Down Goes PASPA: What is Next for Sports Gambling in the U.S.?

Published On May 15, 2018 | By Zach Lerner | General

The Supreme Court has opened the door for the expansion of legal sports gambling, striking down the Professional and Amateur Sports Protection Act (“PASPA”), 28 U.S.C. § 3701, et seq., as unconstitutional. Passed in 1992, PASPA had prohibited states from, among other things, authorizing, licensing, or operating sports gambling (with narrow exceptions that grandfathered in states which already allowed it at the time, notably Nevada). Without PASPA, all states are now free to offer, regulate, license, or otherwise permit sports gambling (at least within their own states). While other federal laws may provide some limits on the scope and means of legal sports gambling, PASPA is no longer an obstacle. The stage is now set for states to amend their gambling laws to allow sports betting.

Reversing the Third Circuit, the Supreme Court ruled in Murphy v. NCAA, et al. that PASPA unconstitutionally limited state sovereignty by barring states from authorizing or licensing sports gambling. The Supreme Court also held that PASPA’s remaining provisions, which prohibited both state and private actors from sponsoring, operating, promoting, or advertising sports gambling were not intended by Congress to stand on their own—meaning they were not severable from the unconstitutional provisions, and thus had to be struck down as well.

States can now decide for themselves how to regulate sports gambling. Some states have already laid the groundwork for legal sports betting. The New Jersey law on which the Supreme Court’s case was focused had partially repealed existing gambling laws to permit horse tracks, casinos, and their partners to accept wagers on certain sporting events; with PASPA struck down, further legislation regulating those activities in New Jersey is anticipated in the near future. Other states, like Connecticut, Mississippi, New York, Pennsylvania, and West Virginia, took proactive steps in advance of the Supreme Court’s ruling to legalize and regulate sports betting if the Supreme Court struck PASPA down. Many other states have sports betting bills in the pipeline, and more states are likely to follow suit.

The Supreme Court’s ruling is likely to produce a patchwork of state regulatory approaches, and the specific contours of the laws will vary from state to state. Some states will develop complicated licensing regimes, permitting third parties to operate independent sports gambling businesses. Others may offer sports gambling themselves through a system akin to a state-run lottery, while certain states may be bound to negotiate with local tribes, which hold exclusive gambling rights. States may also face pressure to set up regulatory structures to address issues related to problem gaming, potentially setting caps on the total amount of money a single individual can wager and creating systems for self-exclusion. Similarly, states may set specific rules on gambling-related advertising, account protection requirements, and betting on amateur sports.

Similar pressures may lead Congress to step in to try and fill the void. Theoretically, Congress could attempt to ban sports gambling in a more direct, constitutional fashion. But federal law has traditionally left gambling regulation to the states, suggesting that federal legislators are more likely to consider legislation that sets a baseline for state regulatory efforts or grants federal regulators authority to oversee legal sports betting, like the Gaming Accountability and Modernization Enhancement Act (“GAME Act”) does.

Even without PASPA, sports gambling remains a heavily regulated industry. At this time, the laws in most states still prohibit sports betting. And those that have passed laws allowing sports betting include significant regulation and limitations. The Supreme Court’s opinion did not strike down other federal laws that affect interstate sports gambling. For example, the Wire Act, 18 U.S.C. § 1084, makes it unlawful to use wire communications facilities to transmit information assisting in the placing of bets or wagers on any sporting event—although dicta in the Murphy decision indicates that the Supreme Court believes the Wire Act allows the transmission of wagers between states if the bet is legal in both states. Other federal laws, like the Travel Act, 18 U.S.C. § 1952, and the Illegal Gambling Business Act, 18 U.S.C. § 1955, also prohibit interstate gambling, although each is predicated on an underlying violation of federal or state gambling laws—and if states legalize sports betting, there will be no predicate violation of state law. Accordingly, operators should closely monitor developments at the state and federal level as legislators and regulators respond to this new environment.

 

About The Author

Zach Lerner’s practice focuses on a variety of legal matters impacting Internet-based companies. He helps companies in a wide range of industries including education technology, financial technology, unmanned aerial vehicles, and fantasy sports with issues related to privacy, e-commerce, and advertising.

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