New Jersey’s Latest Sports Wagering Law Part II – The Legal and Practical Reasons Fighting the Law’s Success

By Christopher W. Hinckley 

@chinckley_HB

The Department of Justice (DOJ)

The DOJ has remained on the sidelines during the recent challenge of New Jersey’s latest sports wagering law, possibly to distance itself from some injudicious concessions made during its challenge of the 2012 law. The DOJ will not, however, remain idle if New Jersey attempts to actively move forward to implement its current sports wagering law. Opposed to any efforts designed to circumvent federal authority, expect the DOJ to utilize its power, influence and laws, including the Professional and Amateur Sports Protection Act (PASPA) and the Wire Act, to block New Jersey’s attempts at allowing intra-state sports wagering. 

Possible Exception

The Wire Act bans the interstate transmission of bets or information assisting in placing sports wagers. Intra-state sports wagering, like that of New Jersey, requires the use of interstate communications and transfer of information across state lines. Supporters of New Jersey’s latest sports betting law see an exception to the Wire Act’s restriction on interstate activity in the Unlawful Internet Gambling Enforcement Act (UIGEA). UIGEA provides an exception for interstate transactions collateral to intrastate gaming, but only for those cross border transmissions connected to intra-state activity authorized under state law. Since New Jersey’s newest sports wagering law has not, according to state officials, been authorized by state law, then UIGEA’s exception for cross border transmission isn’t applicable and the Wire Act would come into play.

The DOJ and the Four Major Sports Leagues

As for PASPA, the DOJ agrees with the four major sports leagues’ (NHL, NFL, NBA and MLB) position that New Jersey’s newest sports wagering law violates PASPA. Expect the DOJ to adopt the Leagues’ position that New Jersey cannot escape the restriction of PASPA by exempting certain venues from the state’s ban on sports wagering. Further, expect the DOJ to argue that since the state constitution prevents the legislature from offering gambling in Atlantic City’s casinos unless the games are specifically authorized by law, that the wagering taking place under the new law is authorized by law and, therefore, a violation of PASPA.

Practical Considerations

The specter of federal prosecution for violations of the Wire Act, PASPA, or both, will likely deter licensed entities within and outside of New Jersey from becoming active participants in the sports wagering business under New Jersey’s latest sports betting law.

The individuals and entities associated with New Jersey’s casino, internet gaming, and racetrack businesses all hold New Jersey gaming licenses and are regulated by the state’s Casino Control Commission and Gaming Enforcement Division. Like most states, a New Jersey gaming license is a privilege under constant scrutiny and revocable for many reasons, including but not limited to, incidents that cast doubt on the integrity of the state’s gaming business that may betray the public trust in gaming as a strictly regulated activity. 

Potential Consequences

Regardless of the jurisdiction(s) in which they are licensed, gaming entities and individuals are expected to uphold the licensing criteria for every state in which they operate. In every case, the standards of behavior include obeying all state and federal laws. Legal violations regardless of where they occur will be reported to and considered by every other jurisdiction in which the individual or entity is licensed and could, depending on the severity of the unlawful conduct, result in disciplinary action.

The regulatory scheme throughout the country illustrates the implausibility of change in the status quo. In New Jersey, if a licensed individual or company involved in the state’s sports wagering business were to be investigated and possibly prosecuted by the Department of Justice they would be required to report the federal action to every jurisdiction in which they operate. Depending on the outcome and the severity of the offense, a licensee would face punishment ranging from fines and suspensions up to and including the revocation of their gaming license.

In several jurisdictions, including New Jersey, felony convictions preclude licensure. In every gaming jurisdiction, however, individuals or entities with felony convictions for activities related to gambling, can never be licensed and if licensed, will almost assuredly have their license(s) revoked. 

Short of a DOJ opinion or language from a federal court ruling providing the individuals and entities in question profoundly clear direction that takes the possibility of a federal investigation off the table, it is highly unlikely that a holder of a gaming license would become involved in the sports wagering business under New Jersey’s current law. 

