United States: Blockchain Tech After Murphy – A Good Bet?

In Murphy v. NCAA, 200 L. Ed. 2d 854 (2018), the United States Supreme Court held that provisions of the Professional and Amateur Sports Protection Act (PAPSA) – which prohibited the state authorization of sports gambling – were unconstitutional. This ruling, barring renewed and restructured federal legislation, clears the way for states previously foreclosed from permitting sports gambling to introduce legalized forms of sports betting. This new landscape carries with it a number of implications not only for professional and amateur sports leagues, state regulators, and potential bettors, but also for technological innovators – particularly with respect to the possible application of blockchain technology to sports betting.

In Murphy, the Supreme Court addressed the State of New Jersey’s challenge to PAPSA’s language making it unlawful for a governmental entity to “sponsor, operate, advertise, promote, license, or authorize by law or compact” sports gambling. See 28 U.S.C. § 3702(1). At issue was a 2014 New Jersey law, which repealed provisions of an older law prohibiting certain sports wagering in Atlantic City. 200 L. Ed. 2d at 868. The major professional sports leagues and NCAA challenged the New Jersey law, and prevailed both in the district court and the Third Circuit. Id. at 868-869.

The Supreme Court reversed, determining that § 3702(1) of PAPSA “unequivocally dictate[d] what a state legislature may and may not do” and therefore violated the anti-commandeering rule – a rule meant to protect the concept of federalism embodied in the Constitution and the Tenth Amendment. See 200 L. Ed. 2d at 872-875. The court went on to conclude that PAPSA’s remaining provision, barring private actors from operating or advertising sports gambling under the color of state law, was not severable and therefore unconstitutional. Id. at 878-882.

Murphy does not, of course, prohibit Congress from directly regulating sports gambling – perhaps through the Commerce Clause (see id. at 882) – but as it stands, the holding opens the door for new states to enter into the sports gambling arena. This, in turn, creates an intriguing possibility for expansion with respect to blockchain technology. Blockchain technology’s benefits, including the security and efficiency that a distributed ledger can provide, would seem particularly applicable to sports gambling. The technology could assist bettors and regulators alike through the introduction of verifiability and trust with respect to matters such as a prospective bettor’s wherewithal to make a wager and to the flow of money relating to wagers. The latter, in particular, could assuage fears regarding money laundering or tax evasion, and could potentially serve as a method for detecting match fixing or other untoward activity, potentially obviating the need for further federal regulation.

These advantages are not surprising, of course, because one of the anticipated benefits blockchain technology is the institution of efficient, self-authenticating systems, and the consequent elimination of regulatory and administrative costs associated with establishing security, stability, and verifiability. With the Murphy decision, a door may have opened for blockchain technology to demonstrate how it can serve this function.

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