The Life And Death Of Paspa
1992: The Birth Of PASPA
In 1992, sports betting was on the rise. Things were more conservative back then and Senator Bill Bradley sponsored a bill to curtail sports betting expansion. It wasn’t just sports betting - multiple states including South Dakota, Iowa, Colorado, Illinois, Mississippi, Louisiana and Missouri all legalized casino gambling within a 3-year period. Indiana was on the cusp of legalizing casino gambling before Congress tackled the sports betting issue. Commercialized casino gambling was on the forefront and Senator Bradley wanted to limit the betting options available. PASPA made its way through the US Senate in June 1992 and the House of Representatives in October. President George Bush signed the bill at the end of October and it went into effect on the first day of 1993. The law prevented states from introducing any regulated betting forms.
The 4 States To Escape PASPA’s Reach
Only 4 states were exempt from PASPA - Oregon, Montana, Delaware and Nevada. These 4 states already had some type of regulated sports gambling in effect at the time of PASPA’s enactment. Each state had something different. Oregon’s lottery ran Sports Action, a parlay service on NFL and NBA betting. The NCAA stepped in and refused to host any events in the state, most notably March Madness. The law was eventually repealed and the NCAA began hosting games again.
Nevada has offered legal sports betting on the books since 1949. It was the only state in the country to offer single-game wagering options. Parlay and teaser cards are available on all sports categories. Las Vegas is the gambling capital of the country and sports betting is included in the spectrum.
The Delaware Lottery also had parlay cards on NFL games. The lottery stopped running the tickets after a year due to its unpopularity. However, the law still technically remained on the books. Delaware attempted to introduce Nevada-style betting in order to resurge gambling revenue, but part of their exemption from PASPA meant that the state could not introduce any new forms of sports betting. This limited Delaware’s offerings to NFL parlay cards.
Montana was different than the other 3. They had a sports pool law that allowed licensed alcoholic establishments to create and host sports betting pools. These establishments cannot take any money from the winnings or total prize pool amount. In 2007, Montana legalized pari-mutuel fantasy sports betting through the lottery. It only ran lines on NASCAR and NFL fantasy contests (like Daily Fantasy Sports). Again, the NCAA decided to step in and bring the case to trial on the grounds it violated PASPA. Unfortunately for them, they had no ground to stand on given that they were not directly involved. NASCAR supports betting and the NFL supports fantasy betting.
The Rising Demand Of Sports Betting
Since the passing of PASPA, sports betting has continued to rise in terms of popularity. The Internet opened up a whole range of possibilities to people who lived in states where sports betting wasn’t allowed. Legal offshore sportsbooks began accepting US residents and gave them a legitimate online option to place wagers on their favorite sports teams. PASPA has no mention of offshore sportsbooks and very few states have laws stating that offshore sportsbooks are illegal. Offshore sportsbooks became the best avenue for residents in PASPA-enforced states for legal online betting.
You would think that the US would provide some type of alternative to keep residents from using offshore sites. However, another federal law known as the Federal Wire Act specifically banned all US based online sportsbooks. It was at one point thought to address all forms of online gambling, but the Department of Justice ruled in 2011 that it only applies to online sports betting in the US. This DOJ Opinion has since changed as of 2019.
New Jersey Fights Back
In 2011, New Jersey tried to pass legislation that would allow its existing casino and racetracks to offer sports wagering options. Governor Chris Christie signed the bill into law in 2012. This move was met with swift resistance by the major sports leagues. They appealed to the federal government and the law was blocked. New Jersey attempted a similar maneuver again in 2014 by repealing certain prohibitions in their state laws that would allow for sports betting. Again, the sports leagues fought back. New Jersey decided to appeal the actions of the federal government on the grounds that PASPA, which the major leagues cited, was unconstitutional.
