(Bloomberg) -- The U.S. Supreme Court freed states to legalize gambling on individual sporting events, unleashing a race to attract billions of dollars in wagers and heralding a new era for the nation’s sports leagues.
The justices on Monday struck down the federal law that had barred single-game gambling in most of the country, saying it unconstitutionally forced states to maintain their prohibitions. Nevada has been the only state with legal single-game wagering.
Sports gambling could begin in a matter of weeks in casinos and racetracks in New Jersey, which instigated the legal fight by repealing its gambling ban. Mississippi, Pennsylvania, New York, Delaware and West Virginia could follow soon, and the number of states might reach double digits by the end of the year.
Shares of casino operators and their suppliers jumped on the news. Scientific Games Corp., a slot machine maker that also processes bets for sports book operators, rose as much as 14.2 percent, while Caesars Entertainment Corp., the largest U.S. casino operator, rose as much as 9 percent.
MGM Resorts International, the largest owner of casinos on the Las Vegas Strip, rose as much as 3.5 percent. The company gave a presentation to investors last week in which it sketched out a future of more professional sports teams in Las Vegas and a greater presence nationally in sports betting, either online or in casinos.
‘We Will Be There’
“We believe in the next two years to three years, there are 10 to 12 states that are ripe and ready to activate on that,” MGM President William Hornbuckle said. “We will be there. We will participate in it. We bring technology. We bring knowledge. And frankly in this space, we bring trust.”
Some of the biggest gains were seen by non-U.S. betting parlor and online operators that have already been taking wagers on sports in other countries. William Hill Plc, one of the U.K.’s largest betting-shop operators, rose 11 percent. William Hill operates the largest number of sports books in Nevada. Stars Group, a Canadian company that operates the PokerStars brand, saw a 14.3 percent gain.
New Jersey’s Monmouth Park is expected to open first. William Hill has spent five years building a bar adjacent to the horse-racing track in anticipation of Monday’s ruling.
"We’re going to get ready to open for business at Monmouth Park as soon as responsibly possible," said Joe Asher, chief executive of William Hill U.S.
Americans place $150 billion a year in illegal sports bets, according to the casino-backed American Gaming Association. The research firm Eilers & Krejcik Gaming puts the number at $50 billion to $60 billion, not counting bets among friends.
Sports leagues fought New Jersey in court even while moving toward embracing legalized wagering. In January, a National Basketball Association executive told New York lawmakers the leagues should get 1 percent of all bets. The NBA says it would prefer a new federal law to set nationwide standards.
"We remain in favor of a federal framework that would provide a uniform approach to sports gambling in states that choose to permit it, but we will remain active in ongoing discussions with state legislatures," NBA Commissioner Adam Silver said in a statement. "Regardless of the particulars of any future sports betting law, the integrity of our game remains our highest priority.”
New Jersey had 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 the 1992 Professional and Amateur Sport Protection Act, or PASPA. That law says states other than Nevada may not "sponsor, operate, advertise, promote, license or authorize by law or compact" a sports-gambling system.
‘Commandeering’ State Regulation
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 threw out that law as running afoul of PASPA.
The Supreme Court majority said PASPA violated the Constitution’s 10th Amendment by "commandeering" the states’ regulatory power. The vote was 6-3 to strike down the entire federal prohibition.
"The provision unequivocally dictates what a state legislature may and may not do," Justice Samuel Alito wrote for the court. "It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine."
Justices Ruth Bader Ginsburg and Sonia Sotomayor dissented and Justice Stephen Breyer issued a partial dissent. All three said they would have left parts of PASPA intact, including a related provision that Ginsburg said should be read to directly bar casinos and racetracks from operating sports books.
The court "wields an ax to cut down" PASPA "instead of using a scalpel to trim the statute," Ginsburg wrote.
Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, Elena Kagan and Neil Gorsuch joined Alito in the majority.
Former New Jersey Governor Chris Christie, who led the fight to legalize gambling, tweeted that "New Jersey citizens wanted sports gambling and the federal Gov’t had no right to tell them no."
The New Jersey law was challenged by the National Collegiate Athletic Association, the National Football League, the National Basketball Association, the National Hockey League and Major League Baseball.
Major League Baseball said the ruling "will have profound effects" on its sport.
The NFL said in a statement, "Congress has long recognized the potential harms posed by sports betting to the integrity of sporting contests and the public confidence in these events." The league said it will call on Congress to "enact a core regulatory framework for legalized sports betting.’’
Republican Senator Orrin Hatch of Utah said in a statement that he plans to introduce legislation in the coming weeks "to help protect honesty and principle" in sports. “The rapid rise of the Internet means that sports betting across state lines is now just a click away,” he said. “We cannot allow this practice to proliferate amid uneven enforcement and a patchwork race to the regulatory bottom.”
The lead case is Murphy v. NCAA, 16-476.
©2018 Bloomberg L.P.