On September 24, 2019, the Third Circuit Court of Appeals found in favor of the New Jersey Thoroughbred Horsemen’s Association (“NJTHA”) and ruled that the NJTHA is entitled to recover the bond it posted as the result of a temporary restraining order (“TRO”) and subsequent preliminary injunction against the NJTHA in the 2014 case, National Collegiate Athletic Association v. Christie. The issue of recovering posted bond was a matter of first impression in the Third Circuit. The majority opinion, written by the Honorable Marjorie Rendell, concluded “wrongfully enjoined” under Federal Rule of Civil Procedure 65(c) can only be determined after a final judgment on the merits. Moreover, the court found a party is “wrongfully enjoined” when the final judgment concludes that party had a right all along to do what it was enjoined from doing. Also, in accordance with the majority of other circuits, the court found there is a rebuttable presumption that a wrongfully enjoined party is entitled to recover damages up to the bond amount.
Duane Morris’ Christopher Soriano will be presenting at a gambling law symposium hosted by the Seton Hall Law School’s Continuing Legal Education at Seton Hall University on March 1, 2018 at 3:30 p.m.
The symposium will discuss New Jersey’s gambling laws while focusing on the following topics:
- The New Jersey Constitution, Statutes, Rules, and Regulations Governing Gambling
- The Definition of Gambling Under New Jersey Law: The Chance Versus Skill Debate Involving Fantasy Platforms and Poker
- The Impact Of Technological Advances Upon Laws Governing The Placement of Wagers On Horse races
- Overview Of Supreme Court’s Sports Betting Case and
- On-Line Casino and Other Forms of Gambling Under Federal and New Jersey Law
For more information and to register, please visit the event website.
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.
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.
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.
A Proposed Amendment to the New Jersey State Constitution will authorize two additional casinos in the State. The details of the Proposed Amendment are as follows:
- No more than 2 casinos, each one to be located in different counties in State
- New casinos must be located outside a 75 mile radius from Atlantic City.
- Eligibility for the license is limited to:
- (1) a currently licensed Atlantic City casino operating as of December 11, 2015; or
- 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
- Tax rate to be determined in subsequent legislation. 49% of such tax revenue for 15 years is dedicated for recovery , stabilization or improvement of Atlantic City. 2% of tax revenue dedicated to thoroughbred and standardbred horsemen.
- The Resolution has 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.
A copy of the proposed amendment can be read here: SCR 185.
Duane Morris LLP has received the 2016 Corporate LiveWire Excellence in Gaming Law Firm Award for New Jersey. The gaming awards look at the gaming sector as a whole and cover casinos, online and mobile gaming, as well as championing firms involved in
gaming law and regulatory compliance.
“We’re honored to receive this award,” said Hersh Kozlov, head of the firm’s Gaming Law Practice Group and managing partner of the Cherry Hill office. “We strive to provide our gaming industry clients with top-notch service and it’s gratifying to be recognized for the work we do.”
The Corporate LiveWire Awards represent the pinnacle of business achievement, recognizing the best in their respective fields. The awards cover the most important sectors of business, from finance advisories and funding providers to law firms and specialist advisory companies that deal with mergers and acquisitions.
For the full story, please see the press release on the Duane Morris website.
Three sentences set the sports betting world afire this morning when the US Court of Appeals for the Third Circuit issued an order granting New Jersey’s petition for rehearing en banc in the most recent round of sports betting litigation. In simple terms, this means that the case will be heard anew by the active judges of the Third Circuit plus the two senior judges who participated in the case – the final count will be an oral argument in front of a total of about 11 judges at once – more than the Supreme Court.
