Goodwin Gaming
March 23, 2016

Goliath Versus Goliath:  Three Takeaways From the En Banc Rehearing of NCAA v. New Jersey


Goliath Versus Goliath:  Three Takeaways From the En Banc Rehearing of NCAA v. New Jersey

Barring congressional action, the future of sports betting in the United States lies in the hands of the U.S. Court of Appeals for the Third Circuit.  Last month, the en banc court heard argument in NCAA v. New Jersey, No. 14-4569, which will decide whether New Jersey’s limited repeal of its sports betting prohibition—a repeal that allows casinos and racetracks to operate sports betting facilities—violates the Professional and Amateur Sports Protection Act of 1992 (PASPA), 28 U.S.C. § 3701 et seq.  The panel decision held that the repeal was in fact an authorization because it operated in a way that allowed certain entities to engage in sports gambling.

This appeal is a clash between two titans—in more ways than one.  It pits a cash-strapped state government against the collective of leagues protected by PASPA (who were, in turn, backed by the federal government).  The oral argument was also a rare one in which two veteran Supreme Court advocates—Paul Clement (representing the leagues) and Ted Olson (representing New Jersey)—argued against each other in a setting other than the Supreme Court.

The oral argument touched on a number of issues related to statutory construction and PASPA’s constitutionality.  Here are three questions that the court may address in its upcoming opinion:

Is PASPA constitutional?

In an earlier iteration of the case, New Jersey argued that PASPA was unconstitutional because it commandeered the states and made them instrumentalities of the federal government by requiring them to pass or maintain restrictions on sports betting.  New Jersey contends that if PASPA can be construed in a way that prevents a state from repealing an existing law, it is unconstitutional under the Tenth Amendment because Congress is essentially requiring a state to maintain a law on its books.  The leagues, on the other hand, argue that there is no commandeering problem because PASPA does not require states to act immediately to carry out a congressional mandate.  (For a refresher on the anti-commandeering doctrine, see Printz v. United States and New York v. United States.)

While courts generally try to avoid deciding cases on constitutional grounds, the Third Circuit may reach the Tenth Amendment question.  It is interesting that the en banc court put the Tenth Amendment issue back on the table (or, at least, Judges Rendell and Jordan said as much during the argument).  The Third Circuit, in a previous panel decision addressing a different New Jersey law on sports betting, had already decided that PASPA was constitutional.  It seems, however, that New Jersey has succeeded in convincing the court that the constitutionality question is one worth revisiting.

What is the meaning of “authorize”?

There is very little caselaw on what the word “authorize” means.  New Jersey asserts that a repeal—at least, the sort of repeal involved in this case—can never constitute an “authorization,” as the state is not expressly or affirmatively agreeing to allow the previously prohibited conduct.  In a sense, the conduct is in a “gray” area—not expressly permitted, but not illegal, either.  The leagues reiterated the panel’s position on what “authorize” means—that a repeal can constitute an “authorization,” if, after examining the laws that remain after the repeal, certain types of individuals or organizations are allowed to engage in what is otherwise prohibited conduct.

At bottom, the Third Circuit must grapple with the question of whether there is a difference between “Sports betting shall not be legal except when conducted by a casino or a racetrack” and “Sports betting shall be authorized when it is conducted by a casino or a racetrack.”  New Jersey says yes, the leagues say no.

If the repeal is permissible under PASPA, will New Jersey turn into the “Wild, Wild, East?”

Judge Ambro’s comment about New Jersey turning into the “Wild East” with an unregulated sports betting industry drew laughter from the courtroom audience.  But the question is a serious one—can an unregulated sports betting industry adequately protect consumers and not return to the days of Atlantic City’s shadier past?  New Jersey and the state’s Thoroughbred Horsemen’s Association (the other appellant in this case) say yes—private industry will provide adequate self-regulation; if self-regulation is inadequate, the state is free to reinstitute its ban at any time.  The United States’ rejoinder was that New Jersey was quietly relying on existing regulations for casinos and racetracks to serve as an indirect way of controlling a casino-and-racetrack-operated sports betting industry.  The federal government argues that this supports the notion that New Jersey’s repeal is indeed an authorization.