Outside the Beltway

Sports Leagues File Suit To Stop Sports Gambling In New Jersey

All of the major sports leagues are trying to stop New Jersey's efforts to legalize sports gambling. They should not be allowed to succeed.

Doug Mataconis · Thursday, October 23, 2014 · 7 comments

For several years now, the State of New Jersey has been trying to legalize sports betting as part of an effort to revitalize the casino business in Atlantic City, which has suffered in recent years from the fact that neighboring states and Native American tribes have opened their own casinos that have significantly cut back on out of state traffic into the state for destination gambling. The process started in 2012 when Governor Christie signed a bill into law meant to implement a 2011 voter referendum that authorized sports betting at the Atlantic City casinos and select horse racing venues, but that law was quickly challenged in Federal Court by a coalition of all the major sports leagues along with the N.C.A.A. that argued that the state’s effort was not authorized by Federal law. The Federal Judge hearing that case ended up ruling in favor of the leagues, and the Third Circuit Court of Appeals upheld that ruling in a ruling handed down just over one year ago, but the Court also said that the state could repeal its own laws against sports betting as long as any sports betting operation in the state was not directly regulated by the state. New Jersey appealed that decision to the Supreme Court, but the Justices declined to accept the appeal and let the Third Circuit’s ruling stand.

Undaunted by this ruling, the Governor and the State Legislature moved forward with an alternative proposal on sports better that they believe would constitute an end run around the Federal laws that had halted the first effort. As a first step, last month Governor Christie issued a directive that casinos and racetracks in New Jersey would not be prosecuted under state law for accepting sports bets while also asking the same Federal Judge who had initially ruled against the state to allow the initiative to go forward. At the same time, supporters of sports betting in the state legislature moved forward on legislation that removes all of the provisions in New Jersey law that ban sports betting, which Governor Christie signed into law on Friday.With that, the state was set to move forward with sports betting at Monmouth Park which would be managed by the English bookmaker William Hill, but that plan is in doubt thanks to another Federal lawsuit filed by the same leagues that had sued the state two years ago:

Days before the era of legalized sports betting is to begin in New Jersey, the four major professional sports leagues and theNational Collegiate Athletic Association filed a lawsuit on Monday and will seek a temporary injunction to halt the wagering plan.

The complaint is the latest battle pitting New Jersey against national sports organizations over the state’s efforts to circumvent a 1992 federal law that banned the sanctioning or licensing of sports betting. On Tuesday, the plaintiffs intend to file papers seeking the injunction from Judge Michael A. Shipp of Federal District Court.

The latest effort culminated on Friday, as Gov. Chris Christie, a Republican, signed into law a partial repeal of the state’s ban against sports betting.

The state’s first sports book is to have a soft opening on Sunday at Monmouth Park racetrack, whose operators plan to have 10 tellers taking bets only on the National Football League, and all by hand.

Nonetheless, the racetrack and state leaders envision a frenzied scene on football Sundays, with thousands of people lining up to wager money on N.F.L. games.

“As we speak, we are geared up to start taking bets,” Dennis Drazin, a legal adviser for Monmouth Park, said.

A lawyer representing the plaintiffs — the N.C.A.A., the National Basketball Association, the N.F.L., the National Hockey League and the Office of the Commissioner of Baseball — declined to comment on the lawsuit.

The challenge argues that the law accomplishes “what it unsuccessfully attempted to do nearly three years ago: sponsor, operate, advertise, promote, license, or authorize gambling on amateur and professional sports at state-licensed casinos and horse racetracks. Because this effort is no more lawful than New Jersey’s past ones, it, too, should be enjoined.”

For a judge to grant the injunction, the leagues will have to demonstrate immediate and irreparable harm from having sports wagers placed at Monmouth Park on Sunday.

“I have a hard time believing that a judge will determine that the leagues can prove they can be irreparably damaged by Monmouth racetrack’s taking bets, when people are betting every single day legally in Nevada,” said State Senator Raymond J. Lesniak, a Democrat and the sponsor of the bill signed by Governor Christie.

“They want a monopoly — they want to have their gambling through fantasy sports,” the senator added of the sports associations. “They are not against us having sports betting, they just want to control it and run it. They are going to fight through the end — and I believe this is the end.”

The legal argument being made by the sports leagues in this new case is essentially the same as the one they made in the previous lawsuit and relies upon a Federal law known as the Professional and Amateur Sports Protection Act (PASPA) which purports to bar states from “sanctioning” sports betting unless they already had laws authorizing it on their books within a year prior to the time the law was passed, meaning of course that states such as Nevada where sports betting has long been legal were grandfathered into the law. There are only four states — Nevada, Oregon, Delaware, and Montana — that are eligible for this exemption, but presently Nevada is the only state where there is active sports gambling. The leagues are arguing that the state’s decision to repeal its laws against sports gambling constitute a nothing but a legal fig leaf that does nothing to get around the bar in the law that applies to all states that didn’t already authorize sports gaming at the time the law went into effect. As noted above, though, New Jersey is relying upon the ruling of the Third Circuit that there is nothing about the PASPA that prevents any state from repealing its own laws against sports betting. The only thing the law would appear to prevent would be any kind of direct operation of the operation by state entities, which is why an outside entity, in this case a British company that has been running sports gambling operations for decades, is being brought in to run the Monmouth Park operation. Additionally, there is a strong argument that the PASPA itself is unconstitutional because it is not authorized by the Commerce Clause and conflicts with an individual state’s rights to establish its own laws on an issue such as this under the Tenth Amendment. As of the writing of this post, the Judge hearing the case has not ruled on the motion by the sports leagues for an injunction, but a ruling is expected today or tomorrow given that betting is scheduled to start this weekend.

