PASPA ruled unconstitutional: Green light for US sports betting

On Monday this week, the US Supreme Court by a majority of 6-3, struck down as unconstitutional a law that has effectively outlawed sports betting across the US since 1992.

The decision was handed down in the case commonly referred to as Chris Christie v NCAA.

New Jersey were contesting their right to legalise and regulate sports betting services within their state. The legislation that has until now prevented them and other states across America (with a couple of exceptions) from doing this is the Professional and Amateur Sports Protection Act of 1992 (PASPA).

Quick look at PASPA

PASPA was enacted in 1992, with the purported aim of protecting the integrity of US sports by making it unlawful for any government (ie state legislature) to authorise any form of wagering on sporting events.

Nevada managed to have themselves exempted from the law; so too did the sports lotteries in Oregon, Delaware, and Montana. New Jersey missed the boat on this early carve out and have been fighting ever since for their right legislate in favour of sports betting. Other states around the US have been watching the fight with interest.

The curious thing about PASPA is that it doesn’t make it illegal to place a sports bet in the US. It doesn’t make it illegal to accept a sports bet in the US (ie as an operator); there’s other legislation for this. It expressly targets government entities and their ability to lawfully authorise sports betting.

Violation of the 10th Amendment

New Jersey have long contended that PASPA operates in violation of the 10th Amendment to the Constitution. In its majority judgement, the Supreme Court agreed, saying…

“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.”

What now?

A number of states have been laying the foundations for sports betting industries in anticipation of this Supreme Court decision and are expected to move quickly to get things running now that they have the green light. Casinos and racetracks in New Jersey could have betting windows open within a couple of weeks. Delaware won’t be far behind.

Online sports betting will take a little longer, even in NJ where a licensing process still has to take place. But this will happen quickly also. The primary candidates, casinos already with remote (casino games) gambling licenses are front and centre and no doubt prepped with the technology to be up an running asap.

Almost 20 states have introduced bills aimed at regulating sports betting, with one eye on the PASPA ruling. These will now likely be fast tracked. A report in the Washington post suggested it was likely that West Virginia, Connecticut, Mississippi, Illinois and New York will have legalised sports betting within 90 days, and that up to 32 states across the US could be accepting sports bets within 5 years.

What about the Federal Wire Act?

There is still one fly in the ointment. Remember the old Federal Wire Act, or Wire Wager Act (lets call it the Wire Act); the legislation passed in 1961 that online gambling opponents hung their hats on for so long as the law banning all forms of online gambling across the US, until the Department of Justice decided in 2011 that it applied to sports betting only?

Well it still unambiguously applies to sports betting. But like all things legal, it’s application isn’t so straight forward.

The Wire Act makes it illegal to…‘knowingly use a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.’

The sports bet itself…no problem. It’s where the communication of that bet (and/or payments & payouts related to) crosses state lines that the law is broken.

Intra-state sports bets are fine. A resident of NJ walks into a casino in NJ and places $100 on the Celtics. The Wire Act has no application here.

But if a resident of New Jersey places a sports bet online with a casino in New Jersey, and that communication is bounced all over the US (or even the world) due to ISP intermediate routing before it finally reaches the casino’s servers, technically the Wire Act has been breached. Will these inevitable breaches be prosecuted?

In Nevada, where punters have been able to place sports bets on their mobile devices for some time, it seems to have been accepted by the powers that be outside the state that intermediate routing is not a Wire Act violation. Whether this position will be applied to all other states remains to be seen.

Implications for broader online casino regulation?

With another major impediment to US state based online gambling falling, momentum towards broader based regulation will accelerate.

More states will now move to legalise remote gambling with casino games likely added to the mix as an allowed offering. Sports betting has always been the big road block, not casino games.

More operators, including the larger European based brands will start investing in a US presence. Just today William Hill announced they are opening a new Hoboken, New Jersey office and are hiring for online roles. Other big names who don’t already have a foot in the door in the US (888, Betfair Paddy Power are already on the ground) will soon follow suit.

It’s going to be a very interesting couple of years for online gambling in the US.