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Sunday, November 16, 2014
Game-Changer or Trojan Horse? Making Sense of Adam Silver's Sports Betting Comments

NBA Commissioner Adam Silver caused a stir last week when he penned a New York Times op-ed piece that called for the legalization (and federal regulation) of sports betting. (For a great analysis of Commissioner Silver’s op-ed, I highly recommend Ryan Rodenberg’s article, co-authored with Jon Wertheim, as well as John Brennan’s fine work in the Bergen Record and Meadowlands Matters). Despite his clarion call for legalization, Mr. Silver’s comments (his most expansive to date on the subject) will likely have no impact on the current federal court case in which the four major professional sports leagues and the NCAA are suing to block New Jersey from implementing its latest sports betting law. As SLB stalwart Michael McCann told John Brennan of the Bergen Record:
I don’t think Commissioner Silver’s op-ed harms the NBA’s legal argument against New Jersey’s efforts to legalize sports betting, because Silver has merely encouraged Congress to consider new federal laws that would give states flexibility in legalizing it. The NBA’s case is built on the contention that New Jersey’s proposed sports betting law would violate existing federal law, specifically the Professional and Amateur Sports and Protection Act. Moreover, Judge Shipp, and any appellate judges who hear this case, would also evaluate the legal arguments based on the laws implicated in the case, not on hypothetical laws that don’t yet exist.
But what struck me about the op-ed more than anything else was its timing. Why now? Was it just an organic evolution of Commissioner Silver's progressive views on the subject, which are entirely consistent with his prior statements made at last year's Sloan Conference and this year's Bloomberg Sports Business Summit? Or was there some strategic reason to drop this bombshell now--just days away from the oral argument on the leagues' motion for a preliminary injunction? Call me a cynic, but I believe the timing of its publication was partly strategic: to diminish the New Jersey law and, more importantly, to influence the court prior to an important hearing. After all, this is the same brilliant lawyer who outmaneuvered the hyper-litigious Donald Sterling at every turn and whose successful legal strategy paved the way for the quick transfer of ownership of the LA Clippers to Steve Ballmer. Remember, throughout the Donald Sterling probate court trial, a number of "NBA-aligned" individuals made statements that were viewed (at least by me) as an attempt to influence then-ongoing court proceedings. Doc Rivers threatened to quit as head coach of the Clippers if Donald Sterling remained as the team owner; and Chris Paul said that a league-wide player boycott was a real possibility if Donald Sterling were still the Clippers owner when the regular season began. These statements were made during the midst of the probate court trial. So, maybe, this tactic is part of the NBA's playbook.

This strategy appears to have succeeded, as Commissioner’s Silver’s emphasis on the need for a “comprehensive federal solution” has already gained traction in the “court” of public opinion and made New Jersey’s law appear to be the problem (e.g., unregulated sports betting) rather than the solution (e.g., regulated sports betting). By offering up the olive branch of a federal solution in the not-too-distant future, Commissioner Silver has shifted the debate away from the current case, which no doubt was his intent.

As Michael McCann aptly observed, Commissioner Silver’s comments won’t help New Jersey on Thursday (or in its eventual appeal to the Third Circuit) because they address future legislative reform rather than any present legal issues before Judge Michael A. Shipp (the Trenton-based federal district judge who is assigned to the case). The issue presently before Judge Shipp is whether New Jersey’s "partial repeal" of its state-law ban on sports betting -- the sole beneficiaries of which are state-licensed casinos and state-licensed racetracks -- runs afoul of PASPA's ban against state-regulated sports betting. In Christie I, the Third Circuit declared that "we do not read PASPA to prohibit New Jersey from repealing its ban against sports wagering," adding that "it is left up to each state to decide how much of a law enforcement priority it wants to make of sports gambling, or what the exact contours of the prohibition will be."

Judge Shipp (and, eventually, the Third Circuit) will have to determine just how far a “repeal” must go in order to fit within the contours of the Third Circuit majority opinion. New Jersey will, of course, zero in on the language in the Third Circuit majority opinion leaving it up to the states to decide "what the exact contours of the prohibition will be.” New Jersey maintains that its “partial repeal” reflects the “exact contours of the prohibition” that it has decided -- as a policy matter -- to enact in conformity with the Third Circuit majority opinion. The leagues, understandably, take a much more narrow view of the Third Circuit language, arguing that only a “complete repeal” will suffice and that what New Jersey has done here is not a true repeal at all, but, rather, a “back-door” authorization of sports betting.

Adam Silver’s op-ed article does not speak to any of these issues. To the contrary, Commissioner Silver’s statements are entirely consistent with the leagues’ present position – that New Jersey’s repeal law violates PASPA. Despite embracing legislative reform (at the federal level), Commissioner Silver continues to stick to the party line -- that “unregulated” sports betting (which is what New Jersey proposes) will negatively affect the integrity of the games and cause irreparable harm to the leagues. Thus, there is no inconsistency between his op-ed and the leagues’ present position on the issues in this case.

While some might argue that Commissioner Silver’s bombshell undermines the leagues’ argument that they will suffer “irreparable harm” (one of the requirements for a preliminary injunction), it is important to remember that the leagues do not need to make a factual showing of irreparable harm in order to prevail on Thursday (or before the Third Circuit). Rather, irreparable harm would be “presumed” based on a violation of the Supremacy Clause (e.g., the New Jersey repeal law contravenes federal law). Both the district court and Third Circuit invoked this presumption in Christie I, and will likely do so again in the current case if they determine that the New Jersey repeal law violates PASPA.

Notably absent from Commissioner’s Silver’s call for the legalization of sports betting is any reference to what the leagues would want in return – monetarily, that is. Previously, Silver was quoted as saying that expanded legal sports betting was “inevitable” and that the leagues would be willing to “participate” in it (presumably, for a price). Commissioner Silver’s op-ed skirts that issue entirely. However, expect the leagues to insist on a royalty or licensing fee (either in the form of a percentage of the total amounts wagered or a flat fee from licensed gaming operators) as a condition to acquiescing to any future federal legislative reform. But it remains to be seen whether the other sports leagues (e.g., the NFL, NHL, MLB and NCAA) share Commissioner Silver’s progressive views on sports gambling.

Nonetheless, Adam Silver’s bombshell is already seen in many corners as a “game-changer” in the sports betting legalization movement (both for New Jersey and other states). I would not be surprised to see something develop on that front by 2016. The biggest impediment to expanded legal sports betting – Senator Harry Reid (Nevada’s protector) – has been removed with the recent election results. With the Republican Party now holding a majority of U.S. Senate seats, Senator Reid may not be able to block new federal legislation to expand single-game sports wagering beyond Nevada. Perhaps, a Republican-controlled Congress would be willing to trade expanded sports betting for a tightening of the Wire Act (to eliminate or heavily restrict online gambling). It may be a bet worth placing.


D-Wall, you say Silver's remarks won't help NJ in this court case "or in its appeal to the Third Circuit" - should we take from this statement that you expect NJ to lose at the district level?

Anonymous Anonymous -- 11/21/2014 2:14 PM  

Pursuant to an earlier post you made on this subject re: potential conflict of interest, Judge Shipp's brother was indeed hired as an NFL head coach - with the New York Jets:

Anonymous Anonymous -- 1/27/2015 5:13 PM  

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