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Legal Bytes: The Murphy decision and the ramifications of sports gambling legalization

By: Daily Record Staff , Robert Marks//May 29, 2018

Legal Bytes: The Murphy decision and the ramifications of sports gambling legalization

By: Daily Record Staff , Robert Marks//May 29, 2018//

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Robert Marks

My father and I went on a trip last summer to tour the national parks on the way from Colorado to San Francisco. In between our travels from the unparalleled beauty of Zion National Park to the striking sequoia trees in California, we stopped in the State of Nevada. Our first stop was at a gas station, and I was immediately struck by a sight I did not expect. Inside the gas station were about 15 slot machines with numerous patrons making use of them. Nevada has always been uniquely known for its gambling attractions, especially since it has long been the only state to offer legal sports betting in its casinos — that is, until now.

With the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association, et al., No. 16-476, 2018 WL 2186168 on May 14, 2018, the door has opened for other states to begin their excursion into the world of sports gambling. Murphy analyzed whether the Professional and Amateur Sports Protection Act (PASPA), and specifically its provision that made it unlawful for a state to “authorize” by law any gambling or wagering schemes on one or more competitive sports games, was constitutional. Id. at *4; 28 USCA § 3702. At the time of PASPA’s adoption in 1992, a few states had already offered limited sports gambling opportunities and, most significantly, Nevada fully allowed sports gambling in its casinos. Id. at *5. As a compromise, these state efforts were “grandfathered” in and their operations were not nullified by the act. Id.

Besides an extended discussion of the meaning of the word “authorize” in the provision above, Murphy held PASPA’s declaration that a state could not authorize sports gambling was held unconstitutional mainly because it ran afoul the “anticommandeering” principle. This fictional Constitutional Law word (just added it to “my dictionary” in the word program) stands for the principle that the Federal Government cannot regulate a state’s exercise of its lawmaking power by prohibiting it from making laws, such as a law that authorizes sports gambling. Id. at *10. The central counterargument used by the National Collegiate Athletic Association (NCAA) and the United States (U.S.) was that the anticommandeering principle should not apply because PASPA does not require state lawmakers to do anything — it simply stops them from doing something. Id. at *13.

Nonetheless, the majority opinion found that the 10th Amendment’s reservation of rights to the states and lack of support from the Constitution required that the anticommandeering principle protect state lawmaker’s rights to draft legislation in their discretion. The distinction made by the NCAA and U.S. was found to be “empty” and simply “a matter of happenstance” that case precedent had only used the anticommandeering principle to prohibit Congress from forcing state lawmakers into action. Id. Interestingly, the Court noted that Congress could directly prohibit sports gambling through a law, but could not prohibit state lawmakers from authorizing sports gambling. Id. at *11. There is a significant lesson to be learned there with regard to the careful drafting of legal documents.

The dissent, written by Justice Ginsberg, took issue with the Court’s destruction of the rest of PASPA provisions — especially the PASPA ban that states themselves cannot operate sports-gambling schemes, as well as the prohibition of private parties’ from participating in sports gambling schemes unless a state law authorizes them to do so. Where the majority opinion felt that the prohibition of a state from legalizing sports gambling was so intertwined with all other PASPA provisions, the dissent disagreed and accused the majority of “wielding an axe to cut down § 3702 instead of using a scalpel to trim the statute.” Id. at *25.

Demonstrating his awareness of the significant repercussions of the Court’s decision, Justice Alito notes in his decision that sports gambling is a controversial subject. Id. at 20. He continues,

“Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime. Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.” Id.

Whatever your stance, and I think both are founded in reason (contrast Pete Rose’s gambling debacle in the MLB with the profits enjoyed by the State of Nevada), there can be no question that the decision to nullify the Professional and Amateur Sports Protection Act, 28 USC § 3702(1), will create an industry of sports gambling in many states across the country.

Already states are moving to pass legislation to authorize sports wagering as a way to generate revenue for the state. New Jersey and Delaware are expected to offer legal sports betting by June of this year, with other states on their heels (Brian Windhorst, “How the NBA, MLB are lobbying states to cash in on sports betting,”, May 14, 2018). It is no surprise that states are pushing to have the ability to offer sports betting, because there is undoubtedly a market and a valuable revenue stream. In 2017, 1.7 billion dollars was gambled on the sport of football alone at Nevada sportsbooks — and that is only what was done legally (David Purdum, “Roger Goodell wants Congress to create uniform betting standards,”, May 21, 2018).

Some of the major sport industries (mainly the Major League Baseball and National Basketball Association) are attempting to receive a cut of the revenue in the form of a royalty of .25 percent of the amount wagered on their league’s games. Windhorst, supra. This royalty revenue is argued by these leagues as necessary to allow them to spend resources to protect the integrity of the sport. Id. The National Football League, on the other hand, is simply trying to be protect and monetize their rights to the data, video and advertising that is a product of the sports world. Purdum, supra.

Here in New York, the Murphy decision had immediate consequences because of the prior passage of the Upstate NY Gaming Economic Development Act back in 2013 (Gaming Act). The Gaming Act had a provision that would legalize sport betting in the four private casinos sanctioned by the Gaming Act if the federal ban was lifted. Senate Bill S5883, 2013-2014 Legislative Session. By ruling the Federal Law unconstitutional and “wielding an axe,” the provision of the Gaming Act was invoked immediately. Murphy, No. 16-476, 2018 WL 2186168 at *25 (Ginsberg Dissent). However, this provision was limited and only allows for wagers to be made in person and only at the four private casinos specified in the Gambling Act. Senate Bill S5883.

In addition, the New York State Senate, and in particular Sen. John Bonacic, have already begun the process of crafting legislation that would update the Gaming Act to allow mobile wagering and expand in-person betting to Off-Track Betting facilities that partner with casinos (Senate Bill S.7900; Jon Campbell, “Rules coming soon for sports gambling in New York, regulators say,”, May 21, 2018). Further, this bill (known as S.7900), although still in Committee, proposes that casinos would pay a tax of 8.5% of gross revenues from sports wagering and up to .25% of gross revenues to sports leagues such as the MLB and the NBA. Id. Meanwhile, the Gaming Commission Board in New York, another product of the Gaming Act, have already begun crafting regulations to address possible issues and provide needed structure following the Murphy decision. Id.

The takeaway from these recent developments is this: We could see legalized sports gambling across the state, even via mobile or online wagering, before the year is up. With a possible total amount wagered in sports gambling likely reaching the billions of dollars in New York, an entire market could be incoming. New businesses and casinos specializing in sports wagering will spread like wildfire, many needing legal work. It will be especially interesting to see how the legal market reacts to this possible new market and whether experts in this future field of sports gambling are at a premium.

Robert Marks is an associate in the Litigation Department at Boylan Code LLP focusing his practice on labor and employment issues, municipalities, commercial litigation, and landlord-tenant litigation.

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