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New Jersey Challenges Nevada in Post-Murphy Sports Betting Climate

30-10-2018

As reported by NPR, Las Vegas no longer has a virtual monopoly on sports betting. Sin City just can`t seem to catch a break these days. The heart-breaking murder rampage that transfixed the nation for months is just now fading into forgotten memory. Yet a new threat to the desert metropolis has now arisen in the form of 7-2 Supreme Court decision known as Murphy v. NCAA, which was handed down in May.

Details of the Murphy Decision

What Murphy did was to overturn the current US Federal ban on sports betting anywhere other than in the State of Nevada although it does this in an indirect rather than overt manner. Rather than saying that sports betting is now legal everywhere, the Court instead held that the Federal prohibitive statute, known as the Professional and Amateur Sports Protection Act of 1992 was unconstitutional. This essentially put the Federal government out of the sports betting regulation game, at least for now.

Sports Betting Legislative Background

Back when PASPA was written, there were four states -- Nevada, Delaware, Montana, and Oregon -- which had authorized sports betting to one degree or another. The regulatory language of PASPA enjoined any other states from joining in on the fun (and profit) of sports betting but left the four then-current sports betting states "grandfathered" in. Although Nevada was the only one that had pursued any significant sports betting activities, the other three states nevertheless retained their right to do so if they were so inclined.

This de facto Nevada monopoly on a very lucrative enterprise began to crumble when the State of New Jersey, home to Las Vegas` financially-suffering rival of Atlantic City, began looking into ways in which it could help out its ailing casino industry. Peeling off a portion of Nevada`s sports betting seemed like a cost-free way of doing this, so New Jersey set about challenging the provisions of PASPA in a clever and indirect way.

Supreme Court`s Reasoning

Rather than pursue a direct court challenge to the law, New Jersey instead repealed its own statewide law that banned sports betting and held that this was an internal states-rights matter that was fully covered by the 10th Amendment prohibition against the Federal government meddling in things beyond its strictly enumerated powers under the Constitution. The Court did not necessarily agree with New Jersey`s defiance but instead stated that, while Congress had the undoubted authority to regulate sports betting, it had not in fact done so.

Instead, the act had simply ordered the various state legislatures to not legalize sports betting on their own. This was found to be a clear case of "commandeering" the powers reserved under the 10th Amendment to the states by ordering them to do something which the Congress itself chose not to do. While this may seem to be a mere procedural issue, and still leaves the US Congress with the power to reverse the Court`s decision through its own proactive legislation, the case does raise a number of interesting legal and economic issues, which will undoubtedly be revisited in the future.

Effects of the Ruling

First off, Murphy v. NCAA shows an increasing predilection of the US Supreme Court to return to a more originalist interpretation than has been the norm for some time. The individual states may have uncovered an unexpected escape hatch from an arbitrary and abrupt Federal legislative straitjacket that has been the governing pattern for several decades.

Next, the decision will undoubtedly siphon off much needed revenue from the State of Nevada. Its sports betting monopoly is now broken from a legislative standpoint, and New Jersey has raced to make this new form of regulated wagering an economic reality as fast as possible, allowing its first fully legal sportsbooks to open in June. After all, even if a new Federal prohibition is crafted, New Jersey may well be able to argue that it now shares the same grandfathered protection as the previous four sports betting states.

Other states have decided to jump into the pool also in the months since the Supreme Court rendered its verdict. There are now legally compliant sportsbooks in Delaware, Mississippi, West Virginia and New Mexico. Most of the excitement surrounding the possibility of betting on sports is taking place in the eastern half of the country – New Mexico notwithstanding – so the river of money that has long flowed west is now being partially diverted to the Atlantic coast. Good news for New Jersey, bad news for Nevada.

On the other hand, the decision is not likely to cause much disruption in the sports betting industry itself. Much, if not most, of the East Coast action is being handled by new branch offices of the same experienced agencies. They may have to spend a little bit to open new betting parlors and hire a few new customer service representatives, but those costs are relatively minor in comparison to the revenue in question. Profits may go up as curious Easterners check out the new hometown attraction even though they don`t normally patronize a sports betting operation of any sort.

In short, the decision is really about reapportioning the pie of total state tax receipts rather than breaking a monopoly or defending the terms of the US Constitution. When a large lump of easy money is at issue, even the most stringently regulated jurisdiction is likely to discover the merits of laissez faire so long as it redounds to its own advantage.




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