New Jersey, Delaware and the Federal Sports Betting Law

 

Recently, both the States of New Jersey and Delaware have challenged the Professional and Amateur Sports Protection Act of 1992 as a means in permitting Sports Betting at the casinos in their respective states. The Professional and Amateur Sports Protection Act (PASPA) was passed by the US Congress and signed into law by President George HW Bush in 1992. It is found in Title 23 US Code Chapter 178, Sections 3701 through 3704. Since Sports betting involves games and currency throughout the United States, the Commerce Clause of the US Constitution permits the federal law’s application throughout the country.

Section 3702 defines what is illegal under the Act:

It shall be unlawful for—
(1) a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or
(2) a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity,
a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.
 
Section 3704 defines the application of the federal law (In part and highlighted)
 
(a) Section 3702 shall not apply to

(1) a lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or other governmental entity at any time during the period beginning January 1, 1976, and ending August 31, 1990;
(2) a lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity where both—

(A) such scheme was authorized by a statute as in effect on October 2, 1991; and
(B) a scheme described in section 3702 (other than one based on parimutuel animal racing or jai-alai games) actually was conducted in that State or other governmental entity at any time during the period beginning September 1, 1989, and ending October 2, 1991, pursuant to the law of that State or other governmental entity;
 
In its simplest terms, no State can allows Sports betting UNLESS such a wagering scheme was previously in place in that state between January 1976 and October 1991. Nevada has always had sports betting in all forms and was always exempt from the federal law. THREE other states (including Delaware) had “some form” of sports betting during that time period.
 
DELAWARE:
As most people know, Delaware previously permitted a three team parlay bet (a two or more sports games betting wager) in 1976 as a means of increasing revenue. The original system was a complete failure, but Delaware was grandfathered under the federal law to permit sports betting. Once the Delaware casinos opened in the 2000s, Delaware wanted to offer sports betting and planned to issue a single game system of sports betting.
 
However in 2009, the Federal Appeals Court 3rd Circuit (Commissioner of Baseball vs Markell, Docket 09-3297) affirmed the District Federal Court and found that a single game wager system violated federal law because Delaware’s single game system wasn’t similar to the original three team parlay system in place in 1976. One can always argue how broadly or narrowly you can interpret “similar”. As of today, Delaware is only permitted three team parlays.
 
The Delaware ruling is, in essence, a joke, since any third grade math class teaches us that three, three team parlay bets with one team as the anchor is essentially a single game wager. Accordingly, smart bettors in Delaware have adopted this strategy to legally circumvent the Federal Law. See: http://www.gambling911.com/gambling-news/bettors-find-loophole-delaware-sports-betting-rules-110711.html
 
NEW JERSEY:
The State of New Jersey faces a much more difficult situation because no prior wagering scheme existed from 1976 to 1991. New Jersey could not grandfather past sports wagering, unlike Delaware. New Jersey passed a sports betting law permitting sports gambling in 2011. This law was immediately challenged by MLB, NCAA, NFL, NHL, and the NBA.
 
New Jersey argued that the 1992 Federal Law was unconstitutional. In 2013, both the Federal District Court and the Third Circuit Court held the law to be Constitutional. New Jersey was prohibited from allowing Sports Betting.
 
On September 8, 2014, Governor Christie issued a directive that NJ Casinos are free to allow sports betting. Under a creative argument, while there is no NJ law permitting sports betting, there is nothing in NJ law prohibiting casinos from offering sports betting either. In essence, Governor Christie has said the State of New Jersey wont stop you, if you want to offer sports betting. A creative reading of section 3702 only prohibits a government from allowing sports betting, or person (including companies) “from allowing sports betting pursuant to a government law“.
 
Could it be that third grade English class has defeated Congress and the Federal law for New Jersey, like third grade math class defeated it for Delaware?
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