Another New Jersey Sports Gambling Law Bites the Dust

National Collegiate Athletic Ass’n v. Governor of the State of New Jersey, 799 F.3d 259 (3d Cir. 2015).  In 2012, in an effort to aid Atlantic City, New Jersey passed the Sports Wagering Act, N.J.S.A. 5:12A-1 et seq.  That law permitted gambling on sports, which previously had been banned by statute and by the New Jersey Constitution.  The NCAA and professional sports leagues sued to enjoin the law, contending that it violated the Professional and Amateur Sports Protection Act, 28 U.S.C. §3701 et seq. (“PASPA”).  New Jersey conceded that the Sports Wagering Act violated PASPA, but argued that PASPA was unconstitutional.  The District Court found PASPA constitutional, and the Third Circuit affirmed that ruling.  The bottom line was that New Jersey could repeal its ban on sports betting, but PASPA forbade New Jersey to authorize sports betting by law.

In 2014, New Jersey adopted another law to permit sports betting, N.J.S.A. 5:12A-7 (“the 2014 Law”).  The 2014 Law, in broad summary, purported to repeal any rule or regulation that limited sports betting, but that repeal applied only to Atlantic City casinos and New Jersey racetracks.  The leagues again sued to enjoin the law as violative of PASPA, and the District Judge again agreed with the leagues.  On appeal, the Third Circuit todayaffirmed by a 2-1 vote.  Judge Rendell wrote the majority opinion, in which Judge Barry joined.  Judge Fuentes was the dissenter.

PASPA makes it unlawful for “a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact” sports gambling.  Judge Rendell concluded that the 2014 Law “authorizes by law sports gambling.”  It “authorizes casinos and racetracks to operate sports gambling while other laws prohibit sports gambling by other entities.”  That “selectiveness,” the majority said, “constitutes specific permission and empowerment.”  Judge Rendell rejected New Jersey’s argument that the 2014 Law “is only a repeal removing prohibitions against sports gambling, … not an ‘affirmative authorization.'”

New Jersey also argued that the injunction against the 2014 Law should have run only in favor of the leagues that had sued.  The majority disagreed.  “The 2014 Law violates PASPA in all contexts, not simply as applied to the [l]eagues [that had sued], and, therefore, the District Court properly enjoined its application in full.”

Nor did an unclean hands argument offered by New Jersey– that the leagues “are essentially hypocrites because they benefit from sports betting” elsewhere– succeed.  Unclean hands applies where “a party seeking relief has committed an unconscionable act immediately related to the equity the party seeks in respect to the litigation.”  The leagues’ conduct did not rise to that level.

In dissent, Judge Fuentes argued that the 2014 Law “renders the previous prohibitions on sports gambling non-existent.”  Since there were, as a result, “no laws governing sports wagering,” and “the right to do that which is not prohibited stems from the inherent rights of the people,” there was no PASPA violation.  Given that dissent, and the high stakes involved. a petition for rehearing and en banc review is a virtual certainty.