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Delaware's Best Option May be to Join iMEGA's Lawsuit...By Hartley Henderson
Last week gambling lawyers and state politicians were stunned when the court of appeals ruled that Delaware couldn't offer single game sports betting. Everyone simply assumed the appeals court would uphold the lower court's ruling which permitted the state to offer any form of sports betting it liked, but instead the higher court ruled that Delaware could only offer a sports lottery as it had in 1976. Naturally this ruling has upset Delaware officials, although they are moving forward with a sports lottery. Delaware, along with Oregon, Montana and Nevada were grandfathered in and thus given an exemption from PASPA, but the leagues (and it appears now the courts) are suggesting that the exemptions had strings attached to them. There was no indication of restrictions or an "expiry date" in the act when it was passed, but the court decision seems to state otherwise. As well, a complaint by the leagues (spearheaded by Major League Baseball) has suggested that Delaware has no right to offer anything under PASPA because they lost the opportunity by waiting so long to act. New Jersey was given the option of a similar exemption to PASPA in 1992 as a result of its casino offerings, but failed to bite. It certainly would have been interesting to see what type of sports betting the courts would have allowed New Jersey to offer now had they agreed to the exemption two decades ago since New Jersey never offered any form of sports wagering. Based on this ruling it would seem the courts would have told New Jersey they weren't permitted to offer anything even if they received the exemption. The reason Delaware is upset with the higher court ruling is clear - sports lotteries never generate the same revenue as single game betting because most large sports bettors won't play parlays. Delaware stopped offering its sports lottery two decades ago due to poor sales, and the lottery in Oregon wasn't a success either. The Sports Select lottery in Canada has fared better than either of those lotteries, but for the most part people who bet Sports Select are traditional lottery players and smaller sports bettors. In fact Ontario now wants to offer single game sports betting to attract the larger Ontario bettors who are currently betting offshore.
Another concern for Delaware is that the leagues are now challenging Delaware's right to offer a sports lottery on the grounds that sports betting is a game of skill, and Delaware's constitution prevents them from conducting a lottery scheme that relies on anything but pure chance. Ironically, Professor Alan Dershowitz two years back stated that Gary Kaplan should be let off because BetonSports only offered sports betting which was a game of skill and skill games are excluded from the law. The courts and department of justice wouldn't buy the argument then, and now it appears the new DoJ will be forced to argue the opposite position if they want to prevent Delaware from offering the sports lottery.
While most lawyers expressed shock at the ruling, Professor I. Nelson Rose was more understanding of the decision.
"I haven't had the chance to read the court of appeal's opinion," Rose stated, "but from the justice's questioning that was reported in the press, I think the real problem for the state was that all this legal activity is taking place at an early stage, before a full trial. The court of appeal was concerned with the legal ramifications of letting straight sports betting take place, which it might later decide was illegal. I ran into a similar problem when I was working with Donald Trump's law firm in challenging the New York Lottery's plan to introduce Keno. What happens to the thousands of players who have lost money betting on a game, which is later declared to be illegal? Can they sue and get their money back? The courts feel it is better to just avoid this problem by not allowing the form of gambling under attack to go forward, until there has been a full trial on the merits."
If Delaware wants to offer single game sports betting sooner rather than later, its best option may be to simply join the lawsuit initiated by iMEGA and New Jersey challenging the constitutionality of PASPA. Since 1992 no state expressed interest in new sports betting endeavours so the law was never really challenged. But with the recession and a renewed interest in sports betting by many states (some which have publicly indicated an interest and some which have passive interest), the law is now being scrutinized more closely. iMEGA has stated the law violates numerous areas of the constitution, including the fifth and tenth amendments, as well as the Commerce Clause because it allows sports betting in 4 states at the exclusion of the other 46 which is unfair.
Joe Brennan Jar, from iMEGA, appeared to welcome Delaware joining the suit.
"The folks in Delaware are a bit stunned by the decision, and are considering their options. We've talked with the affected parties there, and they've said they're going to consider our PASPA challenge. If Delaware doesn't move forward with an appeal, our suit would be their best shot, since Delaware did not raise any of the constitutional issues that our suit does.
We've talked with people from other states about the suit, and there are even more people who are raising this issue on their own in their states. The Delaware ruling in the short-term may dampen some of that interest, until the nature of the ruling is explained to them. We feel very bad for Delaware and the companies that are affected by this, but the ruling ironically strengthens our PASPA challenge. PASPA intrudes on states' rights, and Delaware's plight is a vivid example of that."
Gaming law expert Anthony Cabot seemed to concur that joining the lawsuit would be an option for Delaware, although he did state that the two situations (New Jersey and Delaware) are substantially different. In Cabot's opinion the best route for all states would be to devise a method to give the leagues a piece of the action.
