United States: Sports Gambling In Illinois: What Are The Odds, And Will Municipalities Be Dealt In?

Mr. William R Lyman is a real estate attorney in Holland & Knight's Chicago office

HIGHLIGHTS:

  • The U.S. Supreme Court's recent landmark decision in Murphy v. National Collegiate Athletic Association,et al. overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA), effectively granting each state the authority to legalize and set its own regulations concerning sports wagering.
  • In Illinois, there have been several bills introduced in anticipation of and subsequently amended in response to the Murphy decision. SB 7, which had already passed the Illinois Senate in February, appears to have gained the most momentum, having been amended to add a placeholder for the legalization and regulation of sports gambling made possible by the Murphy decision.
  • While a lot is unclear at the moment regarding the future of sports wagering in Illinois and what that might mean for the state's municipalities, one thing is certain: The only way that a municipality in Illinois would be able to license sports betting for revenue and to tax such betting would be if the General Assembly provides it with such authority.

The U.S. Supreme Court's recent landmark verdict in Murphy v. National Collegiate Athletic Association,et al., overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA) and put an end to the federal prohibition on sports wagering in every state outside of Nevada. The Supreme Court's May 14, 2018, decision effectively grants each state the authority to legalize and set its own regulations concerning sports wagering. 584 U.S. ____ (2018).

Murphy v. NCAA

This groundbreaking case considered the state of New Jersey's attempt to legalize sports gambling by passing a law repealing its previous sports gambling prohibition. The NCAA and three professional sports leagues alleged that the New Jersey law violated PASPA's prohibition against states "sponsor[ing], operat[ing], advertis[ing], promot[ing], licens[ing], or authoriz[ing] by law or compact ... a lottery, sweepstakes, or other betting, gambling, or wagering scheme based ... on" competitive sporting events. 28 U.S.C. §3702(1).

In its sweeping decision, the Supreme Court ruled that PASPA was an unconstitutional exercise of congressional power because it violated the Court's anti-commandeering doctrine. The basic principle of this long-held Court doctrine is that under the limited powers granted to it by the Constitution, "Congress may not simply 'commandee[r] the legislative process of the States by directly compelling them to enact and enforce a federal regulatory program." New York v. United States, 505 U.S. 144, 161 (1992), quoting Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264, 288 (1981). Simply, Congress "cannot issue direct orders to state legislatures" or "regulate state governments' regulation of their citizens." Murphy, 584 U.S. at ____; New York, 505 U.S. at 166.

Applying the anti-commandeering doctrine to PASPA, the Court determined that PASPA's prohibition constituted a direct order to state legislatures. The sports leagues and the federal government contended that "commandeering occurs 'only when Congress goes beyond precluding state action and affirmatively commands it,' " and that prohibiting states from enacting a new law is distinct from previously invalidated laws that "told states what they must do instead of what they must not do." Murphy, 584 U.S. at ____. However, the Court was quick to toss this "empty" distinction aside. Id. It stated that the anti-commandeering doctrine applies in both cases of laws that command "'affirmative' action" and laws that impose a prohibition on legislative action. Id. The Court concluded that: "[T]here is simply no way to understand the [PASPA] provision prohibiting state authorization as anything other than a direct command to the states. And that is exactly what the anticommandeering rule does not allow." Id.

Pending Federal Legislation

Whether Congress will take action in the wake of the Murphy decision remains to be seen. Sen. Orrin Hatch (R-Utah), an original sponsor of PASPA when it was passed in 1992, has stated that he plans to present a new bill concerning gambling in the next few weeks. Hatch's bill would not seek to prohibit sports gambling but instead would set federal baselines to prevent a regulatory "race to the bottom" among the states that do decide to legalize and regulate sports gambling.1

Pending Illinois Legislation

At the State Capitol in Springfield, there have been several bills introduced in anticipation of and subsequently amended in response to the Murphy decision. SB 7, which had already passed the Illinois Senate in February, appears to have gained the most momentum since the Murphy decision, having been amended to add a placeholder for the legalization and regulation of sports gambling made possible by the Murphy decision.2 Although the Illinois House did not vote on SB 7 prior to the conclusion of the spring legislative session, one of the main House sponsors of the bill, State Rep. Robert Rita, said on the last day of the spring session that the bill was held back from a vote in the Illinois House so that the placeholders for sports gambling in the bill may be fleshed out into full-blown, comprehensive authorizations and regulations of sports gambling, all to be voted upon during the fall veto session in November 2018.3

As currently drafted, SB 7 does not contain any substantive sports gambling provisions, only addressing six new casinos and one new racetrack that it authorizes throughout the state and, for the first time, within the city limits of Chicago.

Other pending bills related to sports gambling identify alternative regulations that might find their way into SB 7 or be adopted on their own. For example, SB 3432 would authorize sports gambling at only those casinos currently licensed to operate in the state and would require those casinos to pay to the state a 12.5 percent tax on all revenues generated from sports gambling.4 SB 3125 would allow sports gambling only at racetracks and off-track betting facilities, while leaving the taxation, fees, and other regulations to be set by the Illinois Gaming Board (IGB).5 SB 2478 would not limit sports gambling to specific locations, but instead delegate to the IGB all authority to declare where sports betting should legally occur and to determine how to otherwise tax and regulate sports betting.6

While a lot is unclear at the moment regarding the future of sports wagering in Illinois and what that might mean for the state's municipalities, one thing is certain: Under Article VII, Section 6(e) of the Illinois Constitution, the only way that a municipality in Illinois would be able to license sports betting for revenue and to tax such betting would be if the General Assembly provides it with such authority in the bill that ultimately gets passed or in subsequent legislation.

Despite this constitutional burden, Chicago Mayor Rahm Emanuel has vowed to oppose all of the aforementioned bills, which reserve all of the potential revenues from taxes and fees on sports gambling to the state, as well as any gambling legislation that does not explicitly provide revenue opportunities for Illinois municipalities.7 We will have to wait until November to find out whether Mayor Emanuel's position is enough to sway state legislators.

Until then, Holland & Knight attorneys will continue to monitor legislative activity at both the Illinois and federal levels and will issue updates when warranted.  

Footnotes

1 "Supreme Court decision on sports bets sets off scramble," The Hill, May 14, 2018.

2 Amendment to SB 7, filed by Rep. Robert Rita on May 25, 2018.

3 Tweet by Joseph Bustos, Belleville News-Democrat, May 31, 2018.

4 SB 3432, filed by Sen. Napoleon Harris III on Feb. 16, 2018.

5 SB 3125, filed by Sen. William E. Brady on Feb. 15, 2018.

6 SB 2478, filed by Sen. Don Harmon on Jan. 30, 2018.

7 "Rahm thinks latest Chicago casino bill is a loser, City Hall adviser says," Chicago Sun-Times, May 29, 2018.

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