Murphy v. NCAA: United States Supreme Court Strikes Down PASPA

In 1992, Congress enacted the Professional and Amateur Sports Protection Act (“PASPA”) to prohibit state-sanctioned sports gambling. In 2011, the New Jersey Legislature held a referendum asking New Jersey voters whether sports gambling should be permitted, and sixty-four percent (64%) voted in favor of amending the New Jersey Constitution to permit sports gambling. The constitutional amendment provided:

It shall also be lawful for the Legislature to authorize by law wagering at casinos or gambling houses in Atlantic City on the results of any professional, college, or amateur sport or athletic event, except that wagering shall not be permitted on a college sport or athletic event that takes place in New Jersey or on a sport or athletic event in which any New Jersey college team participates regardless of where the event takes place….

The amendment permitted the New Jersey Legislature to authorize by law sports wagering at casinos or gambling houses in Atlantic City, except that wagering was not permitted on New Jersey college teams or on any collegiate event occurring in New Jersey. After voters approved the sports-wagering constitutional amendment, the New Jersey Legislature enacted the Sports Wagering Act in 2012 (“2012 Law”), which provided for regulated sports wagering at New Jersey’s casinos and racetracks. The 2012 Law established a comprehensive regulatory scheme, requiring licenses for operators and individual employees, extensive documentation, minimum cash reserves, and Division of Gaming Enforcement access to security and surveillance systems.

In 2012, the NCAA, NFL, NBA, NHL, and MLB (“Leagues”) sued to enjoin the 2012 Law as violative of PASPA. New Jersey did not dispute that the 2012 Law violated PASPA, but urged, instead, that PASPA was unconstitutional under the anti-commandeering doctrine. The District Court held that PASPA was constitutional and enjoined implementation of the 2012 Law. New Jersey appealed, and the United States Court of Appeals for the Third Circuit (“Third Circuit”) affirmed.

In 2014, the New Jersey Legislature passed SB 2460 (“2014 Law”), which provides in part:

any rules and regulations that may require or authorize any State agency to license, authorize, permit or otherwise take action to allow any person to engage in the placement or acceptance of any wager on any professional, collegiate, or amateur sport contest or athletic event, or that prohibit participation in or operation of a pool that accepts such wagers, are repealed to the extent they apply or may be construed to apply at a casino or gambling house operating in this State in Atlantic City or a running or harness horse racetrack in this State, to the placement and acceptance of wagers on professional, collegiate, or amateur sport contests or athletic events….

The 2014 Law specifically prohibits wagering on New Jersey college teams’ competitions and on any collegiate competition occurring in New Jersey, and it limited sports wagering to persons twenty-one (21) years of age or older situated at such locations, namely casinos and racetracks.

In 2014, the Leagues filed suit again to enjoin New Jersey from giving effect to the 2014 Law. The District Court held the 2014 Law violates PASPA, granted summary judgment in favor of the Leagues and issued a permanent injunction against the Governor of New Jersey, the Director of the New Jersey Division of Gaming Enforcement, and the Executive Director of the New Jersey Racing Commission. New Jersey appealed, and the Third Circuit affirmed.

The United States Supreme Court (“Supreme Court”) granted certiorari to decide whether PAPSA is “compatible with the system of ‘dual sovereignty’ embodied in the Constitution.” The Supreme Court addressed whether PAPSA violated the anticommandeering doctrine, which, simply, withholds from Congress the power to issues orders directly to the States. The Constitution limited but did not abolish the sovereign powers of the States, which retained “a residuary and invoidable sovereignty.” Therefore, both the federal government and the States wield sovereign powers (i.e., dual sovereignty). The legislative powers granted to Congress are sizable, but are not limited. The Constitution confers on Congress not plenary legislative power but only certain enumerated powers. The anticommandeering doctrine simply represents the recognition of this limit on congressional authority.

The Supreme Court concluded that the PAPSA provision at issue (i.e., prohibiting state authorization of sports gambling) violates the anticommandeering doctrine. The authorization provision of PAPSA dictates what a state legislature may and may not do. Then, the respondents argued that the authorization provision of PAPSA fell under the preemption provision. The Supreme Court, however, concluded this is not a preemption provision, because there is no way in which the applicable provision can be understood as a regulation of private actors. It does not confer any federal rights on private actors interests in conducting sports gambling operations, nor does it impose any federal restrictions on private actors. There is “no way to understand the [applicable] provision prohibiting state authorization as anything other than a direct command to the States” and, thus, disallowed by the anticommandeering doctrine.

The Supreme Court further concluded that Congress lacks the power to order a state legislature not to enact a law authorizing sports gambling and it also may not order a state legislature to refrain from enacting a law licensing sports gambling. PAPSA regulates a state government’s regulation of its citizens. Congress has no such power and, thus, the Supreme Court struck down PAPSA.

For any questions, feel free to contact Christian Dennie at cdennie@bgsfirm.com.