By Christopher W. Hinckley
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.
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.
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.
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).