Sports Markets and the Sports Economy

(credit to: http://blogs.duanemorris.com/duanemorrisgaminglawblog/entry/third_circuit_affirms_prohibition_of)

The United States Court of Appeals for the Third Circuit has issued its long awaited decision in NCAA v. Christie - the ongoing litigation to determine whether the Professional and Amateur Sports Protection Act (PASPA) is constitutional.  The Court has determined that the sports leagues have standing to challenge New Jersey’s efforts to implement sports wagering, and has further determined that PASPA is constitutional, thus prohibiting New Jersey’s efforts to implement sports wagering.  The opinion, available here, is 128 pages long, and authored by Circuit Judge Julio M. Fuentes, joined in full by Circuit Judge D. Michael Fisher and in part by Circuit Judge Thomas I. Vanaskie.

The opinion begins with a discussion of the growth of sports betting in the United States and globally, and acknowledged the “strong views” held on both sides of the sports betting debate.  However, the Court commented that its role is not to judge the wisdom of PASPA, but only to determine its constitutionality.  The court acknowledged New Jersey’s strong arguments against PASPA as a matter of policy, but noted that those policy arguments do not apply to the question of constitutionality.

Turning to the question of standing - i.e., whether the sports leagues can sue the state seeking an injunction against sports betting - the Court concluded that the leagues do have standing.  Interestingly, the Court noted that its earlier decision in Markell v. Commissioner of Baseball (which prohibited Delaware from expanding sports betting) did not address the question of standing and could not be relied upon for that purpose.  The Court concluded that the leagues have suffered an “injury in fact” because of the risk of misappropriation of the Leagues’ reputation - the Leagues “are harmed by their unwanted association with an activity they (and large portions of the public) disapprove of - gambling.”  The Court found that there was enough in the record before the District Court to conclude that the Leagues have suffered an injury and could, therefore, sue.

Turning to the merits, the Court first considered whether Congress has the power to regulate sports betting at all.   The Court disposed of this argument rather quickly, holding that both wagering and national sports are economic activities and that they substantially affect interstate commerce, which is sufficient to establish Congress’ authority to regulate under the Commerce Clause.  The Court concluded that Congress had a rational basis to regulate sports betting, which is sufficient.

The Court then addressed the question of whether PASPA commandeers the state, violating the Tenth Amendment.  The Court concluded that the Supreme Court’s “anti-commandeering” jurisprudence cannot be read as broadly as New Jersey argues.  The Court stated that there are only a few distinguishable circumstances where a statute has been struck down for violating the anti-commandeering principle.  One is where Congress compelled states to either enact a regulatory program or expend resources (New York v. United States, dealing with toxic waste disposal).  Another is where Congress required local authorities to run background checks on firearms purchasers (Printz v. United States). 

The Court found that there has been no case law that strikes down a federal statute that “like PASPA, simply operated to invalidate contrary state laws.”  Thus, the Court concluded that the Supremacy Clause is sufficient to justify PASPA.  The Court (citing the Federalist Papers) stated that accepting the argument that “a state’s sovereignty is violated when it is precluded from following a policy different than that set forth by federal law (as New Jersey seeks to do with its Sports Wagering Law) would be revolutionary.”  The Court concluded that PASPA does not tell the states what to do; it bars them from doing something that they want to do, which does not violate anti-commandeering.

The Court next addressed the State’s argument that PASPA does require New Jersey to do something - specifically, to continue to prohibit sports betting.  But the Court concluded that this is not an actual directive - “PASPA does not require or coerce the states to lift a finger.”  The Court stated that it does not read PASPA “to prohibit its ban on sports wagering.”  Under PASPA, according to the Court, a state may entirely repeal any ban on sports wagering - but the state may not authorize sports wagering by law.  “The fact that Congress gave the states a hard or tempting choice does not mean that they were given no choice at all or that the choices are otherwise unconstitutional.”  Finally, the Court concluded that New Jersey’s sports wagering law conflicts with the purposes of Congress in enacting PASPA and is therefore preempted.

Turning to the question of equal sovereignty, the Court distinguished the cases under the Voting Rights Act, holding that voting and regulation of gambling are entirely different, and that the equal sovereignty principle does not apply outside of “sensitive areas of state and local policymaking.”  Moreover, the Court concluded that because the purpose of PASPA was to curb an increase in state-sponsored sports wagering, eliminating sports wagering where it existed at the time of PASPA’s enactment would not have been consistent with that purpose.

In dissent, Judge Vanaskie agrees that the Leagues have standing and that PASPA does not violate equal sovereignty.  However, Judge Vanaskie wrote that PASPA “violates the principles of federalism.”  Judge Vanaskie stated that it is clear that the federal government cannot direct state legislators to legislate and state officials to implement federal policy.  Judge Vanaskie concludes that because PASPA dictates the manner in which states must regulate interstate commerce, it violates anti-commandeering and is unconstitutional.  Judge Vanaskie disagrees with the majority’s view that there is a difference between an affirmative command from Congress and a negative prohibition by Congress - “the federal government’s interference with a state’s sovereign autonomy is the same.”  Judge Vanaskie commented that PASPA impermissibly diminishes the accountability of federal officials at the expense of state officials.  “Instead of directly regulating or banning sports gambling, Congress passed the responsibility to the states, which, under PASPA, may not authorize or issue state licenses for such activities.”  Given that New Jersey regulates its lottery and casinos, it “would be natural for new Jersey citizens to believe that state law governs sports gambling as well…When New Jersey fails to authorize or license sports gambling, its citizens will undeniably blame state officials even though state regulation of gambling has become a puppet of the federal government, whose strings are in reality pulled (or cut) by PASPA.” 

The State can seek rehearing by the full Third Circuit, or petition the Supreme Court of the United States for certiorari.  Although both of those are rarely granted, the fact that a judge dissented may improve the chances of either.