Duane Morris associate Adam Berger, an associate in the firm’s Cherry Hill office, has been named to Global Gaming Business magazine’s “40 Under 40” list for 2017. Mr. Berger was chosen by the GGB Advisory Board for this recognition, and the feature will run in the November issue of the magazine.
Dealing another setback to New Jersey’s long running battle to implement sports betting at casinos and racetracks in the state, the Third Circuit Court of Appeals has again ruled that the state’s latest effort to implement sports betting runs afoul of the federal Professional and Amateur Sports Protection Act (PASPA).
Briefly, PASPA prohibits a state from “authorizing by law” sports betting. New Jersey previously challenged the constitutionality of the statute, arguing that PASPA impermissibly commandeers a state to implement a federal regulatory scheme because the state legislature has no choice but to keep sports betting illegal in the state. The Third Circuit concluded that states had options, even considering that a state may repeal its prohibitions in whole or in part.
New Jersey then repealed its criminal prohibitions on sports betting to the extent those apply to casinos and racetracks. New Jersey took the position that this partial repeal did not amount to a prohibited “authorization” because there is a distinction between authorizing and repealing. The Third Circuit disagreed, but later agreed to review the case en banc.
Today, the en banc court, in a 10-2 vote, reaffirmed its prior position that New Jersey’s partial repeal amounts to an authorization prohibited by PASPA. The court backpedaled from its earlier opinion: “To the extent that in Christie I we took the position that a repeal cannot constitute an authorization, we now reject that reasoning.” The court also continued to hold that states have more options under PASPA other than a total repeal of prohibitions on sports betting and maintaining those prohibitions as they currently exist. “To be clear, a state’s decision to selectively remove a prohibition on sports wagering in a manner that permissively channels wagering activity to particular locations or operators is, in essence, “authorization” under PASPA. However, our determination that such a selective repeal of certain prohibitions amounts to authorization under PASPA does not mean that states are not afforded sufficient room under PASPA to craft their own policies.”
But the Court did not illustrate any meaningful options that a state has, other than to repeal its prohibitions on sports betting to the extent that they prohibit small bets between family and friends. This is not an economically meaningful option, nor is stopping small bets among friends and family members a law enforcement priority. “We need not, however, articulate a line whereby a partial repeal of a sports wagering ban amounts to an authorization under PASPA, if indeed such a line could be drawn. It is sufficient to conclude that the 2014 Law overstepped it.”
In dissent, Judge Julio Fuentes, the author of Christie I, concludes that the state’s repeal comports with the Court’s direction in Christie I and is therefore not a violation of PASPA. He opined that there is a meaningful legal difference between authorizing and repealing and that New Jersey’s law does not grant any permission to anyone to do anything; instead it is a “self-executing deregulatory measure.”
Judge Thomas Vanaskie authored a separate dissent, arguing that PASPA is unconstitutional. In probably the most powerful language anywhere in the majority or dissent, Judge Vanaskie states:
This shifting line approach to a State’s exercise of its sovereign authority is untenable. The bedrock principle of federalism that Congress may not compel the States to require or prohibit certain activities cannot be evaded by the false assertion that PASPA affords the States some undefined options when it comes to sports wagering.
Judge Vanaskie concludes that PASPA was intended to have the states implement a federal legislative program, and is, therefore, unconstitutional.
It remains to be seen whether New Jersey will seek certiorari from the US Supreme Court or try another means of repealing, or whether these decisions lead to a federal dialogue on a solution to sports betting. With a multi-billion dollar unregulated and untaxed sports betting market in the United States, and a federal statute that dates back to before the prevalence of internet wagering, it is probably time to consider whether the status quo remains the best option.
On June 22, 2016 the Pennsylvania General Assembly passed a sweeping expansion of gambling . The bill, which must be passed by the state’s Senate and signed by the Governor, would allow for internet based gambling, daily fantasy sports, slot machines at off-track betting parlors (“OTBs”), slot machines at airports and even paves the way for legalized sports betting, if, and when that is allowed under federal law.
- Pennsylvania would be the fourth state to allow legal internet gambling (Internet gambling is currently legal in New Jersey, Delaware and Nevada);
- Internet gambling would be offered through the Commonwealth’s current, licensed casinos with each casino paying an $8 million license fee to offer internet gaming;
- Age and geo-location controls will be required – players must open an account, be 21 or over and must be located within PA while participating in internet gambling;
- The tax rate on internet gambling revenue would total 16%;
- Participating casinos would not be allowed to reduce their number of slots machines their existing b casinos
Daily Fantasy Sports
- Bill allows current DFA operators like FanDuel and Draft Kings to obtain a license to offer DFS without partnering with a PA casino; DFS operators would pay 5% of its revenues ( after player payouts) to the state;
- DFS players must be 18 yo or older;
Slots at OTBs
- PA’s 5 racetrack casinos would each be permitted to have up to 4 off-track betting parlors with up to 250 slot machines per OTB;
- Each such OTB must be outside a 50 mile radius of an established PA casino;
- There is a $5 million licensee fee for each OTB with slots;
Slots at Airports
- Casinos can seek permission to install slot machines at airports; the PA Gaming Control Bd can set limits on the number of slot machines l allowed;
- License fees for such operations would be $5 million in Philadelphia; $2.5 million in Pittsburgh; and $1 million a each at the four other international airports in PA;
Expansion of Current Resort Casinos
- Current Category III casinos in PA can expand their max slot machines counts from 600 to 850 and table games from 50 to 65;
- There is also a relaxation in the requirement that casino patrons be customers of other amenities;
- If a current Category III casino and all three changes it so would requires $4.5 million is additional license fees.
