Why New Jersey Won Its Supreme Court Battle to Legalize Sports Betting

The Supreme Court's historic decision came down to a battle over whether the federal government could compel any state to deny sports betting.

If you bet on the U.S. Supreme Court ruling to make sports betting legal, it is time to collect.

The Supreme Court on Monday issued a historic decision in Murphy v. NCAA that will reshape professional sports in America. The critical takeaway: Each of the 50 states is now empowered to decide whether it will allow sports betting. The nine justices were hardly in agreement, as two of them dissented in full and another in part. But like in betting, there can only be one winner—and that winner is that states can legalize sports betting.

The buildup to a historic decision

Writing for the majority, Justice Samuel Alito concluded that the provision of the federal Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibiting states from authorizing sports betting is unconstitutional. PASPA is commonly regarded as a federal ban on sports betting.

Since President George H.W. Bush signed it into law, PASPA has incited debate. Until Monday’s decision, the law had prohibited 46 states from licensing, sponsoring or authorizing sports betting. Advocates of PASPA have long insisted that it diminished opportunities for criminal and unethical figures to influence sports. In the absence of a ban on sports betting, players, coaches and referees are theoretically more susceptible to being “bought off” to throw games or engage in less-obvious attempts to alter scores. In either situation, the integrity of competition is damaged.

There has been no shortage of integrity-damaging payoffs in American sports. For instance, there was the Black Sox scandal of 1919, Boston College basketball players point-shaving in 1979 and BC football players betting against their own team in 1996, Cincinnati Reds manager Pete Rose betting on baseball in the late 1980s, and NBA referee Tim Donaghy collaborating with the mafia to influence scores. While some of those schemes occurred after the federal sports betting ban went into effect, PASPA supporters insist that the law made sports corruption less likely to occur. Along those lines, betting on sports is structurally different from less controversial forms of wagering. The odds of someone being “bought off” to influence the outcome of lotteries, slot machines or poker games are much lower.

PASPA contains an important—and contentious—grandfathering clause: Nevada, Delaware, Oregon and Montana are exempt because they had already adopted sports betting practices by 1992. In other words, PASPA was not designed to halt existing sports betting practices but rather to prevent new ones. Nevada, of course, gained the most from this exemption: Las Vegas is the country’s undisputed leader in sports betting.

The legal controversy that gave the Supreme Court an opportunity to review PASPA was brought about by former New Jersey governor Chris Christie. In January 2012, Christie signed the Sports Wagering Act into New Jersey law. New Jersey Senators Raymond Lesniak and Jeff Van Drew had co-sponsored the act, which authorized New Jersey racetracks, casinos and gambling houses to offer sports wagering and received 64% of the vote in a statewide referendum. In its current form, the act contains a number of restrictions designed to minimize controversy, such as an age requirement of 21 and a prohibition on bets related to certain types of games, including college games played in New Jersey and games played by New Jersey colleges and universities. Advocates of the act have argued that it is carefully designed to minimize social concerns and would bring millions of dollars to the state.

Until Monday, there had been a major problem with New Jersey’s Sports Wagering Act: It violated PASPA, which prevented it from taking effect. The core legal question, therefore, was whether federal law trumped state law in the context of sports betting. Stated differently, should the federal government or states’ governments decide whether sports betting ought to be lawful?

The major professional sports leagues, along with the NCAA, all argued that federal law is supreme. They took this contention to court in 2012 and sued New Jersey. The leagues and NCAA maintained that New Jersey’s act is unlawful since it violates federal law. A year later, the U.S. Department of Justice under President Barack Obama joined the leagues in the lawsuit. The DOJ has remained part of the case under President Donald Trump.

The leagues and the Justice Department had beaten New Jersey at every round. They won before the U.S. District Court for the District of New Jersey and then won again before the U.S. Court of Appeals for the Third Circuit. But the Supreme Court is the proverbial “ace in the hole”—it trumps everything before it.

Why New Jersey won

The takeaway from Monday’s ruling is that each of the 50 states can now license sports betting. However, the legal question considered by the Supreme Court was not so straightforward. New Jersey first highlighted that PASPA compels New Jersey to do what it doesn’t want to do: deny sports betting under New Jersey law. From this lens, New Jersey has insisted PASPA makes the state act against its own self-interest.

