Supreme Court Strikes Down PASPA, Opening the Sports Betting Floodgates

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The Supreme Court on Monday struck down a law which has for over two decades prohibited sports betting in all but a handful of US states, paving the way for a massive expansion of legal sports wagering across the country.

The landmark ruling was handed down in the case of Murphy v NCAA, which revolves around the constitutionality of the Professional and Amateur Sports Protection Act (PASPA), a law ostensibly created to protect the integrity of sporting events.

By vote of 7 to 2, justices sided with Murphy, which argued that PASPA commandeered states’ rights to offer gambling within their borders.

The opinion of the court was delivered by Justice Samuel Alito, who was joined by Justices Kennedy, Roberts, Kagan, Thomas and Gorsuch, as well as in part by Justice Breyer. Justices Sotomayor and Ginsburg were in dissent, along with Breyer in part.

PASPA, which has been in effect since 1992, originally included a carveout for New Jersey. However, legislators failed to act before the specified time limit expired, forcing the state to sit on the sidelines. The end result was a near total ban on sports wagering outside of Nevada, something that has allowed illegal sports books to thrive and deprived states of a potentially lucrative source of tax revenue.

Next steps

New Jersey has secured its victory, but before any betting takes place, it will first need to hammer out the specifics and framework of the forthcoming industry. A pair of NJ lawmakers have tried to solve the issue, recently introducing a bill that lays down a clear set of guidelines. Here are the key points:

  • The industry will be overseen by the Division of Gaming Enforcement (DGE)
  • Sports betters must be 21 years of age and located inside NJ
  • Wagers cannot be placed on collegiate sporting events occurring in New Jersey, nor on NJ college teams playing outside the state.
  • Online sports books must have a land-based hub

The DGE attempted to get a jump on the licensing process earlier this year, announcing that companies interested in providing sports betting-related services could preemptively submit an application. It’s unclear how many have done so.

Now that sports betting has been given the green light, we will see both the regulatory and licensing process kick into high gear.

When can I bet on sports in NJ?

With PASPA on its way out, New Jersey casinos and horseracing tracks will now be allowed to offer sports betting to customers through both physical and virtual sports books. What’s more, this should happen sooner rather than later – some venues could be ready to start taking bets in the next few weeks.

Several NJ properties have already made extensive preparations in anticipation of a favorable decision. Monmouth Park in particular placed a big bet on sports wagering, going so far as to build its own sportsbook far in advance of the ruling at a cost of $1 million. The track is already partnered with UK iGaming giant William Hill and plans to invest a further $5 million in its sports lounge now that the sports betting floodgates have been opened.

The Meadowlands is also poised to take advantage of the windfall which the ruling will likely provide. In fact, the new opportunity couldn’t come fast enough for any of the state’s tracks, which have suffered through a prolonged slump and desperately need to grow their customer bases.

We should also start seeing sportsbooks cropping up at Atlantic City’s casinos very soon, although some seem more prepared than others. Borgata, the state’s top grossing land-based gaming venue, has already committed $7 million to the project.

Sports betting will also be allowed online in the state via Internet connected devices and apps. As per NJ law, iGaming licensees are authorized to offer virtual versions of any of the same games they do inside their land-based casinos. A physical sportsbook on site would allow a casino to open up its sports wagering operation to a potentially massive Internet customer pool.

Countrywide expansion

While New Jersey will be the first mover in legal US sports betting, dozens of other states are chomping at the bit to get involved as well. The effort to repeal PASPA had the backing of at least 18 states, all eager to offer a safe, regulated environment and divert revenue away from black-market books and into government coffers.

Several states have already made it official by passing sports betting legislation, while lawmakers in others have tested the waters by floating their own bills. Apart from New Jersey, the states of Connecticut, New York, Pennsylvania, West Virginia and Mississippi have so far put laws on the books which would allow sports wagering. For the most part, these states will waste no time in getting their industry up and running.

Pennsylvania for its part passed a sweeping gambling expansion package last year, which also allows for online gambling. This fall, we expect Keystone State players to get the chance to make bets at both online and live sportsbooks partnered with PA’s 12 land-based casinos.

In all, lawmakers in 11 states have introduced sports betting bills since 2017, highlighting the nationwide interest in the industry. The Supreme Court decision will likely motivate others to kickstart efforts to get in the game as well.

The Wire Act looms

In the absence of a federal law expressly permitting sports betting, states will be forced to legalize the industry individually.

While an overarching law would greatly simplify the process, there is one big roadblock standing in the way: The Wire Act.

Passed in 1961, the Wire Act attempted to crack down on the Mafia by prohibiting the transmission of sports wagers across state lines.

The law has been effective in battling offshore online sports books and poker sites, but could also prove a nuisance for regulated operators. As it stands now, a company would need to set up servers in each of the states where it wants to offer sports wagering in order to not run afoul of the law.

This is due to the complexities of how data is transmitted on the Internet, and the likelihood that it will travel from a regulated state to a nonregulated state before reaching its final destination, something currently forbidden.

Granted, while some experts believe that authorities would not be aggressive in prosecuting these types of violations, it still highlights the challenges facing lawmakers looking to legalize the industry in a federal capacity.

Bill Grinstead

Bill has over a decade of experience working in diverse aspects of the online gambling space. He is currently focused on legal, US online gaming, which he has reported on since the industry first became regulated in the country.

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