- The bill instructs the PA Gaming Control Bd to develop regulations to allow for sports wagering if, and when the federal government permits such sport betting
Duane Morris associate Adam Berger of the firm’s Cherry Hill office spoke at the 2016 Jeffrey S. Moorad Sports Law Journal Symposium, held earlier this month in Villanova, Pennsylvania. Mr. Berger participated in a panel discussion on “Daily Fantasy Sports: A Legal View.” This year’s symposium, A Changing Game: Challenging the Status Quo in Sports Law, analyzed the hard-hitting legal and business issues in sports today.
Daily fantasy sports—a hot-button issue from a legal, regulatory and business perspective—was the headline topic for the roster of industry leaders. The discussion also included the evolution of the NCAA’s legal and business landscape and a view of pro sports from one of the nation’s top agents and a two-time Super Bowl champion.
To view the Sports Law Symposium program, please visit YouTube.com.
Duane Morris partner Christopher Soriano of the firm’s Cherry Hill office appeared on a recent broadcast of the “Wagner & Winick on the Law” radio program, during which he joined co-hosts Dean Mitchel Winick and Professor Stephen Wagner, both of Monterey College of Law, to discuss the interplay of federal and state laws in the United States related to regulating gambling and how many of these laws are outdated. A sampling of the topics discussed include Internet gaming, office brackets, fantasy sports, casinos and the lottery.
Within the context of the NCAA March Madness Tournament, Mr. Soriano provided insights on the gaming law implications of office bracket tournaments, which, as in most instances where people put in money on the results of a sporting event, are illegal for the most part. Mr. Soriano also commented on the developing area of fantasy sports and the important distinction to be drawn between games of skill and games of chance. For example, the traditional season-long fantasy sports contests are considered legal because skill is involved; while daily fantasy contests have been viewed as being illegal games of chance. Therefore, where is the line between when something is a contest of skill and when it is a contest of chance?
To listen to the radio program in its entirety, please visit the Recent Podcasts, Webcasts and Audio section on the Duane Morris website.
On Monday, three-fifths of each house of the New Jersey legislature passed resolutions that will put a question on the ballot in November asking voters if they want to expand casino gaming outside of Atlantic City. As we previously posted here and here, the North Jersey casino proposal will allow for two casinos to be located at least 72 miles from Atlantic City, in separate counties. The minimum investment required for a North Jersey casino will be $1 billion. Current Atlantic City casino owners will be given an exclusive period of 60 days to submit bids for the two North Jersey casino licenses before bidding is opened up broadly. Current owners of Atlantic City casinos may partner with other investors/developers to submit a bid for a North Jersey casino license.
If New Jersey voters pass the referendum in November, the legislature will then need to adopt enabling legislation. This legislation will provide the details for the bidding process and the tax rate for North Jersey casinos. Atlantic City casinos currently pay an effective tax rate of 9.25% on gross gaming revenue. North Jersey casinos likely will be required to pay a significantly higher rate, perhaps in excess of 50%.
We will provide updates as developments occur.
Duane Morris partner Christopher Soriano in the firm’s Cherry Hill office was quoted in a February 18, 2016 Law360 article (“3rd Circ. Puts Gambling Ban Constitutionality Back On Table“) detailing the 12-judge Third Circuit panel hearing discussing New Jersey’s efforts to legalize sports betting. This is the third time the appeals court has looked at the issue. Mr. Soriano discussed three possible outcomes: 1) the court could hold that the Professional and Amateur Sports Protection Act (PASPA) is constitutional and N.J.’s partial repeal violates it, resulting in no sports betting; 2) the court could find PASPA constitutional but that the state has complied with the act in its partial repeal, resulting in unregulated sports betting in N.J. casinos and racetracks; or 3) the court could determine that PASPA is unconstitutional and therefore regulated sports betting would be allowed in the state.
Mr. Soriano’s blog post on the hearing can also be found here.
Today marked another installment in New Jersey’s efforts to implement sports betting at its casinos and racetracks. The United States Court of Appeals for the Third Circuit heard an en banc argument in NCAA v. Christie. This is the third time that the question of sports betting has been in front of the Third Circuit in the last several years, with the sports leagues winning the last two battles.
