The potential impact of the Murphy v. NCAA decision on sports betting in the United States

Published 31 May 2018 | Authored by: John Wolohan

On 14 May 2018, the United States Supreme Court finally handed down its long-awaited decision in Murphy v. National Collegiate Athletic Association (NCAA) (formerly Christie v NCAA)1. The case, which has been winding its way through the Federal courts since 2012, involved the State of New Jersey’s attempt to overturn the federal ban on state-sanctioned single-game sports wagering outside of Nevada. For the background to the case, please see the author’s previous LawInSport article: Sports Betting in the United States: Supreme Court begins hearing Christie v. NCAA.2

This article briefly reviews the facts and the Supreme Court’s decision, before analyzing its potential impact. A copy of the decision is available here. The decision focuses on the separation of powers between the Federal and State governments and is therefore mainly of relevance to the United States. As a result, the majority of the article will focus on the decision’s potential impact on sports betting in the United States. Specifically, it examines:

  • Background to the Professional and Amateur Sports Protection Act

  • Facts and main arguments of the case

  • Decision of the Supreme Court

  • Analysis – the impact of the decision

  • Comment

Background

Casino gambling has been legal in New Jersey since 1976, making it only the second state in the country to allow casinos. This semi-monopoly did not last very long. Within 15 years, “with the enactment of the Indian Gaming Regulatory Act in 1988,3 casinos opened on Indian land throughout the country, including within driving distance of Atlantic City”4 In additional to tribal casinos, a number of nearby States also legalized casino gambling. Even with the rapid growth of casino gambling, however, Nevada still remained the only state that allowed single-game sports betting.5

The reason sports gambling failed to expand beyond Nevada was the strong opposition of the professional sports leagues and the NCAA.6 By the 1990s, however, there were signs that the trend that had brought about casino gambling might extend to sports gambling7. To protecting the integrity of their sports, the leagues petitioned Congress for help and, in 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA).8

PASPA states that:

It shall be unlawful for--
(1) a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or

(2) a person to sponsor, operate, advertise, promote, pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.9

PASPA, however, did not make sports gambling a federal crime. It only prohibited the expansion of sports gambling by states. Therefore, since Nevada, Oregon, Montana, and Delaware all had, or previously had, state laws allowing some form of sports betting, the four were exempt from the Act’s prohibitions. As a result, Nevada could continue to offer legalized sports betting at its’ casinos and the other three states were allowed to continue running their sports lotteries or sports pools10.

Facts and arguments

In 2012, with the casinos in Atlantic City struggling and New Jersey looking for additional tax revenue, the state introduced new legislation authoring sports gambling. 11 Before they could take a single bet, however, the NCAA and professional sports leagues filed suit in federal court on the ground that New Jersey’s sports wagering law violated PASPA. In response, New Jersey argued that PASPA, in violation of the 10th Amendment of the Federal Constitution, infringed upon the State’s sovereign authority to end its sports gambling ban.12 In particular, the “New Jersey argued that PASPA regulates a State’s exercise of its lawmaking power by prohibiting it from modifying or repealing its laws prohibiting sports gambling.13 The NCAA and professional leagues countered that since PASPA did not command the States to take any affirmative act, it did not impermissibly commandeer the State’s lawmaking powers.14

The lower court agreed with the sports leagues and found that PASPA’s prohibition of state run sports gambling schemes did not contravene the anti-commandeering principle because it “does not command states to take affirmative actions.15 After a six-year battle in the Federal courts, in which New Jersey lost at every level, the case finally ended up at the United States Supreme Court which heard oral arguments in December.

Decision

In a decision, as predicted in the author’s previous article16, the Supreme Court overturned the rulings of the lower courts and held that while the legislative powers granted to Congress are sizable, they are not unlimited.17 While the Supreme Court held that Congress has the authority to regulate sports gambling directly, PASPA does not do that.18 By prohibiting states from authorizing any form of sports gambling, the Supreme Court held that the Federal government, by enacting PASPA, has violated the anti-commandeering rule of the 10th Amendment.19

Finally, while “recognizing that the issues surrounding the legalization of sports gambling requires an important policy choice, the Supreme Court ruled that the choice was not its to make. Congress, it held, has the authority to regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own”.20

Impact of the decision

With New Jersey and Delaware each ready to pass sports gambling legislation by the end of June, and possibly up to another 20 more within the next few years, the sports leagues are scrambling to try to influence any new law that come out.21 Worried that there are going to be a handful of different state laws, the NCAA and the National Football League are pressing Congress to enact another federal law regulating sports betting. The sports leagues argue that comprehensive federal legislation —applying uniformly to all the states— will best protect the integrity of their games.22 Without federal protection, they argue, its games and athletes will be open to match fixing. This could be a particular problem for the NCAA since unlike professional athletes, who on average are paid millions of dollars in salary, college athletes receive little actual money but are paid in educational benefits, such as academic scholarships and room and board. While these benefits can be worth hundreds of thousands of dollars over an athlete’s career in college, they buy very little when an athlete wants to go out to dinner.23

