The Smart Money Is On The Sports Leagues In $150 Million Legal Battle With NJ Horsemen

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The NFL and its allies have doubled down on an effort to prevent Monmouth Park not only from collecting $150 million in damages for being deprived of legal sports betting for a span of 3½ years, but also to deny the racetrack any portion of a $3.4 million injunction bond.

Monday’s filing in United States District Court — backed by the NCAA, NBA, NFL, MLB, and NHL — is the latest paperwork related to a bold effort by the New Jersey Thoroughbred Horsemen’s Association (NJTHA) to turn a huge court victory into a further financial windfall.

On May 14, the U.S. Supreme Court threw out a 26-year-old law passed by Congress that effectively gave Nevada a sports betting monopoly. New Jersey and Delaware got into the sports betting business last month, and several more states are expected to follow suit by next spring.

This lawsuit stems from a temporary restraining order against the track in October 2014 that was accompanied by a $3.4 million bond to cover a four-week period until a permanent injunction was issued.

A “wrongfully enjoined party” ordinarily is limited to seeking the full amount of the bond — and in this case, the NJTHA is seeking much more than that, for revenue it says it lost between 2014 and 2018. But the leagues say the horsemen don’t even deserve the $3.4 million. As you’ll see, there is a twist that might sink the horsemen here.

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The six-year war

The crux of the case is that, in retrospect, the U.S. Supreme Court found that a New Jersey law passed in 2012, the Sports Wagering Act, actually was valid because the federal law improperly “commandeered” most states into preventing sports betting. But along the way U.S. District Court judge Michael Shipp disagreed with New Jersey, twice, as did a U.S. Third Circuit Court of Appeals, twice, and a full panel of the Third Circuit, once.

Thus the case took six years, only to be turned on its head at the highest level.

Further complicating matters, New Jersey took a second bite at the apple — an amended law passed in 2013 that no longer directly took on the Professional and Amateur Sports Protection Act of 1992. That version repealed most of the state’s gambling laws while leaving a path clear for the state’s casinos and racetracks to offer their own, private version of sports betting. And that version was not a part of the Supreme Court’s May 14 ruling.

The leagues appear ready to work the clock on this lawsuit if they can’t win quickly. Their filing states, “the amount of any such damages [to the track]cannot be established as a matter of law on this motion, but must await discovery into NJTHA’s financial and other records and an evidentiary hearing.”

The changing state of “common sense”

A comment from Shipp’s original 2012 ruling that was revived by the leagues in this filing might sound out of date in a world in which many of the leagues and teams are partners with daily fantasy sports operators, the Vegas Golden Knights just played in the Stanley Cup Finals, and the NFL’s Raiders are on their way to Las Vegas, too: “That the Leagues have standing to enforce a prohibition on state-licensed gambling on their athletic contests seems to us a straightforward conclusion, particularly given the proven stigmatizing effect of having sporting contests associated with gambling, a link that is confirmed by common sense and Congress’ own  conclusions.”

The leagues note that the filings by the horsemen “cites no authority for the patently absurd proposition that reliance on a duly enacted federal statute constitutes bad faith because the Supreme Court subsequently invalidated the statute as unconstitutional years after that reliance. Congress enacted PASPA in 1992, and, for more than 25 years, the clear language of the statute expressly provided the Leagues with a cause of action to obtain injunctive relief to address violations of the statute. Until May 2018, every challenge to the constitutionality of PASPA — both before and after the Leagues relied on the statute to seek a TRO [temporary restraining order]— had been rejected.”

Much of the new, 24-page filing goes over old ground in this landmark case, with the leagues not missing a chance to get a dig in to buttress their claims that widespread legal sports betting will harm the leagues: “Even New Jersey’s sports wagering law exempts college sporting events that take place in New Jersey or in which any New Jersey college team participates, regardless of where the event takes place. As this Court observed when it granted the TRO, that exemption for New Jersey college sporting events ‘belies any argument that [the Leagues]are not injured by gambling on their games.’”

Actually, former State Senator Ray Lesniak — who just won $275 on a $50 bet at Monmouth Park thanks to France’s World Cup title run — has said that the exemption stems from the fact that many of his fellow Rutgers alumni in the legislature were squeamish on allowing such betting. So Lesniak, ever the pragmatist, evaded that potential hurdle in his bill.

Why NJ horsemen may not cash in

But why shouldn’t the horsemen at least collect the $3.4 injunction bond? They did ultimately prevail, after all. The leagues strike back:

“NJTHA has not demonstrated that, given the state of the law on PASPA in 2014, it had a right to operate a sports betting venue at Monmouth Park in October and November 2014, when it was restrained by the TRO from doing so. That the Supreme Court struck down PASPA more than three years later in 2018 is insufficient to summarily conclude that NJTHA had the right to operate a sports book in 2014.”

Remember, the law in play in 2014 — the “deregulation” version — was not validated by the Supreme Court. In the fall of the 2014, Monmouth Park wanted to offer privatized sports betting. No court has ever said they could do it that way. It’s an interesting wrinkle that the horsemen may be hard pressed to overcome.

John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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