Sports Law Blog
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Friday, May 29, 2009
What happens in Delaware...

The possibility of sports gambling in Delaware is one step closer to becoming a reality. In March 2009, Delaware Governor Jack Markell requested an opinion from the Delaware Supreme Court regarding the legality of Delaware’s proposed sports lottery. On Wednesday, the Delaware Supreme Court ruled that the lottery does not violate the Delaware Constitution. Here are some questions you might have regarding this development, with a few answers.

I don’t understand. No lawsuit has been filed. Why is the Delaware Supreme Court giving an opinion on this? I’m having trouble deciding what to have for dinner tonight. Can the Delaware Supreme Court give me an opinion on that?

The Delaware Constitution authorizes the Governor to seek advisory opinions from the Justices of the Delaware Supreme Court regarding the constitutionality of any law passed by the Delaware Assembly. The Governor’s request does not need to be connected to any ongoing or potential litigation. Rather, as was the case here, the request can be made to “enable the Governor to discharge the duties of the office with fidelity.” The Opinions of the Justices are not binding in later litigation, but will likely be persuasive. And, to answer the second question, unless you’re the Governor and one of your dining options may violate the Constitution, you are out of luck.

What is the Delaware sports lottery?
Delaware introduced a football lottery back in 1976. That original lottery offered two types of parlay games. In the first game, players had to correctly select the winner of 7 NFL games in a given week. In the second game, players had to correctly select the winner of 3 or more NFL games with the point spread. The lottery lasted less than a year because the lottery commission had difficulty picking the correct point spread, which led to significant losses for the state.

Governor Markell pushed for a new sports lottery to help Delaware deal with its budget deficit. As proposed, the new Delaware sports lottery will consist of three games: First, a single game lottery, where players try to pick the winner of an NFL game with a point spread. Second, a total lottery, where players pick whether the total scoring in an NFL game will be over or under the total line. Third, a parlay lottery, where players pick the winner of multiple NFL games and/or multiple over/unders. In other words, the sports lottery allows people to bet on NFL games. As of now, it appears that the lottery will also use NBA games. If the sports lottery becomes a reality, Delaware will be the only state east of the Mississippi with legalized sports betting.

Did the NFL challenge the original Delaware sports lottery?

Yes. The NFL brought two broad claims in federal district court in Delaware against the original Delaware sports lottery. First, the NFL claimed that the sports lottery was an illegal form of gambling that violated the Delaware Constitution. Second, the NFL argued that the lottery violated the NFL’s trademarks, misappropriated the NFL product, and amounted to a “forced association with gambling.” In a 1977 opinion, Judge Walter Stapleton declared that the lottery did not violate the Delaware Constitution. He also rejected the bulk of the NFL’s intellectual property claims, but did require the lottery to make clear that the games were not affiliated with the NFL.

Why did the Justices of the Delaware Supreme Court determine that the new sports lottery is legal?

The Delaware Constitution prohibits all forms of gambling, except lotteries under state control that are used for the purpose of raising funds. Thus, the key question facing the Justices was whether the proposed sports lottery constituted a legal type of “lottery,” or an illegal type of gambling. This was precisely the issue addressed by Judge Stapleton in 1977, so the Justices relied heavily on his opinion. The Delaware Constitution does not define the term “lottery,” so the court relied on the definition used by Judge Stapleton, which explained that a lottery has three elements: a prize, consideration, and chance.

The question then became, does the sports lottery contain the necessary element of chance? There are (just in case you thought this would be simple) two competing tests to answer that question. Under the English rule, also known as the “pure chance” rule, no element of skill may be involved. Under the American rule, also known as the “dominant factor” rule, chance does not have to be the only factor, but must be the dominant or controlling factor.

Given that the majority of states (and Judge Stapleton) follow the American rule, the Justices adopted the “dominant factor” American test. For what it’s worth, it probably also helped that Delaware is in America. That led to the next question—is chance the dominant factor in betting on NFL games? To answer that, the Justices again relied on Judge Stapleton, who determined that chance was a significant factor because games are often decided by unpredictable factors such as “the weather, the health and mood of the players and the condition of the field.” As Judge Stapleton added, “no one knows that may happen once the game has begun.”

