New Jersey’s gambit: Sports wagering ploy unlikely to work

New Jersey governors during the state's casino era, which began in 1978, have ranged from openly hostile to the industry and Atlantic City to exhibiting a benign neglect that allowed them to stay hands-off while the industry thrived.

That's where Gov. Chris Christie is different.

Christie has declared himself a champion of Atlantic City and the gaming industry and (unlike Jim Florio in early 1990s) has followed through. From the moment he was elected, he made the revival of Atlantic City and its casino industry a centerpiece of his administration. A high-profile visit to the Boardwalk just months after his inauguration outlined the plan drawn up by a special study group and he has implemented that plan carefully and completely.

But will it work? The jury is still out on that, and if you measure by gaming revenues (always a risky assessment in New Jersey) it's not looking good. But Christie isn't done yet, so the books are not closed.

A book of another sort may open in Atlantic City if Christie gets his way. Last month, Christie announced he would challenge the federal government's ban on sports betting and implement the will of the people, expressed last November in a statewide referendum by a 2-to-1 margin. Christie said he would approve sports betting at Atlantic City casinos and at the four state racetracks by allowing the state Casino Control Commission to set up regulations and procedures. Sports betting, Christie said, would bring the crowds and the excitement back to Atlantic City.

His message to the federal government? "Try to stop me."

Well, it's a foregone conclusion that the feds will try and stop him and undoubtedly do it very effectively. The now infamous Department of Justice memo released at the end of 2011 that seems to allow online wagering (although this is another idea that has never been challenged in court), specifically carved out sports betting as a definitely illegal activity under the Wire Act of 1962.

The Professional and Amateur Sports Protection Act of 1992 banned sports betting except in states where it already existed - Nevada, Delaware, Oregon and Montana. But courts have taken that even a step further as regards to Delaware, which attempted to set up full Nevada-style sports wagering. The court said those states could implement only the style of sports betting that had previously been in place - lottery style parlays, which takes all the fun out of the bet.

So not only is legal precedent against Christie but the professional and amateur sports leagues will line up their considerable power if and when New Jersey sports betting is ready to be launched. They are keeping their powder dry, but once the first shot is fired, they will demonstrate their considerable arsenal.

Just a sidebar here: One day, sports betting advocates in the United States are going to realize that if they can figure out a way to cut the sports leagues into the revenue stream, that opposition will magically melt away. After all, these are for-profit businesses and who would turn away new revenue?

So why did Christie, a former U.S. attorney, decide to challenge the U.S. government on this issue?

The truth is, this is the best route to take that will either be affirmed or denied by the courts in the shortest period.

Yes, Christie could have lobbied Congress to change the federal law, but the odds of that happening are infinitesimal. This is one area where the power of the leagues comes to bear.

Threats that teams could move or pass out free tickets to other, more friendly, politicians would carry lots of weight in Washington.

Why not simply challenge the federal law via the courts without the confrontation? This would be a long, drawn-out process that would take years to wind its way through the courts. By setting up a challenge, the federal government would first get an injunction, then press for a quick decision one way or another. While Christie would love to give his state sports betting, he's also ready to take credit for at least trying to respond to the overwhelming will of the people in the referendum.

Another reason to suspect that Christie is as interested in playing good politics as he is at making a real attempt to get sports betting in New Jersey is the consequences of success. Let's say Christie somehow finds a friendly court that affirms New Jersey's rights to offer a specific kind of wagering, which has always been under the purview of the states. At that time, the barn doors would be flung wide open. New Jersey would quickly implement sports betting but it would be followed rapidly by the surrounding states that have already approved casinos to compete with the Jersey shore town. Net gain? Not so much.

And finally, Christie has to convince one of the casinos or racetracks to get on board with his plan. That might be a problem, as well. Putting aside the millions that must be invested in sports books, a casino company with multiple licenses in the United States and around the world might be wary of being charged with violations of federal law and risking those hard-earned licenses in other jurisdictions. A state-owned racetrack would have been an easier sell, but Christie divested those assets last year in his bid to eliminate $30 million a year in casino subsidies to the tracks. They are all now privately held, except for Monmouth Park, which is being run by the state horsemen, no friends of Christie.

So Nevada casinos and sports books can relax (except perhaps for Cantor Gaming and William Hill, which would have profited greatly from a successful New Jersey challenge). Nevada's position as the wide-open sports betting capital is safe.

Christie's bold challenge is more of a Don Quixote-style tilting at windmills. He'll awaken the sleeping giant coalition of sports leagues and the federal government that will crush his little excursion like a pea.

Roger Gros is publisher of Global Gaming Business, the leading trade publication for the casino industry.