Sports Betting Gets Boost as Justices Cite Doubts on Federal Ban

(Bloomberg) -- U.S. Supreme Court justices suggested they may uphold New Jersey’s legalization of sports gambling, in a move that could ripple quickly across the country and let other states grab some of the billions of dollars now bet illegally.

In an hour-long argument in Washington Monday, a majority of the justices voiced doubts about a 1992 federal law that bars wagering on individual sporting events in every state except Nevada. New Jersey, which is attempting to repeal its prohibition on sports gambling, contends the federal law violates states’ rights.

Justice Anthony Kennedy, often the court’s swing vote, said the federal law "leaves in place a state law that the state does not want."

Should the high court strike down the federal law, other states could move quickly to take part of the $150 billion the casino-backed American Gaming Association says is wagered illegally every year. By some estimates, more than a dozen states could have legal sports gambling by the end of next year.

New Jersey Governor Chris Christie, who sat in the front row for the argument, told reporters afterward that his state is ready to begin sports betting within two weeks if it prevails. The court will rule by June.

Justice Ruth Bader Ginsburg suggested she would vote to uphold the federal law, the Professional and Amateur Sports Protection Act, also known as PASPA. She questioned New Jersey’s contention that the federal government was violating the Constitution’s 10th Amendment by saying the state can’t repeal its ban.

‘You Can’t Regulate’

"Isn’t that what the government does whenever it pre-empts state laws?" she asked Ted Olson, the lawyer representing New Jersey. "It says, ‘You can’t regulate.’"

But Justice Stephen Breyer said the sports betting ban was different from typical pre-emption examples, such as federal laws that create a comprehensive national policy by restricting state regulation of transportation standards or workplace safety. PASPA bans sports gambling indirectly, barring states from authorizing it rather than directly banning it under federal law.

The PASPA provisions "are addressing themselves to what kind of law a state may have without a clear federal policy," he said.

The nation’s largest pro sports leagues and the National Collegiate Athletic Association are challenging the New Jersey law along with the Trump administration. The leagues’ lawyer, Paul Clement, said the federal measure was a "comprehensive scheme."

Even as they challenge the New Jersey law, some of the leagues are inching closer to embracing gambling themselves. National Basketball Association Commissioner Adam Silver has said that Congress should let states authorize wagering, subject to strict regulation and technical safeguards.

Earlier Law Voided

New Jersey has been trying to legalize sports gambling in its casinos for years, starting with a 2012 law that explicitly authorized wagering. Federal courts struck down that measure as violating PASPA, which says states other than Nevada may not "sponsor, operate, advertise, promote, license or authorize by law or compact" a single-game sports-gambling system.

New Jersey then took a less direct approach by exempting racetracks and Atlantic City casinos from its gambling prohibition but not explicitly authorizing wagering or setting up a new regulatory system. A Philadelphia-based federal appeals court voted 10-2 to strike down that law as well, siding with the leagues and the federal government, then controlled by the Obama administration.

In their appeal, Christie and other New Jersey officials point to Supreme Court decisions barring the federal government from "commandeering" a state’s regulatory power. New Jersey says those rulings, which invoke the 10th Amendment, mean the state can’t be required to maintain its prohibition on gambling.

Justice Elena Kagan questioned whether those decisions cast doubt on PASPA, saying they merely prevent the federal government from forcing states to be "our little assistants."

"How is New Jersey being put in that position with respect to this statute?" she asked Olson.

‘Commandeering the State’

But Chief Justice John Roberts likened PASPA to a hypothetical law that tells states they can’t spend more than 20 percent of their budgets on employee pensions.

"They’re commandeering the state to achieve that result," he said. "Can they do that?"

Justice Samuel Alito said Congress itself could have directly prohibited businesses from engaging in sports gambling. "What policy does this statute serve that that would not?" he asked Clement.

Christie, who is leaving office in January, watched the argument after being sworn in to the Supreme Court bar.

"This is the fear of every governor -- that we’ll be at the mercy of the federal government and they’ll make us pay for it," Christie told reporters after the argument.

In addition to Nevada, Delaware now offers some sports gambling, but limits it to multigame, or parlay, betting.

Should the justices throw out PASPA, 12 to 15 states might authorize sports betting by the end of 2018, according to Daniel Wallach, an expert on sports and gaming law at Becker & Poliakoff in Fort Lauderdale, Florida. Mississippi and Connecticut have already passed legislation that would let them offer sports gambling almost immediately.

The lead case is Christie v. NCAA, 16-476.

--With assistance from Terrence Dopp

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Justin Blum

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