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Thursday, August 11, 2016
New York May Be The Perfect PASPA Challenger

I met New York Assemblyman J. Gary Pretlow at a gaming industry conference in Boston last week. Mr. Pretlow, the chair of the Assembly's Racing and Wagering Committee, moderated a panel at the National Conference of Legislators from Gaming States (NCLGS) Summer Conference devoted to two subjects near and dear to my heart -- sports betting and daily fantasy sports. Over the course of a long weekend, Assemblyman Pretlow and I indulged in a shared passion--cigars (he brought his own bag of hand-rolled cigars to the conference!). He invited me to join him for cigars on his hotel room balcony, and, inevitably, the conversation turned (or, rather, I steered it) to sports betting. I explained why I believed that New York State--which was on the verge of legalizing daily fantasy sports--would be the perfect state to challenge the federal ban on state-sponsored sports betting. Assemblyman Pretlow was listening intently to my pitch, and I could tell he was interested in the topic. Fast forward eleven days later, and Assemblyman Pretlow, who was in attendance at another gaming conference at which we both spoke (the Saratoga Institute on Equine, Racing and Gaming Law) told GambingCompliance reporter Sara Friedman that he would be "looking at challenging the feds" on the Professional and Amateur Sports Protection Act, the 1992 federal law which prohibits states from legalizing sports betting. He told Sara not to be "surprised if you see a state like New York put through legislation on this very shortly," but that he had "more homework to do." Hey, homework is my specialty!

In many ways, New York is the perfect state to challenge PASPA. As Ms. Friedman notes, New York lawmakers have already agreed to legalize sports pools at the state's racinos and casinos if PASPA is overturned by a court or a new federal law is enacted by Congress. New York's status as one of nine states to have legalized daily fantasy sports may provide it with a litigation advantage that New Jersey lacked. Ironically, the recent state measures to legalize daily fantasy sports may be the catalyst for legalizing sports betting, but not in the way that many envision. One unintended consequence of the new DFS laws is that it may have provided states that have enacted such laws with a "winning argument" in future PASPA cases. Since PASPA in my view (see here and here) also encompasses state-authorized wagering schemes on "athlete performance" (not just game-level outcomes), the recent state laws authorizing daily fantasy sports create a true PASPA quandary for the professional sports leagues and the U.S. Department of Justice (the likely plaintiffs in any lawsuit to enjoin a state from legalizing sports betting). A colorable argument can be made that the leagues and the DOJ are "selectively enforcing" PASPA by opposing state efforts to legalize traditional sports betting, but "looking the other way" on state DFS laws, which in the leagues' case, could be seen as entirely self-serving (and self-interested) given their financial partnerships with (and equity stakes in) FanDuel and DraftKings. They can't have it both ways. Either PASPA applies to both or to neither.

At a minimum, this duality could serve to undermine the leagues' argument in future cases that they would be "irreparably harmed" by expanded legal sports betting when they have neither suffered nor asserted any such harm from other supposed violations of PASPA in the DFS context. The ideal plaintiffs to advance such an argument would be those states that have already legalized daily fantasy sports. These states (which include New York, Mississippi, Indiana, Virginia, Colorado, Missouri, Massachusetts and Tennessee) are perfectly situated to advance a selective enforcement, waiver, or other equitable defense against the four major professional sports leagues, the NCAA and the DOJ. (By contrast, New Jersey, which has no DFS law on the books, was limited to an "unclean hands" defense based on the sports leagues' financial investment in DFS, and that argument was rejected by the Third Circuit since it did not involve the type of "reprehensible conduct" necessary for an unclean hands argument to succeed). These additional equitable arguments, if successfully advanced, could prevent the leagues from securing an injunction against states in future cases, thus serving as a possible "tipping point" for expanded legal sports betting. While such an argument is not guaranteed to succeed, it provides another possible tool in the legal arsenal for states to utilize in toppling PASPA. New York, by virtue of its status as a DFS state, could be well-positioned to advance this argument.


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