The case is National Collegiate Athletic Association v. Christie, 14-cv-06450, U.S. District Court, District of New Jersey (Trenton).

New Jersey’s Latest Sports Wagering Law Part I – A Brief History and Current Status

By Christopher W. Hinckley  

@CHinckley_HB

Since it took effect on January 1, 1993, the Professional and Amateur Sports Protection Act (PASPA) has prevented the vast majority of states from adopting laws allowing for state-sponsored sports betting. Nevada and a handful of states were grandfathered in under the law due to the legality of sports betting in jurisdictions when the PASPA was signed. New Jersey was not one of those states. Since that time, New Jersey has made several efforts to challenge PASPA’s restrictions and each time has fallen short.

Even without sports betting, from 1978 until the mid-late 2000’s Atlantic City, New Jersey thrived, enjoying a period of substantial success as the East Coast’s gambling mecca. But the recession that began in 2008 combined with the growth in regional casinos led to a decline in gaming revenues from New Jersey’s casinos. At that time, and through today, New Jersey’s government leaders view sports betting as the tonic that will help turn around Atlantic City’s decline.  

In 2010, after a failed attempt led in part by New Jersey State Senator Raymond Lesniak to have PASPA declared unconstitutional, the state legislature proposed an amendment to the state constitution allowing for sports betting at Atlantic City’s casinos and the state’s horse racing and harness tracks. After voters approved the amendment, New Jersey amended the state’s gaming act and began putting together the regulations for licensing betting parlors in the state.

Before any wagering began, the NCAA and four major sports leagues (NHL, NFL, NBA and MLB) (Collectively referred to as the “Leagues”) later joined by the Department of Justice (DOJ) filed an action in federal district court to stop the law’s implementation based on a presumptive violation of PASPA. The Leagues and the DOJ were successful in challenging the law’s implementation, which ended in 2013 when the Supreme Court declined New Jersey’s request for review.

Fast Forward to 2014

Earlier this year the New Jersey Legislature went back to work and passed the 2014 version of a sports wagering law. This law took a newer, more innovative, and perhaps antagonistic, approach to allow sports wagering in New Jersey. This time, the legislation called for a partial repeal of  the state’s prohibition on sports wagering, exclusive to casinos and racetracks, and for all sports wagering to be independently regulated; a move necessitated by PASPA’s prohibition against the state’s endorsement or involvement with the activity.  

The 2014 sports wagering law was signed into law by Governor Christie on October 17, 2014. Days later, Monmouth Park, one of the state’s four horseracing tracks, announced its intent to accept sports wagers starting on October 26. 

To the surprise of only a few, the 2014 sports wagering act was immediately challenged by the Leagues in Federal District Court. The Leagues’ now pending lawsuit, seeks to block the law’s implementation again citing violations of PASPA and the New Jersey Constitution. Judge Michael Shipp of the Federal District Court in Trenton, NJ, who ruled against New Jersey’s 2012 sports wagering law, has already granted the Leagues’ request for a temporary restraining order. Shipp will next decide whether to grant the League’s request for a preliminary injunction. A hearing on the matter is expected in the near future. Regardless of Shipp’s ruling and the possibility of a positive outcome on appeal, New Jersey’s latest attempt to bring sports wagering to New Jersey is likely to fail.

Yes, even with a positive decision from the courts, the legal challenges and practical implications facing the law will prevent its successful implementation. More specifically, the threat of legal action by the DOJ will prevent most, if not all, gaming companies from doing business in New Jersey under New Jersey’s latest incarnation of a sports wagering law.

Part II will be posted Thursday, November 20.    