"The decision by the Appellate Court was disappointing. The case, however, is fundamentally different than the challenge raised by the State of New Jersey. Delaware was claiming that it could offer sports wagering under an exemption from PASPA, while New Jersey is claiming that the adoption of PASPA itself is unconstitutional. Therefore, while the Delaware decision has an immediate impact in Delaware and negatively impacts several companies that have invested millions in facilities and infrastructure, its impact is unlikely to extend past the borders of Delaware. The New Jersey challenge, however, could potentially open the door for sports gambling throughout the United States. I give credit to iMEGA for lending support to the cause because the NFL, which is always the opponent in these fights, is a well financed and politically influential organization. At some point, the best solution is [going to be] to figure out a way to pay the NFL team owners and players for the right to bet on its games. Precedent exists for a similar scheme under the Interstate Horse Racing Act. I am guessing that the prospect for an additional $1 billion in net revenues may change some thinking. This is all about money."
Not everyone, however, believes joining iMEGA's lawsuit is necessarily the best road for Delaware to take. Attorney Lawrence Walters from firstamendment.com concurs the lawsuit has potential, but may not be the best option for Delaware. He also expressed concern that the courts may not be willing to hear a case on the constitutionality of the 1992 federal law.
"Delaware need not join iMEGA's suit. It can bring its own challenge. It could decide to join an existing challenge, but it may want to proceed on its own complaint, and raise the issues it felt [were] important in court, without relying on the claims asserted by iMEGA. But iMEGA could also consent to bringing in additional plaintiffs, like Delaware, so long as the case was not too close to trial.
As far as the chances of a federal court overturning a federal law on constitutional grounds - that is one of the hardest things to achieve in litigation. About the only relief more difficult, in this area, is getting the federal court to interfere in a state court proceeding, based on claims of constitutional rights violations. But nothing is impossible with the right judge and talented lawyers. There would certainly be appeals, no matter what the trial court ruled, so I suspect we are years away from this issue being settled. Gambling is traditionally a state issue, but the feds are not prohibited from legislating in the area, where the gambling activity involves interstate commerce. Where the internet is involved, you automatically have interstate commerce, so it will be difficult to argue states rights if the activity involves online gambling. If the internet is not a component of the gambling, there may be no legitimate federal interest. If the online gambling is effectively limited through geo-blocking to one individual state's residents, the arguments get better for state's rights. The Commerce Clause argument would only be applicable to challenge state laws, not federal laws."
Nevertheless, while overturning federal laws is difficult, it certainly isn't unprecedented. Anthony Cabot pointed out to me that federal laws are frequently overturned. For example, in 2002, the Supreme Court invalidated the Child Pornography Prevention Act of 1996, and according to MSN Encarta, "The Supreme Court has overturned more than 125 federal statutes and 1200 state laws and municipal ordinances, most of them since the late 19th century."
All the lawyers and other individuals I spoke to that fight for states' rights see this as an important case. "I have no interest in gambling, but this law sets a dangerous precedent and must be overturned. If the courts can get away with shutting down states' rights on land based gambling, what will they shut out next? We live in a democracy, not a communist country, and in this democracy the states have rights to pass laws for activities within their own borders," a free speech lobbyist stated to me.
Martin Owens, a California attorney specializing in the law of Internet and interactive gaming and a regular speaker at Clarion gaming conferences, not only agreed with the above lobbyist, but was almost livid at the hypocrisy of the exemptions given in the law, as well as the power of the sports leagues. She stated, "I think the law is un-Constitutional, and absurd. Why is it that the citizens of Delaware, Montana, Oregon, and Nevada are moral enough to bet on sports, but the rest of the nation can't handle it? Moreover, it is inherently unfair to make the sports industry a co-equal branch of government. (Things would be a whole lot different today if GM or Exxon had been able to overturn state laws at will, don't you think?)."
In an article published on Sportsnetwork.com Owens, also called on bettors across the nation to take a stand if they want the law overturned:
"It's also time for individual bettors need to make their voices heard.
Just why should any individual's leisure pursuits be subject to inspection and interdict by the sports leagues? The players would be corrupted? To judge by the headlines, throwing games is the only thing they don't do. And if the voters of a US state, through their elected representatives, choose to legalize a given wager or game, where do the sports leagues get the power to sue state governments and veto their legislation?
Time to cut through the hypocrisy and pious PR. Bettors are people too, and it's time they let their public servants know it. Their choices deserved to be respected as much as anyone else's. Tell the powers that be to take a pass on PASPA and repeal it."
It also must be noted that when PASPA was enacted in 1992, the law was opposed by the Clinton administration because the law trampled on states' rights. The DoJ under the Bush administration was clearly in the pocket of the religious right, but the current Obama regime is supposed to be different. Yet it appears that when it comes to gambling the current regime has simply taken the baton from the Republican Attorney General and is running with it. When the issue was with online gambling many politicians went along with Kyl, Goodlatte and the Republican naysayers because it because it involved foreign governments and a medium they weren't convinced about. But with the current courts passing judgements against land based gambling within the United States it seems clear that the issue is no longer about the internet or offshore wagering, but is about pious morality and pandering to sports leagues.
It is imperative that American bettors step forward and inform the government that they are tired of being talked down to and taken for granted.
And if the voters of a US state, through their elected representatives, choose to legalize a given wager or game, where do the sports leagues get the power to sue state governments and veto their legislation?
I hate the NFL more and more everyday.
“Two things are infinite: the universe and human stupidity; and I'm not sure about the universe.”
― Albert Einstein
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