Supreme Court nixes PASPA, paving way for sports betting

The U.S. Supreme Court on Monday ruled that a 1992 federal law prohibiting states from authorizing gambling on sports is unconstitutional, a decision that could lead to sports wagering in New Jersey within weeks and potentially open up the practice in other states down the line.

The ruling, written by Justice Samuel Alito, relied heavily on the so-called anti-commandeering principle in striking down the law, the Professional and Amateur Sports Protection Act. That law was passed by Congress in 1992 to prevent states from authorizing sports wagering, with the exception of states that had already authorized the practice.

Alito repeatedly asserted in his majority opinion that PASPA was a clear violation of the anti commandeering principle as interpreted by the Supreme Court in prior decisions. That principle, derived from the 10th Amendment, is generally interpreted as preventing the federal government from requiring states to perform certain actions, such as passing laws.

“The legalization of sports gambling requires an important policy choice, but the choice is not ours to make,” Alito wrote, in an opinion joined by six other judges, though one of the concurring judges also agreed with a portion of the dissenting opinion written by Ruth Bader Ginsburg. “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”

The case is the culmination of a six-year battle by the state of New Jersey to authorize sports gambling within its borders. After a series of setbacks in the lower courts, the Supreme Court agreed to hear New Jersey’s appeal last year, and oral arguments in December had appeared to indicate that the judges were leaning toward rejecting PASPA.

Because New Jersey already has laws on its books allowing for sports wagering, along with regulations to govern the practice, casinos and racetracks in the state are expected to begin taking bets on sports within weeks, track officials have said. Monmouth Park, which joined the state of New Jersey in its appeal, has already built a sports-betting facility on its grounds and has partnered with the British firm William Hill to run the bookmaking operation.

“We started this fight back in 2012 and are grateful that the Supreme Court has recognized that we’ve been right all along,” said Dennis Drazin, chief executive of the group that runs Monmouth Park. “We can now shift our focus on commencing sports betting, which will be off and running at Monmouth Park as soon as possible.”

Beyond New Jersey, several states have introduced bills to authorize sports wagering dependent on the result of the Supreme Court case, including New York. But while Monmouth Park is operated by the state’s horsemen’s group, meaning that benefits from any sportswagering operation will flow at least indirectly to the racing industry, it is not clear at all in other jurisdictions whether an expansion of sports betting will have a negative or positive impact on horse racing, which has not fared well when faced with more competitors in the gambling marketplace.

In addition, many gambling experts have cautioned that the sports-betting business model as now practiced by bookmakers in Vegas and overseas will not survive a widespread expansion of the practice because professional sports leagues have already devised a strategy to push federal and state governments to enforce regulations that would cut the leagues in on the action. If the leagues are successful in pushing for regulations recognizing their value as content providers – or threaten bookmaking operations with lawsuits based on that principle – that will likely lead to a shake-up of the current model and could have unanticipated results on the market.

Account-wagering operations owned by racing companies also are expected to weigh whether to enter the market, given that the companies have years of experience operating internet gambling websites and already have thousands of customers with characteristics similar to those of sports bettors. However, existing accountwagering websites take parimutuel wagers, in which revenues are derived solely from betting handle, while bookmaking operations require active management of risk, which few existing racing companies have experience in.

Eric Hamelback, president of the National Horsemen’s Benevolent and Protective Association, issued a statement following the release of the ruling that sounded a cautionary note about the expansion of sports betting, signaling that some horsemen are wary about the impact of the practice.

“All stakeholders and horsemen in our industry must prepare for the challenges that may be ahead but also be willing to embrace opportunities that may arise from this expansion of sports betting,” Hamelback said.

Alex Waldrop, president of the National Thoroughbred Racing Association, took a cautionary tone in response to the ruling.

“Until today, parimutuel wagering on horse racing has been the only legal form of sports wagering available throughout most of the United States at both physical locations and online,” Waldrop said in a statement. “Now that the U.S. Supreme Court has ruled the Professional and Amateur Sports Protection Act (PASPA) unconstitutional and states are free to regulate sports betting as they see fit, our multi-billion dollar industry must rise to the challenges and seize the opportunities presented by this expansion of sports betting.”