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New Jersey Lawsuit Attempts to Strike Down Federal Gambling Ban...By Jay Graziani

New Jersey has had its stomach in knots over sports betting for weeks. The Garden State has always fretted about their neighbors to the south, who have slowly but surely been eating up their share of the East Coast gambling pie. Most recently, Delaware governor Jack Markell proposed sports parlay cards at the state's three casinos and up to 10 other venues, including sports bars. New Jersey knows it can't afford to give up any competitive edge on the gambling front, and thus its Senate passed a resolution a few weeks ago calling for the end of the federal sports betting ban so that the novelty of sports wagering could be used to prop up sagging Atlantic City casino revenue.

Monday, the next move in the escalating East Coast gambling turf war materialized. New Jersey Senator Raymond Lesniak, a longtime and outspoken proponent of sports gambling in Atlantic City, announced in a press conference that he'd filed a lawsuit in federal court seeking to overturn the federal ban on sports wagering. Lesniak headed a list of plantiffs including all the usual suspects: Interactive Media Entertainment & Gaming, the Standardbred Breeders & Owners Association of New Jersey, the New Jersey Thoroughbred Horsemen, and the Thoroughbred Breeders Association of New Jersey. While all sought to take credit for the move, Lesniak's PR skills naturally put him in the spotlight. Lesniak's legislative partner on the gambling front, Senator Jeff Van Drew, of course also attended the press conference.

What better time than the Monday morning after the first round of March Madness to announce the next move in the online gambling battle? It's arguably the biggest gambling weekend of the year, with plenty of water cooler talk about who's brackets did what and a last-minute hustle to grab the last of the bracket fees before the less-interested coworkers log on to the bracket manager to realize they've already been mathematically eliminated. And of course all the hoopla over hoops makes that fictional figure of $100 million in annual tax revenue from sports gambling at least imaginable. No one can accuse Lesniak of bad timing.

Passage of the Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibited sports wagering in all but four states - and the New Jersey Legislature was too slow to act during the one year opt-in window to be grandfathered in under the law. It's been a bitter issue in the state for years, festering even more than normal during the present budget crisis and surprisingly rapid decline of the Atlantic City tourism industry.

Despite being a constant thorn in the side of sports betting industry, PASPA has, surprisingly, never been challenged in court. Jersey's decided to fight this battle on the competitive edge front. Their case is that Delaware's right to sports betting gives them an unfair advantage in attracting East Coast gambling dollars. The law therefore discriminates between states, and interferes with states' rights to collect revenue.

The present lawsuit challenges the constitutionality of PASPA, including violations of the Commerce Clause and Equal Protection Clause of the U.S. Constitution, as well as the First, Tenth, and Eleventh Amendments. It also claims violations of due process and privacy rights. In other words, Lesniak and his co-plantiffs are throwing the book at PASPA.

Whether the bill ends up having any legal teeth has yet to be seen. Even if it does, it will take years to wind through the court system. If it succeeds, legislation will still have to be passed to change the gambling laws of each state, no small task considering gambling's precarious crawl through the political minefield so far. And even if a bill succeeds in the states, any regulation of sports betting will ultimately face legal challenges from the sport leagues and the NCAA, bitter enemies of sports gambling despite the clear economic benefit legalized wagering would provide to their bottom lines. No matter what happens, sports gambling in New Jersey is many court battles away from coming to fruition.

More interesting is the fact that striking down the PASPA impacts not just New Jersey, but 45 other States of the Union as well. Eliminating PASPA conceivably allows all of those States to offer sports wagering if they so desire, including New Jersey's neighbor to the east, Pennsylvania, which has slowly found itself drawn deeper and deeper into the escalating gambling-for-tax-revenue movement.

As the turf war heats up for East Coast gambling dollars, expect both sides to become less and less discriminatory in how far they're willing to push the envelope in search of new tax bases. Delaware may be Jersey's threat now, but if Lesniak is successful, there may be many other states willing to tap the vice markets a little deeper for a quick fix to their budget woes. The competitive edge New Jersey is fighting for may disappear before it even fully materializes.

While striking down PASPA gets rid of one thorn in the side of regulated sports wagering, other thorns exist, namely the outdated Wire Act of 1961 and the more recent Unlawful Internet Gambling Enforcement Act of 2006. The legal maneuvering may end up being complicated, but opening up the doors to sports wagering in any form will ultimately raise the issue of online wagering. Casinos will surely lobby for online access, at least within the state, starting down the slippery slope of state-to-state wagering and, ultimately, offshore and international wagering.

Antigua recently challenged U.S. gambling policy under WTO trade rules, using essentially the same argument Lesniak is using - that current U.S. gambling law discriminates between providers. In Lesniak's suit, the discrimination is between states; in Antigua's, it's between domestic and foreign operators. No doubt Antigua and other offshore gambling havens will be monitoring this case closely. Even if sports gambling never materializes in Jersey, this lawsuit may have long-lasting implications on the offshore gambling scene.

Jay Graziani

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