New Jersey fought and lost in the lower circuit courts. Each time, the courts upheld the original ruling and said that New Jersey was in violation of PASPA and therefore could not offer sports wagering. After some time, the case reached the US Supreme Court. SCOTUS was on the fence about taking the case and asked the acting Solicitor General to weigh in on the matter. The SG heard arguments from both sides and put together a brief suggesting that SCOTUS abandon the case and uphold the rulings of the lower circuit courts.
Over these past few years, sports betting’s notoriety has grown. This case also drew a large amount of attention, especially when SCOTUS decided to step in. It became more of a states’ vs. federal rights issue which must have resonated with the Supreme Court justices, especially in light of how the NJ already offers legalized online gambling. SCOTUS decided to hear the case and began accepting written briefs. Oral arguments were set to begin in December 2017.
The Major Sports Leagues Change Their Tune
The NFL, NBA, MLB, NHL and NCAA were the ones vehemently against legal sports betting. They claimed it would jeopardize the integrity of their games and present more problem scenarios. Out of these leagues, the NCAA is the most opposed to it. They want their hands in everything and refused to accept the notion of others profiting off their leagues, even though it was already happening through reputable offshore sportsbooks.
NBA Commissioner Adam Silver once penned an op-ed in the New York Times that said he believed sports betting should be legalized and regulated. He proposed that it would be good for the league and since it is already rampant, why not have a hand in it? This was the first of many contradictions by the leagues. MLB Commissioner Rob Manfred also gave several interviews where he said the league would be examining their position on sports betting legalization. The NFL remained quiet on the matter, though Commissioner Roger Goodell has gone back and forth with the issue. They contradicted themselves by moving the Oakland Raiders to Las Vegas, the sports betting capital of the US. The NHL also announced a new franchise in Las Vegas - the Golden Knights.
As time went on, and the NJ sports betting case gained more traction, it became clear that New Jersey actually had a chance of winning. In this scenario, sports betting would be legalized. Several states began preemptively passing legislation introducing sports betting in preparation for PASPA’s repeal. The NBA and MLB began touring around these states lobbying for certain things that would benefit them. For example, they wanted a 1% integrity fee on all gross bets. This was essentially a royalty paid out to the leagues. They also wanted a monopoly on data rights, meaning they wanted official league data used to determine betting outcomes. These leagues wanted sports betting on their terms. It seemed to be case of embracing the inevitable.
None of the other leagues jumped on board, but you can bet there was planning going on behind the scenes. Their lobbying efforts were not successful in every state, but they were able to find a middle ground with others. It set a precedent for future states looking to pass sports betting legislation. That precedent would be that the states need to play ball with the leagues if they want any legislation to pass.
May 14, 2018 - PASPA’s D-DAY Thanks To Scotus
Oral arguments began in the NJ betting case back in December 2017. Most reports said that the opening remarks seemed to throw a favorable light on New Jersey’s side of the argument. After that, the justices retreated to deliberate on their own. Months went by and not a peep came out. In the time that passed, states like West Virginia, Pennsylvania and others passed legislation that would trigger sports betting once PASPA was repealed. These states were hinging on the possibility of PASPA’s demise.
Fast forward several months to May 2018. SCOTUS finally announced their decision. They ruled in favor of New Jersey and stated that PASPA was indeed unconstitutional by commandeering states and forcing them to impose a ban they may not support. The justices stated that while sports betting legalization is an important policy decision, it isn’t theirs to make on the federal level. This meant that PASPA was repealed and the 46 states once blocked by it could host legal sports betting if they vote it in. For New Jersey, who have had sports betting pending since 2014, it meant that they could host wagering options in a matter of weeks.
The Aftermath Of PASPA’s Repeal
While this is a major victory for sports betting advocates, there could still be trouble looming. For one, Congress could pass federal regulations on sports gambling. This seems odd since NJ just won a major battle for states’ rights, but the federal government may look to control this new sports betting market. There could also be major changes since there are so many states that still need to pass legislation allowing betting. This gives the sports leagues plenty of opportunities to impose their will. All in all, PASPA’s repeal is a step in the right direction. Once the Federal Wire Act is repealed and online betting is allowed, states can have the full spectrum of legal betting options.