Interpretation and Explanation of PASPA and its Implications

Note: As of Mar. 5, 2007, the following are the only states grandfathered from the PASPA: Delaware, Montana, Nevada and Oregon.

Extracted from: Internet Gambling in Nevada: Overview of Federal Law Affecting Assembly Bill 466, Courtesy of Liebert Publishing, Gambling Law Review

Specifically, PASPA makes it unlawful for:

(1) a government entity [187] to sponsor, operate, advertise, promote, license, or authorize by law or compact, or

As documented in the Section-by-Section Analysis of the Senate Report, the Judiciary Committee made it clear that it had no desire to prohibit the lawful sports gambling schemes that were in operation when Senate Bill 474 was introduced. [189]  Congress manifested this intent in section 3704 of PASPA by providing a grandfather provision for states that either had (1) operated a legalized sports wagering scheme prior to August 31, 1990, or (2) legalized sports wagering and such operations were conducted during the period of September 1, 1989, through October 2, 1991. [190]  Consequently, the sports lotteries conducted in Oregon and Delaware [191]  were exempt, as well as the licensed sports pools in Nevada. [192]  In addition, Congress provided a one-year window of opportunity from the effective date of PASPA (January 1, 1993) for states, which operated licensed casino gaming for the previous ten-year period to pass laws permitting sports wagering. [193]  The latter exception was clearly crafted with New Jersey in mind. However, New Jersey failed to take advantage of this opportunity and carve out an exception for itself. [194]  Also excluded from the reach of PASPA are jai alai and pari-mutuel horse and dog racing. [195] 

Unlike the Wire Act, PASPA does not require the use of interstate wire transmissions. Reading PASPA together with section 1084(b) of the Wire Act, sports wagering is effectively limited to Nevada. As one author remarked, "in order to accept lawful Internet sports wagers on college or professional football, the casino must be located in Nevada and only accept Internet wagers from Nevada residents." [196] 

The United States Department of Justice strongly opposed the passage of PASPA based, in part, upon its belief that the legislation was a substantial intrusion on states' rights. [197]  The Justice Department outlined three fundamental concerns in its September 24, 1991, letter to Senator Joseph R. Biden, Jr. (DDE), Chairman of the Senate Judiciary Committee. [198]  First, the Justice Department observed that Congress has historically left the decision on how to raise revenue to the states. [199]  Second, it noted that if PASPA were construed as anything more than a mere clarification of existing law, it would put into question issues of federalism. [200]  Finally, the Justice Department found section 3703 "particularly troubling" in that it permits not only the United States Attorney General to seek enforcement of PASPA through the use of civil injunctions, but also amateur [201] and professional [202] sports organizations as well. [203] 

To date, there are no reported cases interpreting PASPA except for the 1999 decision in Greater New Orleans Broadcasting Ass'n . In Greater New Orleans, the Supreme Court briefly touched upon the interplay between the exemptions set forth in section 3704 and the scope of section 3702's advertising prohibition, in light of its analysis of whether the Communications Act of 1934 violated First Amendment free speech as applied to radio and television advertisements of private casino gambling in Louisiana. [204]