New Jersey sports bet opponents do battle at Third Circuit Court of Appeals

new-jersey-sports-betting-appeal-ted-olsonAdvocates and opponents of New Jersey’s quest for legal sports betting squared off in the US Third Circuit Court of Appeals on Tuesday.

For those who’ve been in a state of suspended animation over the past few years, New Jersey has been doggedly trying to enact a legal sports betting environment but has been stymied at every turn by their opponents at the US Department of Justice, four pro sports leagues and the NCAA.

Having been told that their earlier attempts fell afoul of the federal PASPA sports betting prohibition, New Jersey took the advice of a DOJ attorney who argued that the state had the option of repealing its own anti-betting enforcement “in whole or in part.” The state ran with this ball, passing legislation that would permit – without explicitly authorizing or regulating – sports betting at Atlantic City casinos and state racetracks.

The state’s opponents insisted this was too clever by half, arguing that New Jersey’s options were limited to either an all-out ban or an anything goes, anarchic, bookies moving from the back-of-the-bar to kindergarten playgrounds scenario. In November, a federal judge sided with the state’s opponents, setting up Tuesday’s appeal to the Third Circuit court in Philadelphia.

New Jersey’s lead advocate Theodore Olson (pictured) kicked off the proceedings (full audio of which is available here). Olson was barely one minute into his argument before Justice Marjorie Rendell jumped in, seeking clarity on whether authorization and repeal was the same thing. This theme – whether New Jersey’s law amounted to explicit authorization of sports betting and thus ran contrary to PASPA’s rules – was to dominate the day’s discussion.

Olson argued that authorization and repeal were “false equivalents” and suggested it would be “Orwellian” to believe otherwise. Olson suggested New Jersey’s government would have as little oversight of betting as they would if a casino or racetrack decided to stage a ping-pong or debate championship.

Justice Maryanne Trump Barry argued that the state’s 2014 law was “revising the licenses of the casinos.” Olson said there were all sorts of activities that weren’t expressly regulated over which casinos had control, such as how people dressed.

Olson argued that the state’s opponents would be arguing the exact same points had the 2014 law authorized betting at barbershops, which are also required to hold state-issued licenses. “The license goes to the activity; it doesn’t go to other activities that might take place in that venue.”

Asked by Justice Julio Fuentes about the state’s exact role in overseeing sports betting, Olson replied: “Zero.” Olson said the state retained options under its police powers to control the activities of its citizens that are irrespective of the activity itself.

Michael Griffinger, appearing on behalf of the heads of New Jersey’s two legislative bodies, said the difference between the state’s 2014 law was specifically designed to meet the requirements laid down in the first court fight. Griffinger said he wanted to “channel Dr. Seuss” by paraphrasing Horton Hears a Who: “You meant what you said and you said what you meant … we followed your guidance 100%.”

Speaking on behalf of the sports leagues, former US Solicitor General Paul Clement claimed that “not all partial repeals are created equal.” Clement said it would have been quite a different thing had New Jersey passed a law that repealed all sports betting prohibitions except within 1,000 feet of a school, rather than channeling all sports betting activity to the state’s “favorite venues.”

Clement argued that the state’s partial repeal equated to “an affirmative act” and thus ran contrary to PASPA’s prohibition on state “authorization” of sports betting. Fuentes countered that states could decriminalize marijuana without necessarily encouraging people to blaze up.

Clement said New Jersey’s plan would create “a tiny tiny hole in the donut” by leaving the vast majority of its sports betting prohibitions in place. Challenged by Fuentes as to how far a partial repeal would have to go for the leagues to be satisfied, Clement could only say “pretty far.”

Clement eventually offered an acceptable hypothetical in which a state that allowed no gambling whatsoever decided to allow wagers of up to $100 between private citizens. Asked by Rendell whether that wasn’t the same as authorizing betting, Clement said no.

Clement said there was “no way for the state of New Jersey to get to the place they seem to want to get,” i.e. to give racetracks and casinos “a shot in the arm economically.” Clement said the original Third Circuit decision had given New Jersey “hard choices” i.e. maintaining the status quo or opting for a total anarchic repeal, but Clement maintained these were “not unconstitutional choices.”

DOJ attorney Peter Phipps argued that the receipt of a state license was a prerequisite for New Jersey sports betting. This represented “a repeal for a preferred class” of citizen.

Rendell asked if Phipps was arguing that, had the state included licensed funeral homes as eligible entities, it would equate to the state explicitly licensing the operation of sports betting. Phipps said it would, because the state was “enlarging” the licenses to include sports betting.

Phipps said the DOJ also had a problem with the state’s plan to allow sports betting at two defunct racetracks. Fuentes wondered how that equated to enlarging a license, when neither of those tracks currently holds a gaming license.

Phipps countered that the 2014 law allowed the defunct racetracks to offer sports betting provided they had the consent of “the operator.” Phipps said this was a “false positive,” in that the tracks couldn’t be deemed to be still in operation.

Phipps said that the DOJ’s previous position that the state had the option of a partial repeal was “not a categorical endorsement of any partial repeal.” Sounding a bit frustrated, Fuentes wondered how far the state had to go to satisfy the DOJ, given that “at every turn there’s an obstacle.” Phipps said New Jersey was attempting to permit sports betting at “a specific, a limited, a targeted and a preferred set of entities,” which was enough to contravene PASPA.

In his brief rebuttal, Olson said the issue at hand wasn’t state law but a federal law, and “a very bad law” at that. Olson said New Jersey’s 2014 law merely meant that the state is “agnostic” about sports betting at casinos and tracks.

Asked by Fuentes whether the state would benefit financially from allowing betting at tracks and casinos, Olson said all income was taxable, even if it’s prostitution or drug dealing.

Justice Trump Barry said the court would take the issue “under advisement.” A ruling isn’t expected until May at the earliest.