In one of its final acts of the October 2016 term, the Supreme Court of the United States recently agreed to hear a New Jersey challenge to the constitutionality of the Professional and Amateur Sports Protection Act (“PAPSA”), a federal statute banning states from authorizing and regulating gambling on sporting events.[1]

As we reported earlier this year, legislators in numerous states have introduced legislation aiming to legalize and regulate sports wagering. Thus far, sports wagering legalization efforts by various states have been blocked by federal courts on the basis that PAPSA prevents states from taking such actions. Most notably, the United States Court of Appeals for the Third Circuit held in an en banc decision that a New Jersey statute seeking to legalize sports wagering was preempted by PAPSA and that PAPSA was a constitutionally valid exercise of congressional power.

The Supreme Court’s decision to grant review was issued at the end of the October 2016 term because the Court gave the then-incoming Trump administration an opportunity to file an amicus brief expressing its views on whether the Court should take up the matter. The Trump administration took the position that the Court should not grant review to the Third Circuit’s en banc decision. Despite waiting for the Trump administration’s views, the Court disagreed with the Trump administration’s position and granted review of PAPSA to determine whether the statute’s language prohibiting states from authorizing sports wagering exceeds the constitutional power of the federal government, which is constrained by the Tenth Amendment. The key legal battleground in this case will be the Court’s interpretation of PAPSA under the controlling precedent of New York v. United States, a 1992 decision which held that “the Federal Government may not compel the States to enact or administer a federal regulatory program.” 505 U.S. 144, 188.

Takeaway: Advertisers will need to watch this case closely. Should PAPSA be struck down, there will be new opportunities for states to legalize sports wagering, creating an entirely new competitive advertising market in the gaming industry.

[1] Nevada and certain other states are exempt from the PAPSA prohibition because they allowed legal sports wagering before PAPSA was enacted.