A federal appeals court has dealt another setback to New Jersey’s efforts to boost its declining gaming industry with the legalization of sports betting.
In a 2-to-1 decision released Tuesday, the 3rd Circuit Court of Appeals in Philadelphia upheld a prior ruling that New Jersey’s law legalizing sports gambling conflicts with the Professional and Amateur Sports Protection Act.
Also know as PASPA, the 1992 federal law that restricts sports gambling. The three-judge panel also ruled the sports leagues had standing to oppose New Jersey’s efforts.
The decision is a setback in New Jersey’s efforts to implement sports betting, but the state now has 45 days to ask for a review by the full court.
New Jersey argued that PASPA violates the state’s sovereign rights and is unconstitutional. Republican Gov. Chris Christie has publicly vowed to continue to push for sports betting in New Jersey.
Analysts expect legalize sports betting to generate $1 billion in bets and almost $100 million in annual revenue for New Jersey. Estimates put the illegal sports betting handle in New Jersey at $20 billion and $500 billion nationwide.
“I’ve always thought that New Jersey’s best chance of success is in front of the Supreme Court,” said Joe Asher, CEO of Las Vegas-based William Hill U.S. “One day, sports betting will be legal throughout the United States; it is just a question of when.”
William Hill operates 100 race and sports books in Nevada. The bookmaker also serves as risk manager for Delaware’s Sports Lottery, as well as being the sports betting provider at Monmouth Park racetrack in New Jersey and title sponsor of the Haskell Invitational.
The U.S. Department of Justice, along with Major League Baseball, the National Football League, the National Basketball League, the National Hockey League and the National Collegiate Athletic Association, argued the law would undermine the integrity of professional sports and violate PASPA.
The law bans sports betting in all but four states — Nevada, Delaware, Montana and Oregon. Casino visitors in Nevada wagered $3.4 billion on sporting events in 2012, but gross gaming revenues totaled just more than $170 million, only 4.9 percent of the amount wagered.
Bill Lerner, an analyst with Las Vegas-based Union Gaming Research, said a legal Atlantic City sports betting market could be four times larger than Las Vegas, “given rabid Northeast sports fans and the illegal sports betting market.”
“If New Jersey were allow to conduct sports betting, intuitively we think other states would follow,” Lerner said. “We continue to expect a protracted legal battle in the courts.”
If New Jersey decides to pass on an appeals court review, the state has 90 days to appeal to the U.S. Supreme Court. Griffin Finan, with Ifrah Law in Washington, D.C., expects the Supreme Court to hear the case because of its “interesting and complex constitutional issues.”
“The Supreme Court has never addressed the constitutionality of PASPA,” Finan said.
The 3rd Circuit decision was by no means by consensus. In his dissent, Judge Thomas Vanaskie noted that by “prohibiting states from licensing or authorizing sports gambling, PASPA dictates the manner in which states must regulate interstate commerce and thus contravenes the principals of federalism.”
Vanaskie wrote that “conscripts the states as foot soldiers to implement a congressional policy choice.”
Asher said two things from the court’s ruling stood out.
“First, it seemed like the majority opinion recognized that as a matter of policy, PASPA is a bad law,” Asher said. “And, Judge Vanaskie’s dissent was particularly striking. Most decisions in the court of appeals are unanimous, so the existence of the dissent was noteworthy in itself. However, the substance of his dissent was persuasive to me.”
A legal New Jersey sports betting market is expected to benefit Las Vegas gaming companies. Brian McGill, a gaming industry analyst with Janney Capital Markets, expects Boyd Gaming Corp. and MGM Resorts International to benefit because of their stake in the Borgata in Atlantic City.
Contact reporter Chris Sieroty at email@example.com or 702-477-3893. Follow @sierotyfeatures on Twitter.