Any concern that the leagues have over increased legal sports betting will have a negative impact on their games, however, is misguided. As noted above, gambling on sports is not a new threat. On the contrary, gambling on sports has been legal in Nevada since 193124 and according to the Nevada Gaming Control Board generated $4.8 billion with Nevada Sports Books in 2017, around $300 million was on the NCAA Basketball Tournament. While these numbers may seem large, the Nevada Gaming Control Board estimated that an additional $150 - $300 billion was wagered illegally, including an estimated $10 billion on the NCAA Tournament.25 People are already betting on sports. Therefore, it is naive of the leagues to believe that increased legal sports betting will affect the integrity of their games.

The Supreme Court’s decision is only going to take sports betting out of the hands of organized crime that operates free from regulation or oversight and bring it under the control of the states. In Nevada, both the leagues and the state sports books have an interest in keeping the games clean, and work together to monitor and guard against match fixing. The efforts to weed out match fixing are only going to get better as more states legalize sports betting. For example, as more money is bet through the legal sports books and less with illegal bookies, the state and leagues should be better able to monitor teams and games for problems. The league’s integrity argument also seems to be out of sync with their actions. In 2017, the NHL added a team in Los Vegas, the Golden Knights, while the NFL has agreed to allow the Oakland Raiders to move to Las Vegas in 2020.26

In addition to seeking renewed Federal legislation, the leagues have also been actively in discussions with several state legislatures trying to influence any new sports wagering laws. In fact, even before the Supreme Court’s decision in Murphy, the leagues seemed to have read the tea leaves and started working with states in trying to get a piece of the market for themselves. For example, the NBA has argued that it deserves a 1% cut, a so-called integrity fee, of every bet made on its games. Since casinos in Vegas historically only make about 5% on sports bets, the league is basically asking for 20% of all sports betting revenue. In support of this position, the NBA claims that “as the intellectual property creators, our games serve as the foundation for legalized sports betting, providing casinos the ability to earn revenue off our games, while we bear all of the risk that accompanies sports betting and will incur additional expenses to expand our existing compliance and enforcement programs.27

Such a fee could generate hundreds of millions of dollars in additional revenue for the leagues. Arguing that the leagues are more concerned with getting a piece of the action, New Jersey State Senate President Steve Sweeney has called on governors in all 50 states to reject efforts by professional sports leagues to collect an “integrity fee” on sports betting revenue, saying their demands were tantamount to “extortion.”28 In support of rejecting the leagues’ demands, the states argue that the states are the best platforms to coordinate with each other and federal law enforcement to prevent illegal gambling and prevent match fixing, not the leagues. In addition, they point out that any fee that the states pay to the leagues is only going to reduce the tax revenue the states receive. This argument may be especially difficult in states that do not have professional sports team, and, therefore, do not contribute to these states’ economies. One final note – if the leagues really want a piece of the action, there is nothing to stop the NBA or other leagues from taking bets themselves. They would just have to follow all the state laws. Of course, if they did, they probably would not make as much as if they could get the integrity fee, plus incur additional costs.

In addition to asking for an integrity fee and a piece of the sports betting action, the leagues are also requesting that the states grant them exclusive control of game and player data, which state licensed sportsbooks would then be required to purchase from the leagues for its operations.29 The NFL, in fact is asking for this to be included as part of any federal Legislation. Granting the leagues exclusive ownership of such data, which some courts have held the leagues currently do not own, would not only give them a monopoly to sell data to the state’s sportsbooks but also potentially give them control over all daily fantasy sports. Once again, since some courts have rejected the leagues attempt to control game and player data in the past, it is difficult to see why any state would feel the need to grant such a valuable property right to the leagues.30

Conclusion

While the leagues have publicly voiced opposition to the expansion of sports gambling, they really should be celebrating the court’s decision. The biggest sources of revenue for professional and college athletics is television money and gate receipts. However, over the last few years people have been attending and watching fewer and fewer games. This is especially true at the college level where, according to the NCAA, the average attendance for Division I basketball games has declined for the last ten years.31 In college football at the FBS level, the average attendance has declined for four straight years.32 Besides fewer people attending games, this seeming lack of interest has also translated into fewer people watching games on television. Since it has been argued that people who bet on sports watch more games than the average fan. The Supreme Court’s decision should lead to an increase in game attendance and TV viewers next year, which would certainly be a big victory for the leagues.

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About the Author

John Wolohan

John Wolohan

John Wolohan is an Attorney and Professor of Sports Law in the Syracuse University Sport Management program and an Adjunct Professor in the Syracuse University College of Law. In addition to being one of the lead editors of the book "Law for Recreation and Sport Managers" by Cotten and Wolohan, John has been teaching and working in the fields of doping, antitrust, gaming law, and sports media rights for over 25 years.

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