As we’ve covered here, this case centered around what it means to “authorize.” Previously, New Jersey challenged the constitutionality of the Professional and Amateur Sports Protection Act (“PASPA”) on the grounds that it commandeered the states to maintain a federal prohibition. As has been written before, PASPA does not prohibit sports betting – it prohibits a state from authorizing sports betting by law. But the courts found PASPA constitutional because it gave the states a choice: keep sports betting prohibitions in place, or repeal them. That choice saved the constitutionality of PASPA. New Jersey, seizing on this language, partially repealed its prohibitions on sports betting. The sports leagues argued that partial repeal amounts to an “authorization,” which violates PASPA. The court agreed.
Judge Julio Fuentes wrote the court’s 2013 opinion on constitutionality – finding the statute to be constitutional. He was again on the panel in 2015. This time, he dissented, writing that a partial repeal was permissible under PASPA because there is a difference between authorizing and repealing.
The Court of Appeals grants rehearing en banc when either a question of exceptional importance is involved or is there is a need to reconcile precedents of the court. Needless to say, Judge Fuentes’ view that the 2015 opinion was not consistent with the 2013 opinion probably triggered some of the judges on the court to want to take a close look at the consistency of the two cases. It is also the case that a prior precedential opinion of the Court can only be overruled en banc – so it is possible that the Court wants to take a closer look at the constitutionality of PASPA as addressed in Christie I. There is no guarantee, however, that the Court will reach a different result this time around. Because rehearing en banc has been granted, however, the court’s August 2015 opinion is vacated.
The fact that the court granted en banc review does mean that some of the judges may be inclined to reach a different result. The logic there is that if the judges were satisfied with the result, they would have simply let the underlying decision stand. That too is no guarantee of a different result – they may, after examination, reach the same result but based on different reasoning. Of course, the en banc review could lead to a different result or to a modification of Christie I.
Thus far it is not known when the en banc hearing will be scheduled. No new briefs will be filed. Typically the Court schedules a number of en banc cases on the same day for convenience. The case will be orally argued and voted on by the judges who hear it; one will be assigned to write an opinion, which will have to receive a vote of a majority of the judges who hear the case in order to become the opinion of the court.
One thing is clear – unless rehearing was granted, New Jersey’s only remaining shot under the partial repeal legislation was the extremely unlikely chance that the Supreme Court would take the case after once declining to do so. New Jersey’s chances of success have increased significantly as a result of this order.
Associate Adam Berger in the Cherry Hill office wrote an article for the Philadelphia Business Journal titled “P.A. Gaming Industry at a Crossroads: Lessons from Atlantic City.”
As the song goes, Atlantic City didn’t know what it had until it was gone. In 2006, the city’s casinos brought in more than $5.2 billion in gaming revenue. In 2014, that number was down almost 50 percent, to $2.7 billion, and expected to fall even further in 2015, the first full year of operations following the closures of four casinos – Atlantic Club, Revel, Showboat and Trump Plaza.
Pennsylvania casinos, on the other hand, experienced their highest total gaming revenue of $3.15 billion in 2012. Gaming revenues declined slightly in the Keystone State during each of the next two years, down to just over $3 billion in 2014, but despite the recent declines, Pennsylvania remains the second largest gaming market in the nation, next to Nevada. It is from this point of strength that Pennsylvania needs to recognize what it’s got and not repeat the mistakes of its neighbor to the east.
So how did New Jersey allow its casino market to fall so far? Clearly the loss of New Jersey’s East Coast monopoly on gaming — as a result of the advent of casino gaming in Connecticut, Delaware, Maryland, New York and Pennsylvania — did not help. But this increased competition did not seal Atlantic City’s fate; rather, its fate was sealed during the preceding decades when Atlantic City casino operators failed to improve their properties and make Atlantic City a true and viable destination. Instead of making necessary capital expenditures and adding resort amenities, casino owners upstreamed profits while their properties slowly became outdated. The result was a city full of mostly unexciting casinos that offered little more than the slots-in-box style options found in neighboring states.
To read the full article, please visit the Philadelphia Business Journal website.
The “40 under 40” list was made by the Global Gaming Business Editorial Advisory Board and the Innovation Group and honors top leaders in the Gaming industry.