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Any Changes to U.S. Gambling Laws Will Involve New Jersey...By Hartley Henderson

With all the talk about changing laws for sports betting and online gambling in the United States, it's pertinent to note that New Jersey has been at the forefront demanding change at every step. In 1976 New Jersey legalized online gambling via a state referendum in an attempt to rejuvenate Atlantic City which was becoming a cesspool, and also to bring necessary revenue to state coffers. The state decided to offer casino wagering, but opted not to allow sports betting the way it's main state rival, Nevada, did. The decision proved to be fruitful for a short period of time as people flocked to Atlantic City, but it was clear that the place would never generate the tourist interest that Las Vegas had. Furthermore, while the boardwalk itself was spectacular, the casino revenue did little to help clean up the rest of the city. In fact in the years after casino gambling was legalized, crime apparently increased in Atlantic City and people weren't safe once they strayed away from the boardwalk.

In 1992 the federal government passed the Professional and Amateur Sports Protection Act (PASPA) at the behest of the sports leagues. The federal law made it illegal for all states (except Nevada) to offer wagering on sports, but provided a chance for states to exempt itself from the law if they were already offering other forms of casino wagering. That exemption was geared towards New Jersey, but after a state referendum failed to generate any interest in sports betting New Jersey decided not to opt in. The law also allowed exemptions for states that had existing sports lotteries between 1976 and 1992, which meant that Oregon, Delaware and Montana were technically exempt. However there is much wrangling now as to whether Delaware truly has the right to offer any form of sports betting. Thus far Oregon and Montana haven't indicated any interest in sports betting, but Delaware wants in and argues that they are exempt from PASPA, because for a brief time in 1976 the state offered a sports lottery. The NFL is challenging Delaware's right to offer sports wagering because they contend sports betting involves skill, and Delaware's constitution only allows wagering on a lottery. By the NFL's definition, a lottery means a game of pure chance such as the Powerball lottery and picking sports doesn't meet the criteria of a lottery. The Delaware Supreme Court is currently deciding whether the state has the right to offer sports betting and also whether it has to be by a lottery or whether they can offer single game sports betting. The NFL is arguing that the Delaware Supreme Court shouldn't be involved in the development of legislation relating to the sports lottery, and in fact the state's highest court should only be determining if the proposed lottery violates state law. The NFL suggests that doing anything else upsets the balance of power between the 3 branches of government, as the Supreme Court should only be involved in interpreting existing laws. The Department of Justice has been mum on the issue, but it should be noted that in 1992 when PASPA was passed the DOJ stated its objection to the law because they were worried problems exactly like this would crop up in the future.

Fast forward 17 years from the passing of PASPA, and New Jersey now wants to offer sports betting, fearing competition from Delaware, as well as to help boost interest in its other gambling options. The state believes that Atlantic City casinos and racetracks such as the Meadowlands have to offer a new product such as sports betting to help garner interest in their existing products. In fact the New Jersey Horsemen believe sports betting may be their real saviour. New Jersey Senator Raymond Lesniak has decided to spearhead the effort and is challenging PASPA on the grounds that it is discriminatory. Furthermore, the state argues that sports betting is occurring throughout the United States anyway, but no states are actually benefiting from it, instead the money is going to the wrong hands. In announcing his challenge Lesniak stated:

"Sports betting in the U.S. is unregulated, untaxed and illegal"..."Rather than supporting thousands of jobs, economic activity and tourism, the federal ban supports offshore operators and organized crime."

The comments are no surprise considering only 3 years ago New Jersey was at the forefront of a massive illegal gambling ring involving Rick Tocchet, Janet Gretzky and the Bruno-Scarfo crime family. Finding an illegal bookmaker in New Jersey or anywhere isn't too difficult.