NYRA Back in Black; Discusses Aqueduct

By The Editorial Team

As reported by the Daily Racing Form, the New York Racing Association Reorganization Board met on Wednesday, November 12, 2014, to discuss finances and the future of Aqueduct Racetrack.  NYRA’s chief financial officer reported that NYRA expects to show an operations surplus of $1.5 million for 2014 and even larger surpluses for the next couple years.  The $1.5 million surplus excluded revenues from video lottery terminals, which are being used to cover certain expenses such as federal taxes and pension obligations.  NYRA cited cost-cutting measures, the raising of prices at its three thoroughbred tracks, and larger than expected profits from Belmont Stakes Day as attributing factors for the first operating surplus in 13 years.

NYRA President and Chief Executive Officer Christopher Kay also reported that upcoming recommendations to be issued by the Reorganization Board will not include a proposal regarding the future of Aqueduct.  As noted by the Daily Racing Form, “the prevailing theory” since the creation of the Reorganization Board has been to move winter racing in New York state to Belmont Park, which would host all NYRA races other than the 40-days of racing in the summer at Saratoga Race Course.  Kay noted that the current Reorganization Board is only “temporary and transitional” and that the future of Aqueduct will be the responsibility of the next NYRA Board, which is expected to take over in the fall of 2015.

Karl Sleight to Appear on The Capitol Pressroom September 25

By The Editorial Team

New York Racing and Gaming Blog editorial team member Karl J. Sleight will appear on The Capitol Pressroom with capitol correspondent Susan Arbetter Thursday, September 25 at 11:00 a.m. to discuss casino applicant presentations, regional public hearings, the vetting process of applicants that will continue and time frame for recommendations for winners. You can listen to a live broadcast on The Capitol Pressroom web site.

 

Board Releases Details on Public Hearings

By The Editorial Team

This afternoon, the New York Gaming Facility Location Board released details concerning the protocol for three public hearings to be held across the state as part of the casino application and siting process.  Each public hearing is scheduled to last up to 12 hours and can be observed either in-person or through the gaming commission’s webpage.  The three public hearings will be held at the following locations and dates:

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Karl Sleight and Christopher Hinckley to Moderate Panels at the Saratoga Institute on Racing and Gaming

By The Editorial Team

Harris Beach attorneys Karl J. Sleight and Christopher W. Hinckley are presenting at the Saratoga Institute on Racing and Gaming to be held August 12-13, 2014 at the Gideon Putnam Hotel and Conference Center, Saratoga Springs. Continue reading

Massachusetts Voters Will Decide Casinos’ Future

By The Editorial Team

On June 24, the Supreme Judicial Court of Massachusetts ruled that a citizen-sponsored referendum to repeal the state’s 2011 casino law can appear on the ballot in November. As the Boston Globe reported, the ruling sets the stage for a fierce campaign between casino supporters and opponents. Casino developers will be among those arguing to maintain the legal status quo. They will be joined by labor unions, who welcome the job opportunities casinos would create for Massachusetts residents. On the other side are organizations that oppose gambling and the expansion of the casino industry, such as the citizen-led Repeal the Casino Deal. Millions of dollars will likely be spent on the campaign between now and Election Day, November 4, when voters in the Bay State will ultimately decide the issue.

Delivery Day for the Remaining 16

By Karl J. Sleight
@ksleight_HB

As the 4:00 p.m. deadline came and went on Monday to submit applications for one of the four casino licenses up for grabs, 16 entities had submitted applications for 17 sites that in many cases consisted of tons (literally) of paper. After the passage of the state constitutional amendment by voters last November, and the release of the Request for Applications (RFA) by the Facility Location Board (siting board) in March, the competition is officially underway. The question is: Now what? The landscape of the three development regions has been defined by the various applications. Continue reading

Williams Confirmed as Executive Director of Gaming Commission

By The Editorial Team

Last night, the New York State Senate confirmed Robert T. Williams as executive director of the New York State Gaming Commission. Since the creation of the commission— Continue reading

Gaming Commission Releases White Paper

By The Editorial Team

This week, the New York State Gaming Commission released a “Regulatory Practice White Paper” providing the views of staff “on how commercial gambling in New York State should be appropriately regulated.”  The White Paper addresses a number of issues  Continue reading