Interestingly, because Judge Stapleton’s opinion was limited to the parlay games of the original lottery, the Justices only concluded that chance was the dominant factor in the parlay games offered by the new sports lottery. Citing a lack of evidence, they did not offer an opinion as to the chance element present in the single-bet games, noting that the point spread may provide the requisite chance element, but may just “manage the money flow.” So, for now, the only form of sports gambling that the Justices have explicitly blessed is parlay games. Other forms of gambling—including single games—may also be legal, but the state will have to prove that chance is the predominant factor in those games.

I live in New Orleans. We have a casino in the middle of the city and drinks named after dangerous weapons and natural disasters. Surely we can have a sports lottery, too. Right?

Wrong. The Professional and Amateur Sports Protection Act (“PASPA”), passed by Congress in 1992, prohibits all states from operating any form of sports gambling operation, except those states operating sports wagering schemes between 1976 and August 31, 1993. Delaware, along with Nevada, Oregon, and Montana, fall within that exception.

But, all hope is not lost. The State of New Jersey, seeking to start its own sports lottery, recently filed a lawsuit challenging the legality of PASPA. According to the lawsuit, “PASPA represents a substantial intrusion into States’ rights and restricts the fundamental right of States to raise revenue to fund critical State programs. Moreover, it blatantly discriminates between the States.”

The NFL recently allowed its teams to sign licensing deals with state-sponsored lotteries, so they must be fine with the Delaware sports lottery, right?

Not quite. The NFL has approved team licensing deals with state-sponsored lotteries, so their anti-gambling stance seems to have softened, at least where it will provide an influx of revenue to their teams. But, the NFL has not softened on their anti-sports gambling stance. What’s the difference? Gambling on the NFL impacts the integrity of the game; playing scratch-off games does not. Here is how Commissioner Roger Goodell phrased it in his letter to Governor Markell urging him not to go forward with the Delaware sports lottery:
Professional sports involve athletic contests that must not only be honest, but be perceived by the American public as honest. NFL owners and players have worked hard from the league’s inception nearly 90 years ago to protect its integrity. There is no issue of greater importance to the league. That is why the NFL’s position on legalized sports gambling has remained consistent for decades. State-promoted gambling not only adds to the pressure on our coaches and players, but creates suspicion and cynicism toward every on-the-field mistake that affects the betting line.

The NFL prides itself on the parity they have achieved throughout the league and on their “on any given Sunday” mentality (which, I suppose, has now become an “on any given Sunday, Monday, Thursday, and, late in the season, Saturday”). The beauty of sports—and the NFL in particular—is that we don’t know who is going to win the game until they play it. The NFL wants to ensure that nothing interferes with that unpredictability. (Note that this unpredictability is precisely why Judge Stapleton determined that chance is the predominant factor in predicting the outcome of an NFL game.)

Of course, many argue that the NFL would be quite happy if Delaware and other states legalized gambling on NFL games. Gambling drives a tremendous amount of interest in games and keeps people watching even when the result of the game is no longer in doubt. Others point to the fact that the NFL’s position on the Delaware lottery is hypocritical. The NFL has a billion dollar television contract with ESPN, a company that provides predictions of NFL games with the point spread. As Governor Markell noted in his response to Commissioner Goodell: “the notion that the NFL has aggressively and actively fought against betting on its games is belied by the very programming the NFL indirectly endorses and from which it handsomely profits.”

Can the NFL prevent the Delaware lottery from using the schedule and scores of NFL games?

Unlikely. Judge Stapleton ruled in 1977 that use of NFL scores and schedules by the original Delaware sports lottery was a fair use, as long as no NFL trademarks were used and a disclaimer made clear that the games were not authorized by the NFL. Thus, expect the new lottery to refer to the matchups by city names—for example, Philadelphia vs. New Orleans, instead of the Eagles vs. the Saints.

On a scale from 1 to 10, what impact will this have on Brett Favre’s possible un-retirement?