To simplify, the Professional and Amateur Sports Protection Act (“PASPA”) prohibits a state from, including other things, “licensing” or “authoriz[ing] by law” sports betting. It does not prohibit sports betting in its own right. New Jersey initially challenged the constitutionality of PASPA, arguing that it violated the Tenth Amendment of the United States Constitution. The Court of Appeals disagreed, holding that PASPA gave the states a choice between continuing their existing criminal prohibitions on sports betting or repealing those prohibitions. While an unattractive choice, the Court reasoned, it was not a circumstance where a state had no choice at all, which would violate the Tenth Amendment.
Acting on this, New Jersey then partially repealed its prohibitions on sports betting to the extent that they applied to casinos, racetracks, and former racetracks. After a challenge by the leagues, the courts concluded that this narrow repeal amounted to authorizing sports betting by law, which was prohibited by PASPA.
Today the Court focused on two issues: how much of a repeal is necessary before the repeal no longer constitutes an authorization by law, and is PASPA constitutional on an overall basis. The state’s argument is that the limited repeal, because it is a repeal and not an affirmative act, is consistent with PASPA. The leagues conceded that PASPA gives the state more than two options and the DOJ noted that states could “tinker” with their sports betting provisions. One example that the leagues stated would comply with PASPA is a repeal of state criminal laws to the extent that they prohibit bets of under $1,000 between acquaintances on sporting events. The question the court struggled with is where, then, is the line – if some partial repeal complies with PASPA, how much of a repeal is necessary? There was no clear answer at the end of the hearing.
The other question raised by the Court is whether the constitutionality of PASPA should be revisited. Several judges had questions about whether PASPA, as construed, essentially commandeers the states and forces them to implement a federal policy. While many thought this issue was closed after Christie I, several judges seemed interested in it today.
It’s always difficult to tell where a court may be headed, but it seems that the Court had more difficult questions for the state than for the leagues. That said, there seems to be three camps on the Court: those who believe PASPA is unconstitutional (and thus NJ gets regulated sports betting); those who believe PASPA is constitutional but NJ has complied with PASPA in its partial repeal (and thus NJ gets unregulated sports betting in casinos and racetracks) and those who believe PASPA is constitutional and that NJ’s partial repeal violates it (and thus no sports betting). How the votes ultimately shake out, and whether there is a compromise position, may make the result of this case interesting indeed.
Under a compromise reached by the New Jersey Senate and Assembly leadership the proposed state Constitutional amendment will be put to a vote in both bodies which would allow two additional casinos in the northern part of the state. Under the compromise current Atlantic City casino license holders would have and inside track and have six months to submit proposals to build the new casinos, and their plans must call for investing at least $1 billion in each facility.
If that criteria isn’t met, those without Atlantic City licenses can bid to build the new North Jersey casinos. They would also be required to invest at least $1 billion for each facility
It appears the proposed amendments will not be voted on in this current legislative session which ends on Tuesday, January 12, 2016 and 12:00 noon, but rather in the new session which begins thereafter. As such both the Assembly and Senate will be required to pass the amended proposal with 3/5th majorities for the proposed amendment to be on the November, 2016 ballot.
Just days following a proposed amendment to the New Jersey State Constitution proposed in the State Senate and as detailed here , the New Jersey Assembly offered its own proposed Amendment to the Constitution which would also authorize up to two additional casinos in North Jersey.
Both Amendments propose no more the two casinos, each located in different counties and outside a 75 mile radius of Atlantic City. The 75 mile radius restriction eliminates Monmouth Park Racetrack as a possible site for casino expansion.
The primary differences are as follows;
- Applicant eligibility: The Assembly version of the proposed amendment allows one of the two licenses to be awarded to an applicant with no current ownership or ties to an existing Atlantic City casino. The Senate version of the amendment limits eligibility to (1) a currently licensed Atlantic City casino operating as of December 11, 2015; or (2) any person licensed as a principal owner (yet undefined) of a holder of a New Jersey casino license that was operating a casino which was conducting gambling on December 11, 2015 if that principal owner also holds a valid license to own and operate a casino in another jurisdiction with licensing standards similar to those in New Jersey. The Assembly version only applies the Senate version’s proposed eligibility requirements to the “initial license.” The current Atlantic City casino tie-in eligibility requirement presumably does not apply to the second license awarded.
- Tax Allocation to Atlantic City. The Assembly version of the proposed Constitutional Amendment allocates 35% of state tax revenuers from the two new casinos for purposes if the recovery, stabilization or improvement of Atlantic City. The Senate version allocate 49% of such tax revenue for the recovery, stabilization or improvement of Atlantic City.
The Senate and Assembly must agree on an identical version of the proposed Amendment which would have to be approved with 3/5 votes by both houses of the NJ Legislature or majority votes, twice over two years. The votes have to be completed at least 90 days before going on the ballot of a state-wide referendum to amend the NJ State Constitution.