On December 4, 2017, the Supreme Court of the United States heard oral arguments in Christie v. National Collegiate Athletic Association, No. 16-476, regarding the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”), a federal law that prohibits states from authorizing and regulating sports wagering. The case could have significant implications for legal and regulated gambling across the country, including Pennsylvania, where the General Assembly recently passed legislation that would authorize sports wagering in the Commonwealth if PASPA is found to be unconstitutional or is repealed by Congress.

Enacted into law in 1992, PASPA placed prohibitions on legal sports betting across the country. The law specifically prohibits any government or individual to operate, sponsor or license a gambling or wagering scheme, which included lotteries and sweepstakes, that are based directly or indirectly on the outcome of competitive games in which athletes participate. The law excluded certain forms of competitive sports, including jai alai and pari-mutuel horse and dog racing. The law also grandfathered in states that had already authorized sports wagering, which included Delaware, Oregon and Montana, each of which had authorized sports lotteries within its borders, and Nevada, which had authorized full-scale sports wagering prior to PASPA’s enactment.

Also, Congress provided a one-year window under PASPA during which certain eligible states could authorize sports wagering. This option was limited to states that had at least 10 years of licensed casino gaming at the time of enactment of PASPA, and was included in the law to provide New Jersey with the opportunity to add sports wagering to its existing gaming regime. However, New Jersey failed to act within the one-year window provided under PASPA.

Nearly two decades after failing to authorize sports wagering during the one-year window under PASPA, in 2012, the New Jersey Legislature passed a law legalizing and regulating sports betting. The 2012 law was subsequently challenged in federal district court by the major sports organizations – the National Collegiate Athletic Association, Major League Baseball, the National Basketball Association, the National Football League and the National Hockey League. The challengers argued that New Jersey’s law violated PASPA’s clear ban on governments establishing or licensing sports wagering. New Jersey responded by arguing that PASPA violated the 10th Amendment to the U.S. Constitution. The federal court agreed with the sports organizations, and struck down New Jersey’s sports wagering law. The decision was subsequently upheld on appeal to the Third Circuit. National Collegiate Athletic Association v. Christie, 730 F.3d 208 (3rd Cir. 2013), and the Supreme Court declined to review the decision.

In response to these setbacks, New Jersey adopted a new tactic: in 2014 it passed new legislation which deregulated sports wagering and removed the state’s existing ban on sports wagering, but only as it related to casinos and racetracks within the state. This 2014 legislation was again the subject of litigation brought by the major sports organizations, and like before the state lost at both the federal district court and the Third Circuit. National Collegiate Athletic Association v. Christie, 832 F.3d 389 (3rd Cir. 2016).

This time, however, the Supreme Court granted New Jersey’s petition for a writ of certiorari. At the hearing in the appeal held on December 4, 2017, the Court appeared especially interested in an argument advanced by the Petitioner, that PASPA unconstitutionally commandeers the regulatory powers of the states to enforce federal law, in violation of the 10th Amendment and the Court’s decisions in New York v. United States, 505 U.S. 144 (1992) and Printz v. United States, 521 U.S. 898 (1997).

Since PASPA directly limits a state’s ability to regulate, or not regulate, sports wagering within its borders, while not establishing any standards or regulations of its own at the federal level, the Petitioner argued that PASPA is a direct command to the states, without any effort by the federal government to regulate sports wagering itself. Simply put – Congress could have developed a federal ban on sports wagering, which would have superseded any state law regulating or permitting such gambling. But the federal government did not establish any set of standards instituting a federal ban, but rather left the state’s no alternative but to prohibit sports wagering on its own.

The argument seemed to hit home with many of the justices, some of whom argued that the costs, expectations and “political accountability” of prohibiting sports wagering squarely falls to the states, while Congress has no federal policy or prohibition of its own in place to serve as preemption. Justice Kennedy went as far to say, “[PASPA] leaves in place a state law that the state does not want, so the citizens of the State of New Jersey are bound to obey a law that the state does not want but that the federal government compels the state to have.” Christie v. National Collegiate Athletic Association, No. 16-476, Tr. at *32.

Not all justices were convinced of New Jersey’s argument that PASPA moves away from preemption and enters the unconstitutional world of commandeering. Some justices were skeptical that the lack of a detailed regulatory structure automatically makes PASPA unconstitutional. In addition, the Responded sports leagues argued that unless Congress tells the states that they must regulate or pass prescribed legislation, it is not commandeering. The leagues added that PASPA does not demand states to maintain a prohibition; states just cannot license or regulate the activity. If New Jersey completely repealed its prohibition on sports wagering, it would not be in violation of PASPA. However, the 2014 law constituted only a partial repeal, which still left some form of regulation in place.

A decision in this case is expected this summer. As with any oral argument before the Supreme Court, we should not draw conclusions from the remarks of the justices on how the Court will ultimately decide the case. But if the Court rules that PASPA is unconstitutional as many are hoping, the decision could significantly impact Pennsylvania.

Last October, the General Assembly passed Act 42 of 2017, a sweeping and comprehensive gambling expansion bill that addresses the issue of sports wagering. We previously discussed other provisions of Act 42 here. In addition, Act 42 contains provisions to legalize and regulate sports betting in the Commonwealth, but would only apply if PASPA is overturned by a federal court decision or repealed by the federal government. Sports wagering would be permitted at casinos, non-primary locations, and online, pending additional federal changes.

As with previous gaming expansions, sports wagering, if legalized would result in a potential financial windfall to the state and local municipalities. Act 42 establishes a $10 million fee for casinos to add sports wagering, and taxes the activity at a 34% rate. In addition, Act 42 establishes a 2% local share assessment that is directed to the Commonwealth Financing Authority for projects across the state.

If the Supreme Court rules in favor of New Jersey this summer, Pennsylvania will be primed to offer sports wagering within its borders. If the case is decided on more narrow grounds, lawmakers in Pennsylvania will likely need to revisit the issue if sports wagering is to be permitted in the Commonwealth. Regardless of the Court’s decision, it is expected to result in much more discussion and debate regarding sports wagering in Pennsylvania and throughout the country. According to the American Gaming Association, Americans wager $150 billion in illegal sports bets each year. Estimated tax revenues in Pennsylvania alone could be in excess of hundreds of millions of dollars if sports wagering was legalized. Time will tell whether Pennsylvania’s sports wagering bet in Act 42 pays off.

The author thanks William Thomas, who assisted in the preparation of this post. Bill served as the Executive Director of the House Gaming Oversight Committee from 2010-2014, and remained heavily involved in gaming policy for the House as the Leadership Executive Director for the House Democratic Caucus Secretary from 2014-2017. He now is President of Mid-Atlantic Strategic Solutions, a McNees subsidiary and government affairs and political consulting firm. Bill can be reached at 717-574-2923.