U.S. sports betting: is the Professional & Amateur Sports Protection Act still fit for purpose?
Published 14 July 2015 By: Cameron Jean
A third of Atlantic City’s casinos are closed—blank screens and blacked-out windows replacing the dancing neon lights and dazzling signs.1 Atlantic City casino revenues have plummeted nearly 50% in the past eight years.2 New Jersey racetracks are operating at losses into the multi-millions of dollars.3 New Jersey is desperate for the money that legalized sports betting could bring into the state.
On January 17, 2012, New Jersey Governor Chris Christie signed into law the Sports Wagering Act (SWA),4 which created a “comprehensive licensing and regulatory regime authorizing sports wagering.”5 But federal courts struck down the SWA,6 finding that it violated the Professional and Amateur Sports Protection Act (PASPA),7 a 1992 federal law that made sports betting illegal in all but four states (Nevada, Oregon, Montana and Delaware).
New Jersey lawmakers remained determined though, believing that the “economic impact that sports betting could have on New Jersey [was] far too important to simply shrug [their] shoulders and move on.”8 Accordingly, on October 17, 2014, Governor Christie signed into law Senate Bill 2460 (S2460).9 S2460 explicitly states its intention to repeal certain, not all, state sports gambling laws rather than create a new regulatory regime that permits state sponsorship of sports betting10 in hopes that this method would avoid a similar fate to the SWA.
The new strategy failed at the district court level; United States District Judge Michael Shipp, again at the behest of America’s major professional sports leagues and the NCAA, granted summary judgment in favor of the leagues and enjoined New Jersey from violating PASPA by giving any effect to S2460.11 But New Jersey appealed this decision to the Third Circuit appeals court and the case is ongoing at the time of this writing.12 Full details of the case, including the nature of the technical arguments, can be found here.13
Many states are poised to copy New Jersey should the state provide a roadmap around PASPA. This is in part owing to the fact that negative stigma surrounding sports betting has weakened—over half of Americans think sports betting should be legal.14 Even Adam Silver, the commissioner of the National Basketball Association, has spoken in favor of enacting federal legislation to legalize sports betting.15 If the commissioner of an American major sports league can advocate for change, perhaps PASPA should no longer be the law of the land.
This article details the historical context of anti-gambling laws in the US and the motivations behind the enactment of PASPA; discusses whether or not PASPA remains fit for its purpose; and describes popular alternatives to the current PASPA regime.
A brief history of US sports gambling and the enactment of PASPA
Gambling has been generally recognized as a state concern.16 Gambling laws across American history have “vacillated between permissive and prohibitive.”17 Courts encourage this; the Supreme Court of the United States has suggested that states should experiment.18
The history of sports betting specifically is more turbulent than traditional gambling regulation in the United States. As professional baseball gained popularity, so did betting on the sport.19 However, because gambling was outlawed at this time, sports wagers were handled by underground crime syndicate bookies.20 The general public had little problem with this until the 1919 World Series when a notorious gangster paid members of the Chicago White Sox to purposefully lose games in the Series.21 Realizing the disastrous effects of match-fixing scandals, professional baseball team owners appointed the first commissioner of baseball—who promptly restored the public’s faith in baseball with the creation of the “lifetime ban” against the White Sox players involved.22
The threat of a lifetime ban for match-fixing brought legitimacy to all sports, helping to usher in the “Golden Age of Sports,” where fan viewership and attendance greatly increased.23 Unfortunately, the rise in popularity of sports in turn led to a rise in gambling and large interstate organized crime syndicates controlled the majority of underground sports-books.24 Again, scandal struck: this time in the form of a one of baseball’s greatest players, Pete Rose. It was reported that, while playing, Rose had bet $8,000 to $16,000 daily on baseball games during the 1987 season. On August 24, 1989, then-commissioner of baseball, Bart Giamatti, announced that Rose was banned from Major League Baseball for life:
"One of the game's greatest players has engaged in a variety of acts which have stained the game, and he must now live with the consequences of those acts."25
The scandal led to outcries over sports betting, and contributed to a momentum that finally allowed Congress to enact PASPA in 1992. PASPA is a short act of four sections. The principal operative section (3703) states:
"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, or 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."26
Congress managed to pass PASPA27 despite as many as thirteen states considering policies that would allow some form of sports betting in order to battle mounting state deficits.28 The legislative record reflects Congress’s major concerns about state-sponsored sports betting:
"(1) that children would become unnecessarily exposed to this potential harm, thus making them more susceptible to engage in this undesired activity, and (2) that any increase in sports gambling, be it regulated or not, would increase the likelihood of corruption and the possibility of destroying the integrity crucial to professional and amateur sports."29
Congress was not exempt from outside pressures. The commissioners of professional baseball, basketball, and football all supported PASPA under the notion that the prevention of state-sponsored sports betting would reduce the overall activity of sports betting, thus decreasing the chance that another scandal could shake consumer confidence.
Four states can still legally participate in state-sponsored sports betting. This is because legislators carved out a “grandfather clause”30 exception to PASPA: all states with sports betting regulatory schemes in place between 1976 and 1990 or with licensed casino gaming who legalized sports betting within one year of PASPA’s enactment would be exempt.31 The “legislation in one year” provision inside this exemption was clearly intended for New Jersey because it was the only state at the time that met this requirement.32 However, New Jersey decided not to create legislation to meet this PASPA exception because it held a monopoly on the east coast.33 New Jersey legislators put New Jersey on a crash course with PASPA, and now many states are waiting to see if the Third Circuit allows S2460 to circumvent PASPA, or fails like the SWA.
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- Tags: Baseball | Basketball | Gambling | Governance | National Collegiate Athletic Association (NCAA) | Professional and Amateur Sports Protection Act (PASPA) of 1992 | Regulation | Sports Wagering Act | Tax Law | United States of America (USA)
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Cameron graduated Pepperdine University School of Law in May 2015. He hopes to specialize in commercial litigation upon completion of his clerkship with Magistrate Judge Christine Nowak of the Eastern District of Texas. Cameron loves to watch and play all sports, but American football will always hold a special place in his heart.
He is particularly interested in the economics of sport and the underlying consumer behavior.