June 2018

An End to the Madness? Supreme Court Paves the Way for Legal Sports Betting

By Daniel De La Cruz

Sheppard, Mullin, Richter & Hampton LLP

In our March issue, just before March Madness began, I wrote about the current state of sports betting and about a recent challenge to a New Jersey betting law that was currently before the United States Supreme Court.

On May 14, 2018, in a 7-2 decision, SCOTUS released its opinion in Murphy v. National Collegiate Athletic Association, 200 L. Ed. 2d 854 (2018). Although the decision will only immediately impact the State of New Jersey, a ripple effect across the country is almost inevitable.

By way of background, Murphy involved a challenge from five sports leagues to a voter-approved Sports Wagering Act in New Jersey, which legalized sports betting within the state. The sports leagues sought to enjoin enactment of the law, pursuant to the Professional and Amateur Sports Protection Act (“PASPA”), a federal law which prohibited states from passing their own laws intended to legalize sports betting. See 28 U.S.C. §§ 3701-3704.

The case pitted two legal principles against one another: (1) the doctrine of pre-emption, which provides that Congress can override a state law on a particular subject because Congress has been vested with the power to regulate that area to the exclusion of the states; and (2) the doctrine of commandeering, which prohibits Congress from compelling a state’s legislative process to enact and enforce a federal regulatory program.

Justice Alito delivered the opinion of the court. In it, he refused to accept the sports leagues’ contention that PASPA did not compel a state to enact legislation; it merely prohibited a state from enacting legislation. This distinction, Justice Alito wrote, is an empty one. “The basic principle – that Congress cannot issue direct orders to state legislatures – applies in either event.” Murphy, 200 L. Ed. 2d at 874-75.

In doing so, Justice Alito endorsed an “anti-commandeering” stance. Citing the Tenth Amendment, which grants all legislative power not conferred on Congress to the states, Justice Alito held that the anti-commandeering doctrine “simply represents the recognition of this limit on congressional authority.” Id. at 872. The doctrine, Justice Alito noted, protected the sovereignty of the states, promoted political accountability, and prevented Congress from shifting the costs of regulation to the states. Further, Justice Alito dismissed the application of the pre-emption doctrine because PASPA in no way regulated private actors, an essential requirement for a preemption provision to be valid. 

For these reasons, PASPA was struck down as unconstitutional.

In one fell swoop, PASPA was no more — much to the chagrin of the NCAA, NBA, NHL, MLB, and NFL, who fought to defend it. With the fall of PASPA, three more states — Mississippi, Pennsylvania, and West Virginia — are set to legalize sports betting. Officials in those states have said proposed betting regulations would go into effect before the 2018 football season begins.

As I noted in my previous article, this change does not impact California, which still has a law on the books prohibiting sports betting. However, in July 2017, California Assembly Member Adam Gray introduced a constitutional amendment that would allow the state “to permit sports wagering only if a change in federal law occurs.” Within hours of the Supreme Court ruling in Murphy, Gray reiterated his desire to move forward with legalizing sports betting. Gray said he would move the proposed amendment to the Assembly Governmental Organization Committee, which he chairs, to begin consideration.

This is not the first time California has considered a change like this. Since 2012, Gray and other California legislators have tried four times to allow sports betting in the state, but none of these bills reached the governor’s desk. The fifth time may be the charm.