The Mouthpiece


By Martin Owens
Contributing Editor


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    Philadelphia, PA (Sports Network) - Suddenly, out of the clear blue sky, New Jersey has authorized sports betting. Has it really? What's going on? And how will it affect the other gambling jurisdictions, the operators, the software providers-and oh, yeah, the players?

    Pendulum

    Gambling, like the poor, we will always have with us. But US state approval and licensing of gambling is a pendulum, swinging back and forth between two poles. On the one hand is public rectitude: gambling's reputation is that of a disreputable and scurrilous activity, often enough run by criminals, a standing menace to the solvency and sanity of a public which has all too often proven to be weak willed and unthinking (to which tendencies many dedicated public servants owe their job security). On the other hand is practicality: people are going to gamble anyway, have done so since the dawn of time. Far better to license and regulate it, and collect fees and taxes for public purposes, than have it remain out of the public view, a potential war-chest for organized crime. Virtue tends to carry the day when times are prosperous. Practicality wins out when purse strings are tight.

    Most US states now practice some form of progressive politics: no worthy cause left behind, full spending ahead. Which means the demand for fresh revenue is more or less permanent. Why, then, has Internet gambling not been added to the revenue stream so badly needed?

    To begin with, legal and licensed Internet gambling is already here. It has been for 10 years in the form of simulcast betting on horses and dogs, licensed and utilized in various forms by no fewer than 32 state racing commissions. When people speak of Internet gambling licensing they are talking about expanding into casino style gaming and especially poker, state licensed and offered online.

    New Jersey and Sports Betting- A Surprising Loophole

    Which leads us to New Jersey, one of the first three US states to legalize online gambling. Unlike California, where only online poker is being considered, New Jersey went almost the whole hog: slots, table games, video poker as well as poker games online. But a gold rush it was not. Governor Christie had projected almost $200 million from taxing Internet gambling. So far, the actual intake has been around $12 million- less than 10% of the prediction. Meanwhile, the push to expand and liberalize gambling opportunities in the Garden State marched on. The state wound up in Federal court against a Federal law. The Professional and Amateur Sports Protection Act (PASPA), passed in 1992, forbids state governments and tribal governments too from licensing and legalizing sports betting beyond horse and dog races, except for Nevada and three other states which were "grandfathered" due to sports related lottery programs at the time.

    This was a bad law for many reasons. It violated Constitutional principles on a number of points. Worst of all, it kept states and tribes from participating in sports booking. This is the holy grail of popular gambling, far and away the biggest single market in the gaming world.. Over $350 billion is wagered on various sporting events every year in the USA alone. There are whole countries that have GDP's lower than that. But most of it goes to the dark side, to businesses and websites unregistered and unregulated in America.

    But the Federal courts refused to overturn the law , even on appeal. The important thing for our purposes, however, was that the Third Federal Circuit Court Of Appeals noted that there was nothing preventing New Jersey from repealing or amending its own state law ban on sports betting. Let's repeat that, 'cause it's important. The Federal Court refused to overturn federal law for New Jersey's sake. But New Jersey has power over its own state laws.

    Repeal By Decree

    So on Monday, September 9th, Governor Christie turned to a 2012 New Jersey statute which deleted an existing prohibition against sports betting pools at New Jersey casinos and racetracks. This law did not exactly authorize them, you see, nor set up a set of regulations for application and licensing. It merely made an exception for casinos and tracks.

    Based on this exception , the governor declared that New Jersey tracks and casinos could now open up sportsbooks . And the New Jersey Attorney General sent a directive to state law enforcement and prosecutors, ordering them to respect this exception. At the same time, he applied to the same Federal court that turned down his appeal, for clarification and confirmation of the part about New Jersey controlling its own laws.

    And this in turn raises the very interesting question: since New Jersey casinos are already allowed to offer other sorts of gambling online, could they simply add sports betting online under essentially the same conditions- that is, New Jersey residents only, located within the state only?

    This is very similar to what has been happening across the country in relation to medical and even recreational marijuana. While it is still a Federal offense, the states who feel otherwise have either changed their laws against weed, or simply stopped enforcing them. And one of the little wrinkles of the American legal scene is that, while a conflict between state and Federal law is liable be resolved in favor of the Feds, Washington has very little to say about how a state enforces its internal laws, so long as the Constitution is not violated..

    Right now it is anybody's guess what the US Department of Justice will do. There seems to be an open question whether or not PASPA preempts New Jersey law on this particular item. It is based in fine semantics and hairsplitting -but hey, what else are us lawyers paid for? Given the Obama Department of Justice's spirit of cooperation in such things as interpretation of the Wire Act, would it be too much to hope that they leave New Jersey alone?

    Future Prospects

    At the same time, it is early days to predict that this is the first stone in a nationwide avalanche of new, licensed sports betting, online or off. While Monmouth Park has announced it hopes to open up its sports book as early as this Sunday, it seems most other operators will wait to see what the courts say.

    Lastly, PASPA granted the power to seek injunctions against state licensing of sports betting to the major sports leagues such as the NFL, NBA, and the NCAA. They would not welcome a state-by-state legalization of sports betting any more than a national one. And part of the judgment against New Jersey was the granting of an injunction on behalf of all the big leagues. But if the move became general, as with fantasy sports, would the big players try to make some sort of compromise?

    These are uncharted waters for everybody, and we can only wait and see.

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009); Associate Editor, Gaming Law Review & Economics; Contributing Editor, TSN. Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2014


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