Federal Court Blocks New Jersey's Attempt to Legalize Sports Betting

by | August 10, 2016

By Chris Mondics

Sports betting fans in New Jersey may have finally run out of luck.

A federal appeals court on Tuesday rejected New Jersey's attempt to legalize sports betting for the third time in three years.

The U.S. Court of Appeals for the Third Circuit, ruling in Philadelphia, said that the state's initiative to legalize sports betting at casinos and race tracks -- an effort to revitalize the faltering casino industry -- breached the federal Professional and Amateur Sports Protection Act (PASPA), which banned sports betting in all but a handful of states.

"States may not use clever drafting . . .to escape the supremacy of federal law," the third circuit said in its majority opinion, written by judge Marjorie Rendell.

Given that the Supreme Court declined to hear an earlier appeal, the ruling would seem to foreclose the possibility of further legal or legislative maneuvers to revive the fortunes of sports gambling in New Jersey.

Indeed, during oral arguments in the case in February seemingly exasperated third circuit justices peppered former solicitor general Theodore Olson, who represented New Jersey, with questions about the initiative, with some of the jurists voicing open skepticism.

"We're on what, the fourth or fifth iteration of New Jersey trying to do it [sports gambling]," asked judge Kent Jordan.

New Jersey voters amended the state constitution in 2011 to permit sports betting at struggling casinos and racetracks while barring wagers on New Jersey college teams or on any collegiate event occurring in the state.

The National Collegiate Athletic Association, the National Basketball Association, the National Football League and other sued to prevent sport gambling in New Jersey from going forward.

PASPA, enacted in 1992, limited sports betting to Nevada, Montana, Delaware and Oregon. It also gave New Jersey the opportunity to enact legislation authorizing sports betting in the state through 1993 but the state failed to do so.

Since then, the state's casino industry has fallen on hard times, and voters amended the state constitution in 2011 to permit sports betting at casinos and race tracks.

In its opinion, the third circuit acknowledged, as it has in the past, that New Jersey faces tough economic consequences from the decline of the casino industry.

But the appeals court said that PAPSA's meaning was unequivocal, and that no amount of legal or legislative finesse could overcome its restrictions.

The case turned on a technical argument over New Jersey's proposed regulatory scheme for overseeing sports betting. After New Jersey residents voted to amend the state constitution in 2011, the state legislature enacted a detailed regulatory scheme for overseeing sports betting.

A federal district judge overturned that plan and in 2012, the Third Circuit affirmed. The state responded by eliminating all state laws governing sports betting in New Jersey, effectively deregulating the industry. The state's lawyers argued that while PAPSA barred states from authorizing sports betting, nothing in the law prevented it from declining to regulate the industry.

A three judge panel of the Third Circuit found last August that the law was a back door means for permitting sports betting. The full Third Circuit agreed to rehear the case last year, and issued its opinion on Tuesday.

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