The state is being represented by iMEGA and the horse racing industry and contend that their effort is for the other 45 states as well, which do not have an exemption to PASPA. Lesniak added that he believes PASPA ,as well as being discriminatory, violates many constitutional amendments. In a press release announcing the decision to challenge the law, Lesniak wrote the following:

The law, entitled the Professional and Amateur Sports Protection Act of 1992 (PASPA), violates the Commerce Clause of the United States Constitution by not uniformly regulating commerce throughout the United States. It also violates the 14th Amendment to the United States Constitution by being unconstitutionally discriminatory against the plaintiffs and the people of the State of New Jersey. It also violates the 5th Amendment to the United States Constitution by being unduly overbroad and vague. It also violates the 10th Amendment to the United States Constitution by regulating a matter that is reserved to the States. It also violates the 11th Amendment to the United States Constitution by empowering private parties, sports organizations, to enforce its provisions over other private parties. It also violates the First Amendment to the United States Constitution by having a chilling effect on efforts by Senator Lesniak to sponsor and have enacted legislation to legalize and regulate sports betting in New Jersey and raise revenues for the state treasury. And, lastly, it violates constitutionally protected rights of privacy of the Interactive Media Entertainment & Gaming Association.

Asked exactly what the last statement meant, Joe Brennan Jr. from iMEGA told me:

"The Senator was making the point in that iMEGA has members that would happily participate in a legal, regulated sports wagering market in NJ, and because PASPA unconstitutionally prohibits NJ from offering it to its citizens, it also interferes with what should be a matter between NJ and these operators. It is not for the Federal government to say how the states may raise revenue. And, the Federal government cannot create special revenue opportunities for four states to the exclusion of the other 46."

When asked why New Jersey didn't take advantage of the opportunity to opt in to sports betting when they had the chance, Lesniak replied "things change" and also implied that it was an error in judgement at the time. But he also maintained that the state can't be held to a decision that is no longer relevant. The leagues and many in the federal government argue that New Jersey made a choice not to opt in when they had the chance and they should live by that decision. Ironically, those opposing New Jersey are many of the same government officials who told the WTO that America shouldn't have to live up to the gambling concessions they agreed to in GATS because the American government made a mistake by not opting out of gambling like many other countries had and will not be held to an agreement that is no longer relevant to them. Mind you, hypocrisy is nothing new in government.

Of course this isn't the first time New Jersey seemed ready to challenge the federal government on laws they believed were unreasonable. Back in 2000 when John Kyl and Robert Goodlatte were pushing their anti online gambling bills, New Jersey was preparing to move forward with internet gambling. At a River City Group (now Clarion Gaming) conference in Montreal, New Jersey Assemblyman Tony Impreveduto announced to the thousands in attendance that New Jersey was preparing to set up virtual casinos and would take bets worldwide. According to the plan, which Impreveduto introduced at the General Assembly, the state planned to authorize the Casino Control Commission to permit Atlantic City casinos to offer casino gambling over the Internet by amending the "Casino Control Act" of 1977.

The proposed bill mandated that the equipment for virtual casinos would be kept in designated areas of existing casinos which would ensure the legitimacy of games, although patrons would be kept out of the rooms where the equipment was to be stored. The proposed amendment also called for extensive game testing and safeguards to ensure no one could bet compulsively and that underage bettors would be stopped. Money from the casinos was also designated to help compulsive gamblers. Sports betting was never in the equation, but it appears New Jersey dropped the idea for the virtual casinos when George W. Bush was elected to office in 2000. It is quite interesting to note, however, that New Jersey is challenging a federal law again now that the Democrats are in power. That could speak volumes as to the different feeling towards gambling by the current regime.

Make no mistake about it, states are prepared to stand up for their rights in the area of gambling, which they believe is a vice that only the states should decide about. Many states oppose all laws like the UIGEA and PASPA, believing it's none of the federal government's business. California is prepared to challenge the UIGEA and set up an intrastate poker network, even though the DOJ claims all internet betting is interstate by nature (at least the DOJ under Bush did); Delaware is preparing to offer sports betting, believing that they have an exemption from PASPA, even though the leagues and many in the federal government don't believe this is the case; and now New Jersey is preparing to challenge the legality of PASPA in court. Furthermore, while the other 45 states may not have indicated any interest in any of the cases, almost all the states are monitoring the situation closely since gambling is a form of revenue that can't be overlooked in these tough economic times. Plus, the NFL, who is opposed to new forms of sports betting, has unanimously agreed to put their team logos on state lottery promotional materials as a potential revenue source for the league in these tough times. It seems what's good for the goose isn't good for the gander.

One thing is certain, however. If any federal laws are overturned or amended, New Jersey will be at the forefront and ready to take advantage.

Hartley Henderson

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