Aside from the legal argument, the sports leagues and those that support their position argue that the New Jersey program should be stopped because it threatens the integrity of professional sports:

The current case for gambling, framed in progressive terms and emphasizing economic benefits, misses the underlying issue with mass sports betting. Betting should stay illegal not because it poses a dangerous moral hazard to individuals but because it leads to a marked increase in match-fixing. The scale of sports corruption even prompted the head of Europol to issue a stark warning last year: “Match fixing is a significant threat to football… involving a broad community of actors. Illegal profits are being made that threaten the very fabric of the game.” Just ask Declan Hill, a gambling guru, who has described the corruption associated with match-fixing as a “tsunami” that has wrecked most Asian soccer leagues and is now perverting its European counterparts.

Indeed, according to a study conducted this year by the Sorbonne University in Paris, gambling has been identified as “the primary purpose for match fixing.” Since the evolution of betting regulations hasn’t kept up with technological advances and globalization, authorities everywhere are often ill-equipped to deal with the related issues of money laundering and corruption plaguing the world sports industry.

The flaw in this argument, of course, is that bribing athletes to fix matches is already a federal crime, and that wouldn’t change if New Jersey or any other state legalized sports betting. Additionally, notwithstanding the claims about corruption in soccer in other parts of the world, it’s worth noting that sports betting is legal in both the United Kingdom and Australia and there is little evidence of games being fixed in those countries. To the extent that there is a problem related to games being fixed then, perhaps it has more to do with the legal systems and cultures of the nations where it happens, along with the rather lax regulation of organizations like FIFA, than it does with the fact that sports betting is legal. The sports leagues in the United States, on the other hand, have been much more vigilant about monitoring for evidence of game fixing and far more stringent in punishing even legal gambling when it comes to light, as the Pete Rose situation makes very clear.

The classic example of sports betting tainting American sports, of course, is the Black Sox scandal, where members of the Chicago White Sox conspired with members of organized crime to fix the outcome of the 1919 World Series. It remains a stain on American sports, but as Michelle Minton notes, it had a profound impact on how all sports approached the issue:

[T]his story serves a good example of why match-fixing is an anomaly in U.S. sports—and will remain so even with legalized sports betting. All eight players involved in the scandal were banned from Major League Baseball for life. Today, American sports leagues take gambling by players and match-fixing very seriously: The NCAA has a zero-tolerance policy for athletes gambling; the MLB and NFL prohibit gambling by players, coaches, and referees; and the NBA prohibitsbetting on NBA games. Match-fixing carries serious consequences such as lifetime bans and civil lawsuits—as happened to Tim Donaghy, the NBA referee who in 2007 was accused of betting on and fixing matches. And let’s not forget Pete Rose, baseball’s all-time hits leader, who was banned from the game and remains ineligible for the Hall of Fame.

This is what is working for American sports: the leagues’ self-interested motivation to weed out anything that will lessen fans’ interest and players’ and officials’ desire not to risk destroying their lucrative careers. The teams and leagues, for the most part, are private businesses interested in preserving the perceived fairness of the game so that they can keep making money. That’s why it’s their responsibility. And that is where the regulation of sports integrity should stay.

Minton is absolutely correct. First of all, to the extent that the “integrity” of professional and amateur sports is tainted by the fact that sports betting is legal, that has already happened thanks to the fact that gamblers can already place bets on sporting events in Nevada, not to mention in venues overseas. Despite that fact, as Minton notes, the leagues have done a very good job of policing themselves when it comes to gambling among players, coaches, and officials as well as efforts to try to fix the outcome of matches. More importantly, even though sports betting is illegal in most of the rest of the country, it’s an open secret that it occurs anyway, whether in the form of informal bets among friends and co-workers or more organized efforts that operate under the auspices of organized crime. The idea that much of anything would change to impact the integrity of the game if the practice were legal just seems silly. More importantly, though, whatever the justification for laws like the PASPA might be, protecting the “integrity” of sports leagues is not one that should justify them legally. Such a goal, while it may be laudable in some sense, is not a proper concern of the Federal Government, and should not be the province of Federal legislation. If New Jersey, or any other state wishes to allow sports gambling to take place, they ought to be allowed to do so. If there is indeed a market for the practice, then that will be the ultimate test for whether or not it’s a good idea.