To link such a contention to legal doctrine, New Jersey maintained that PASPA was incompatible with the so-called “anticommandeering” doctrine. This doctrine derives constitutional support from the Tenth Amendment to the U.S. Constitution and, in a general sense, precludes Congress from ordering states to adopt a specific regulatory scheme when the federal government itself has not adopted a relevant scheme. PASPA fits within at least part of that argument: It doesn’t create a federal standard for sports betting, but it blocks 46 states from doing so under their own laws.

The more divisive question is whether PASPA goes further to “commandeer” New Jersey to adopt a particular scheme. The leagues and the Justice Department argued PASPA doesn’t commandeer New Jersey to adopt any scheme. From their vantage point, it merely stops New Jersey from legalizing sports betting. New Jersey disagreed, stressing that when the federal government prevents a state from pursuing a policy it wishes to pursue, the federal government has engaged in a form of commandeering. Much of the debate therefore centered on the appropriate meaning of “commandeering” in the context of constitutional law, and whether it requires forcing a state to take action or whether it also includes preventing a state from taking action.

New Jersey’s commandeering argument clearly resonated with Justice Alito, who noted “PASPA’s provision prohibiting state ‘licens[ing]’ of sports gambling schemes violates the anticommandeering rule. It issues a direct order to the state legislature . . . [and] unequivocally dictates what a state legislature may and may not do.”

To bolster this conclusion, Alito observes that “conspicuously absent from the list of powers given to Congress” in the U.S. Constitution “is the power to issue direct orders to the governments of the States.” To that end, Alito reasons that the leagues and Justice Department seem to have forgotten a common-sense understanding of the lay of the land when PASPA became law in the early ’90s. “At that time,” Alito writes, “sports gambling was generally prohibited by state law, and therefore a state’s political subdivisions were powerless to legalize the activity.” Alito then asks, “What if a state enacted a law enabling, but not requiring, one or more of its subdivisions to decide whether to authorize sports gambling? Such a state law would not itself authorize sports gambling.” A federal mandate like PASPA, then, would supersede the state’s sovereignty on the issue of sports gambling.

As a secondary argument, New Jersey underlined the apparent unfairness of the federal government treating Nevada more favorably than 46 states. In that regard, PASPA is an unusual federal law. Federal laws normally treat the 50 states equally. Not so with PASPA, which grandfathered out the four states that had already adopted sports betting systems.

This secondary legal argument connects to an American legal principle. Although not expressly stated in the Constitution, judges over the years have endorsed the so-called “equal sovereignty doctrine.” This doctrine simply instructs that the federal government can’t provide preferential treatment to certain states when states are owed equal treatment from the federal government. Of benefit to New Jersey, one of the judges who has long advocated for the equal sovereignty doctrine is Supreme Court Chief Justice John Roberts.

For their part, the leagues, NCAA and Justice Department insisted the anticommandeering principle was inapplicable to New Jersey’s case. No state, they argued, was treated differently under PASPA. The only difference stemmed from the fact that PASPA exempts states that had already licensed sports betting practices prior to PASPA becoming law. While only four states fit that definition, the other 46 states had every opportunity to join them before PASPA became law. They choose not to.

The leagues, NCAA and the Justice Department also stressed that the Constitution clearly gives the federal government the power to relate economic activities that impact multiple states. The Constitution’s “Commerce Clause” is often interpreted to prevent states from regulating a particular economic practice—in this case the licensing of sports betting—when the impact of that practice crosses state lines. Although a person placing a sport bet in a casino does so in one state, other states are likely implicated by that activity: the bettor may have travelled across state lines to place the bet; the bettor may have paid for the bet using a bank account located in a different state; they bettor might take any winnings and use them to travel to another state; the teams involved in the bet may play in other states or travel to other states—the list of “interstate” possibilities could go on and on.

Justice Alito seemed both persuaded by the equal sovereignty argument and unconvinced by the interstate commerce reasoning. He bluntly compares to PASPA to scenario where “federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals.” In Alito’s view, “A more direct affront to state sovereignty is not easy to imagine.”

For a detailed analysis on how Monday’s Supreme Court ruling will impact states, fans, leagues and players, click here. For the “winners” and “losers” from the ruling, click here.

Michael McCann, is SI’s legal analyst. He is also the Associate Dean for Academic Affairs at the University of New Hampshire School of Law and co-author with Ed O'Bannon of the new book Court Justice: The Inside Story of My Battle Against the NCAA.