Tuesday, March 15, 2011

New Jersey Sports Betting Lawsuit Dismissed

The prospect of Vegas-style sports gambling in New Jersey took a hit on March 7, 2011 when Chief Judge Garrett E. Brown of the United States District Court of New Jersey dismissed a long-percolating federal lawsuit challenging the constitutionality of the Professional & Amateur Sports Protection Act (“PASPA”). The 19 page opinion has yet to be posted on the court’s website, but the decision is available via PACER. Passed in 1992, PASPA prohibits sports betting in all states except for Nevada, Delaware, Montana, and Oregon. New Jersey State Senator Raymond J. Lesniak and Stephen M. Sweeney, along with a number of pro-gambling trade associations, sought to invalidate PASPA on constitutional grounds, thereby allowing New Jersey (and, presumably, other states) to offer state-regulated sports wagering. New Jersey Governor Chris Christie declined the opportunity to intervene in the lawsuit as an additional plaintiff. The lawsuit suit was filed in 2009. U.S. Attorney General Eric H. Holder, the U.S. Attorney for the District of New Jersey, and unnamed sports organizations were listed as defendants.

The plaintiffs put forth a multi-pronged argument based on the U.S. Constitution. Specifically, they claimed that PASPA violates the following constitutional provisions: (i) the Commerce Clause; (ii) the First Amendment’s protection of expression and assembly; (iii) the Tenth Amendment; (iv) the Eleventh Amendment; (v) the Due Process Clause; and (vi) the Equal Protection Clause. Instead of contesting the lawsuit on substantive grounds, the U.S. government moved to dismiss the lawsuit procedurally for lack of standing and failure to state a claim.

Citing Supreme Court cases familiar to every first year law student, Chief Judge Brown addressed the standing issue. The judge cited Lujan v. Defenders of Wildlife for Article III’s requirement that federal judicial review be limited to actual cases and controversies. Likewise, Chief Judge Brown quoted FW/PBS, Inc. v. City of Dallas for the proposition that the plaintiff must “clearly…allege facts demonstrating that [it] is a proper party to invoke judicial resolution of the dispute” (p. 6). The plaintiff trade associations were found to have no standing on this basis.

In connection with New Jersey Senators Lesniak and Sweeney, the judge provided additional reasoning and specifically addressed the fact that the New Jersey legislature recently passed Senate Concurrent Resolution No. 132 (“SCR 132”). If approved by popular vote in November 2011, SCR 132 would amend the New Jersey constitution “to permit the legislature to authorize sports wagering at Atlantic City casinos and certain horse racetracks, so long as the gambling did not extend to sporting events taking place in New Jersey or involving New Jersey collegiate teams” (p. 4). The judge posited that the Senators’ SCR 132-related argument for standing “puts the cart before the horse” given that SCR 132 has yet to be voted on, let alone approved. Accordingly, Chief Judge Brown found Senators Lesniak and Sweeney to lack standing to challenge PASPA’s constitutionality. Under New Jersey law, “the proper party to bring such a claim would be New Jersey’s attorney general, but the governor and attorney general have not intervened in this lawsuit” (p. 18).

It isn’t particularly surprising that certain New Jersey lawmakers are looking to sports-based gambling as a way to increase state revenue. According to a recent Pew Research report, 33% of American men gamble of sporting events. In 2009, $2.57 billion was wagered legally in Nevada, although the amount of action in Nevada-based sports books probably only represents 1% of all sports bets made nationwide. The illicit nature of some gambling, coupled with the availability of the Internet, has caused the popularity of off-shore sports wagering to explode during the past fifteen years. The passage of the federal Unlawful Internet Gambling Enforcement Act in 2006 has done little to diminish online/offshore sports gambling. As a result, internet sports wagering is largely unregulated, potentially depriving certain states and municipalities of tax revenue. A 2011 Contemporary Economic Policy by Douglas M. Walker and John D. Jackson article investigated whether state-sponsored gambling increases revenue. The authors found that lotteries and horse racing did contribute to the bottom line, but casinos and greyhound racing did not.

The future viability of sports betting in New Jersey now seemingly rests with the state’s voters. If SCR 132 is approved, it is possible (probable?) that Governor Christie and the New Jersey Attorney General will feel compelled to re-institute the lawsuit. Given that Chief Judge Brown decided the case on procedural, not substantive, grounds, such a reincarnation would not have the hurdle of any adverse precedent, as the constitutional claims promulgated by the plaintiffs in the just-dismissed case were not at issue.