Trump Barry, the older sister of Donald Trump (Trump relinquished his stake in New Jersey casinos years ago)
Sponsored by former New Jersey Sen. Bill Bradley and signed into law by President George H.W. Bush in 1992, PASPA bans sports betting except in four states: Nevada, Oregon, Delaware and Montana.
It granted New Jersey, the only other state at the time that had casino gambling, one year to legalize sports gambling. Because of political in-fighting, though, the state let the deadline expire without passing a law.
Now state lawmakers want a mulligan.
New Jersey Sen. Ray Lesniak is leading the charge to try to circumvent PASPA in an attempt to prop up the state's ailing casino and racetrack industry.
But a law repealing the state's ban on sports betting, signed by New Jersey Gov. Chris Christie in October 2014 after it overwhelmingly was approved by the state Senate and General Assembly, is being challenged by the NFL, NBA, NHL, MLB and NCAA.
“I'm more than an advocate (of sports wagering),” Lesniak said. “I'm a champion. I've been waging this battle over six years, with three pieces of legislation and one referendum. I've been in and out of court.”
A 2011 referendum received 64 percent approval by New Jersey voters.
Legalizing sports gambling in New Jersey, which has eight operating casinos (by law, all must reside in Atlantic City), would have far-reaching effects on a state that could use the additional revenue, Lesniak said. Four casinos closed in 2014, and gambling revenue fell by 48 percent — from $5.2 billion in 2006 (Pennsylvania's first casino opened late that year) to $2.7 billion last year.
“It means hundreds of millions of dollars for casinos and racetracks and tens of millions for the state,” he said.
It also would bring betting “above ground,” he said, and help regulate the industry. “Making sure there is no fixing of any games,” he added.
That was PASPA's intent, but many believe the time has arrived for nationwide legalization.
Even U.S. Sen. John McCain of Arizona, a former GOP presidential candidate, recently acknowledged it might be time for discussion.
“The Bill Bradley Act didn't contemplate the boon of Internet betting,” said Ryan Rodenberg, assistant professor of sports law at Florida State.
Although his league is fighting legalization, NBA commissioner Adam Silver seemingly has softened his stance.
Silver wrote an op-ed piece in the New York Times in November in which he called for Congress to adopt “a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.”
He added, “Without a comprehensive federal solution, state measures such as New Jersey's recent initiative will be both unlawful and bad public policy.”
NBA vice president and assistant general counsel Dan Spillane, who helped Silver draft the Times piece, told Trib Total Media, “The reason why we're participating in the New Jersey case is we think if sports betting is to become legal, it's a process that should happen in Congress and not in the courts. The way it's being done right now is sort of a partial regulation of sports betting, which from a policy standpoint is not the ideal way to go.”
Daniel Wallach, a gaming lawyer with Becker & Poliakoff in Fort Lauderdale, Fla., said he understands the apparent contradiction.
“The NBA and other leagues envision the day where sports betting in a legal environment would lead to multiple direct and indirect revenue streams,” he said. “Sports betting could be one of the greatest forms of fan engagement ever invented. We are talking significant money. The word significant doesn't do it justice.”
So how big?
Even without sports betting, Payne said, Pennsylvania annually receives $1.3 billion in tax revenue from its dozen casinos.
“Gaming is big business,” he said.
Wallach said he believes the New Jersey case might be headed toward a rehearing, especially if the state prevails. “Chances of rehearing are lower with a league victory,” he said.
Said Payne: “It's going to the U.S. Supreme Court.”
I. Nelson Rose, a Whittier (Calif.) Law School professor and one of the nation's leading authorities on gaming laws, isn't optimistic the judges will rule in New Jersey's favor.
“The first decision that allowed Congress for the first time to preempt state laws on gambling was wrong,” he said, “but once that decision was made, this attempt to go around that statute, I don't think it's going to work.”
Nonetheless, Payne continues his quest to grow the gaming industry in Pennsylvania, sponsoring legislation that, in part, would introduce fantasy games and 24-hour liquor sales at casinos.
“We need to look for alternate revenue,” he said, “other than raising taxes on the people.”