United States: Third Circuit Continues NJ Sports Betting Prohibition

In a much anticipated, closely watched decision, today the US Court of Appeals for the Third Circuit held that New Jersey's 2014 efforts to implement sports betting at casinos and racetracks violates federal law.  The 2-1 majority decision was authored by Judge Marjorie O. Rendell joined by Judge Maryann Trump Barry; Judge Julio Fuentes dissented.

How did we get here?   The federal Professional and Amateur Sports Protection Act (PASPA), enacted in 1991, prohibits states from authorizing sports betting.  In 2012, New Jersey challenged the constitutionality of PASPA, but the Third Circuit held that the statute was constitutional.   The Supreme Court declined to hear the case.  Sports betting is a crime in New Jersey.  Seizing on language in the Third Circuit's opinion, however, New Jersey enacted a statute in 2014 that simply stated that any state law that would prohibit sports betting at a casino or racetrack was repealed – i.e., that activity was no longer a crime.  It did not explicitly say that casinos or racetracks could offer sports betting.

The sports leagues, however, took the position that this limited repeal amounted to an "authorization" by another name.  And, "authorizations" are prohibited by federal law.  This dispute – what does it mean "to authorize" – is at the base of the decision that was issued this morning.

The court held:  "We conclude that the 2014 Law violates PASPA because it authorizes by law sports gambling."  The court cited three reasons for its holding.  First, the court stated that absent the 2014 law, sports gambling prohibitions would apply to casinos and racetracks; therefore, repealing those prohibitions must amount to an authorization.  "The 2014 law provides the authorization for conduct that is otherwise clearly and completely legally prohibited."

Second, the court stated that the selectiveness of the repeal – limited to racetracks and casinos – "constitutes specific permission and empowerment."  The court distinguished its holding in the 2013 decision that saved the constitutionality of PASPA.  The court notes that "had the 2014 Law repealed all prohibitions on sports gambling, we would hard pressed...to find an 'authorizing by law' in violation of PASPA."  In other words, the Court has essentially held that the only repeal that would pass  muster under PASPA is a complete repeal – i.e., allowing anyone in the state to offer sports betting.

Third, the court held that because Congress gave New Jersey one year to opt out of PASPA initially, Congress must have concluded at the time that sports betting in New Jersey casinos would violate PASPA.  "If sports gambling in New Jersey's casinos does not violate PASPA, then PASPA's one year exception for New Jersey would have been superfluous."

Judge Fuentes – who wrote the Court's 2013 opinion finding PASPA to be constitutional – dissented.  He notes that "the 2014 Law renders previous prohibitions on sports betting non-existent" and then criticizes the majority for taking issue with the "selective" nature of the repeal.  "As I see it, the issue is whether a partial repeal amounts to authorization.  Because this logic rests on the same false equivalence we rejected in Christie I, I respectfully dissent."

Judge Fuentes notes that to repeal a statute is to make it as though the statute never existed.  "A partially repealed statute is treated as if only the remaining part exists...after the repeal, it is as if New Jersey never prohibited sports gambling in casinos, gambling houses, and sports racetracks."    How, therefore, Judge Fuentes asks, can a repeal be an authorization?

Judge Fuentes says that there is no explicit grant of permission under the statute for anyone to engage in sports betting.  Second, Judge Fuentes argues that there is a logical flaw in the argument:  if withdrawing some prohibitions amounts to an authorization, then withdrawing all prohibitions must also amount to an authorization, which means that New Jersey has no choice at all, which means that PASPA is unconstitutional.  This is particularly striking reasoning from the author of the 2013 decision holding PASPA to be constitutional.

It remains to be seen whether New Jersey will seek review in the Supreme Court, or whether some other legislative solution – either on the state or federal level – may be forthcoming.  For now, though, New Jersey will still not be able to offer sports betting in its casinos and racetracks.

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