On May 14, 2018 the Supreme Court of the United States released its decision in Murphy v. National Collegiate Athletic Association.  This decision invalidates the key Federal prohibition on State-authorized sports gambling businesses, the Professional and Amateur Sports Protection Act (PASPA).  Under PASPA, except in connection with very narrow exemptions, States could not authorize entities to operate, sponsor, or advertise betting, gambling, or wagering businesses that were based on sporting events.  The Court invalidated PASPA because it unconstitutionally regulated that which a State could regulate in violation of our system of “dual sovereignty,” which reserves for the States certain rights to regulate themselves free from Federal intervention.

 

Citing a variety of sources, including the Declaration of Independence, the Federalist Papers, and notes from the Constitutional Convention, Justice Alito, joined by six other justices and joined in part by Justice Breyer, recognized the “anti-commandeering principle,” which dictates that the Federal government may not “command to the States” or its officers and subdivisions that they administer or enforce a Federal regulatory program.  Applying this principle to PASPA, the Court held that a statute that tells a State – in this case New Jersey – how to regulate sports gambling is unconstitutional.  Thus, New Jersey is now free to change its State constitution and enact a statute – 2014 N.J. Laws p. 602 – that authorizes most sports gambling in casinos and horse betting tracks in New Jersey.

 

PASPA contains a separate provision that prohibits private parties from sponsoring, operating, advertising, or promoting sports-gambling schemes if state law authorizes them to do so.  The Murphy decision takes a “wrecking ball” to PASPA, according to Justice Ginsberg’s dissent (joined by Justice Sotomayor and Justice Breyer, in part) because the decision applied to the entire statute, rather than just the State-prohibitive language.  The majority reasoned that it was nonsensical to say that a State was free to authorize sports gambling and then create a Federal civil cause of action to enable the State or other third parties to seek an injunction against a private entity who engages in the State-authorized activity.  The dissent reasoned that it was not unreasonable to interpret the Congressional intent to encompass a broad belt-and-suspenders approach to stem the spread of sports gambling.  The dissent argued that New Jersey could be permitted to act independently because of the “anti-commandeering principle”; but the Federal government could still seek to suppress the spread of sports gambling by regulating the actions of individuals affecting interstate commerce.  Justice Breyer agreed with the interpretation articulated by the dissent, and he noted that it would have left New Jersey with a Pyrrhic victory:  The State could authorize sports gambling but entities in the State could be sued for actually operating a sports-gambling company.

 

Though any State that wishes to authorize sports gambling may do so now, the decision did not mandate that every State authorize sports gambling.  The decision is distinctly focused on the principle of respecting “the policy choices of the people of each State” on controversial issues such as gambling.  Further, the decision reiterates the important principle that the Federal government cannot ban advertising speech about a lawful activity.

 

The decision did not affect any of the other Federal criminal statutes that prohibit gambling including 18 U.S.C. § 1955, prohibiting operation of a gambling business if that conduct is illegal under state or local law; 18 U.S.C. § 1953, prohibiting interstate transmission of wagering paraphernalia; 18 U.S.C. § 1084, prohibiting interstate transmission of information that assists in the placing of a bet on a sporting event if the underlying gambling is illegal under state law; and 18 U.S.C. § 1952, prohibiting travel in interstate commerce to further a gambling business that is illegal under applicable state law.

 

Takeaway: The Murphy decision does not immediately open the entire U.S. to sports gambling.  Entities seeking to operate a sports gambling business must analyze each State’s approach to this area separately and carefully.