In a Landmark Ruling, the U.S. Supreme Court Strikes Down PASPA: What Happens Now? By Mark Hichar, Partner, Hinckley Allen law firm

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By Mark Hichar, Mark Hichar is a Partner with the Hinckley Allen law firm and is the Chair of its Gaming Law Practice Group. Mark represents operators of casinos, internet gaming and fantasy sports contest operators, and providers of lottery and gaming systems, software, equipment and services. HinckleyAllen.com

On May 14, 2018, the U.S. Supreme Court issued its long-awaited ruling in the New Jersey sports betting case Murphy v. NCAA, et al.1 In a 6 – 3 ruling, the Court struck down as unconstitutional the Professional and Amateur Sports Protection Act (“PASPA”),2 the federal law that, since its enactment in 1992, made it unlawful for state, local and tribal governments to operate, promote, license or authorize sports betting, and also prohibited non-government operators from conducting sports betting pursuant to state, local or tribal law. The majority’s key holdings were the following:

1. PASPA’s provision prohibiting state authorization of sports gambling schemes violates the anticom mandeering rule embodied in the 10th Amendment to the U.S. Constitution – the amendment that reserves to the states the powers not granted to Congress. The respondent sports leagues and the U.S. Department of Justice had argued that, while the anticomman deering rule prohibits Congress from compelling states to enact legislation, prohibiting states from enacting new laws is different and does not violate the rule. They argued “that commandeering occurs ‘only when Congress goes beyond precluding state action and affirmatively commands it.’”3 The Court disagreed, stating: “This distinction is empty.... The basic principle – that Congress cannot issue direct orders to state legislatures – applies in either event. [The PASPA provision prohibiting state authorization of sports gambling] “unequivocally dictates what a state legislature may and may not do, [and therefore] violates the anticommandeering rule.”

2. ASPA’s anti-authorization provision does not constitute a valid preemption provision under the Constitution’s Commerce Clause.4 The Court stated: “Regardless of the language sometimes used by Congress and this Court, every form of preemption is based on a federal law that regulates the conduct of private actors, not the States... [T]here is simply no way to understand the provision prohibiting state authorization as anything other than a direct command to the States. And that is exactly what the anticommandeering rule does not allow.”

3. PASPA’s provision prohibiting state “licens[ing]” “suffers from the same defect as the prohibition of state authorization. It issues a direct order to the state legislature. Just as Congress lacks the power to order a state legislature not to enact a law authorizing sports gambling, it may not order a state legislature to refrain from enacting a law licensing sports gambling.”

4. No provision of PASPA is severable from the provisions directly at issue. The Court did not think – “that Congress would have wanted to sever the PASPA provisions that prohibit a private actor from ‘sponsor[ing],’ ‘operat[ing],’ or ‘promot[ing]’ sports gambling schemes ‘pursuant to’ state law. §3702(2). These provisions were obviously meant to work together with the provisions in §3702(1) that impose similar restrictions on governmental entities. If Congress had known that the latter provisions would fall, we do not think it would have wanted the former to stand alone.” 

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Concluding its opinion, the Supreme Court reversed the lower court and stated: “The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not. PASPA ‘regulate[s] state governments’ regulation’ of their citizens. The Constitution gives Congress no such power.” Note that the Supreme Court’s landmark decision did not make sports betting legal throughout the United States. While it will be the catalyst for dramatic changes in state gambling laws, all it did was remove the federal law that prohibited states from passing laws authorizing and regulating sports betting, should they wish to do so.

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