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Thursday, October 06, 2016
NJ Horsemen Question "Legality" of DFS Laws in SCOTUS Filing in NJ Sports Betting Case

New Jersey's quest to legalize sports betting has officially landed at the United States Supreme Court--for a second time. In an under-the-radar legal filing on Friday (which I exclusively reported on Twitter), the New Jersey Thoroughbred Horsemen's Association ("NJTHA"), which represents the interests of Monmouth Park Racetrack, filed a formal petition with the Supreme Court asking the high court to review the Third Circuit's recent en banc decision in the "Christie II" case. That decision--entered on August 9th--upheld a lower court's ruling preventing New Jersey from partially repealing its state-law ban on sports gambling which had sought to decriminalize sports betting (and remove any and all state law restrictions, including any applicable regulations) at the state's casinos and racetracks.

The NJTHA petition focuses on two central issues: (1) whether PASPA violates the Tenth Amendment anti-commandeering principle by requiring states to maintain unwanted state-law prohibitions on sports betting; and (2) whether state laws legalizing daily fantasy sports also violate PASPA. As to the first issue, the NJTHA identifies the following "Question Presented" as meriting review by the Supreme Court: "Does a federal statute that prohibits adjustment or repeal of state-law prohibitions on private conduct impermissibly commandeer the regulatory power of States in contravention on New York v. United States, 505 U.S. 144 (1992), and Printz v. United States, 521 U.S. 898 (1997)?" Answering that question in the affirmative, the NJTHA argues that the Third Circuit's decision "flouts" the Supreme Court's anti-commandeering jurisprudence by "requiring the State of New Jersey to keep in place criminal prohibitions that the State has chosen to lift." The NJTHA asserts that principles of "federalism"--which are designed to protect both the States and the People--"have been nullified" by the Third Circuit's decision which results in "the content of New Jersey law [being] dictated by the national government, in derogation of the will of the people of New Jersey and their elected representatives." 

Conflict with Commandeering Decisions on Marijuana Decriminalization Laws

Although no "circuit split" has yet arisen on the issue of PASPA's constitutionality, the NJTHA seeks to elicit Supreme Court review based on a conflict between the Third Circuit's decision and the decisional law of three state supreme courts and one other federal court of appeals on the broader issue of whether a state is free to repeal its own state-law prohibitions without interference from the federal government. On this critical constitutional issue, the NJTHA petition points to case-law from four other jurisdictions (besides New Jersey) upholding state marijuana decriminalization laws:
In conflict with the Third Circuit's decision, the highest courts of several States have recognized that the national government lacks the constitutional authority to require States to freeze in place State law prohibitions. See Reed-Kaliher v. Hogatt, 347 P.2d 136, 141 (Ariz. 2015); Ter Beek v. City of Wyoming, 846 N.W.2d 531, 538 (Mich. 2014); State v. Nelson, 195 P.3d 826, 834 (Mont. 2008). In these decisions, the Supreme Court of Arizona, the Supreme Court of Michigan, and the Supreme Court of Montana each relied on anticommandeering principles to uphold the validity of State laws removing, for qualified patents, prior State law prohibitions of marijuana. See also Conant v. Walters, 309 F.3d 639, 645-46 (9th Cir. 2002) (Kozinski, J., concurring) ("much as the federal government may prefer that California keep medical marijuana illegal, it cannot force the state to do so. . . . If the federal government could make it illegal under federal law to remove a state-law penalty, it could then accomplish what the commandeering doctrine prohibits: The federal government could force the state to criminalize behavior it has chosen to make legal.")
"Under the Third Circuit's interpretation of the United States Constitution," the NJTHA petition declares, "all of these State Court decisions are wrong. Under the Third Circuit's reasoning, Congress has the constitutional power to prohibit States from selectively removing State law prohibitions on private conduct." The NJTHA insists that the Third Circuit, unlike the aforementioned state court decisions, "failed to recognize that while State law cannot create a defense to federal prosecution, a State remains free to prohibit as little private conduct as it chooses under its own law." Continuing on this theme, the NJTHA petition adds that the Third Circuit "failed to see that the Constitution, properly interpreted, leaves the people of New Jersey as free to exercise their liberties and partially remove New Jersey's prior state law prohibiting sports gambling as it leaves the people of Arizona, Michigan, and Montana free to partially remove their prior State law prohibitions on marijuana."

The NJTHA warns of the "truly deplorable" results and "public mischiefs" that would ensue from such a lack of uniformity in the federal constitutional case-law. In urging the Supreme Court to review the Third Circuit's anomalous result, the NJTHA petition stresses that "[o]nly the Court alone can make the Constitution uniform across the nation." Thus, the petition concludes this argument section by urging the Supreme Court to "grant certiorari and make this promise of liberty-enhancing federalism uniform throughout the country."

New Jersey's commandeering argument in this latest round of litigation is arguably more compelling than its prior iteration advanced in the Christie I case. In its previous Supreme Court petition, New Jersey's commandeering argument was directed to PASPA's "negative command" forbidding states from licensing or authorizing sports wagering. That argument was always an uphill battle given the Supreme Court precedent limiting the anti-commandeering doctrine to cases where the federal government requires states to engage in some type of "affirmative activity," such as taking title to radioactive waste (as in the New York case) or performing background checks on prospective handgun purchasers (as in the Printz case). But this time around, New Jersey's commandeering argument addresses the flip-side of PASPA: its "affirmative requirement" compelling states to prohibit sports wagering. This view of PASPA fits more nearly into the Supreme Court's anti-commandeering jurisprudence, and, as such, greatly enhances New Jersey's prospects for Supreme Court review. Nonetheless, this is still a long-shot proposition at best since the Supreme Court typically grants less than two percent of all petitions seeking certiorari review. Still, this one has a better shot than most.

Selective Enforcement of Daily Fantasy Sports Laws

Turning next to the hot-button issue of daily fantasy sports, the NJTHA's petition highlights the fact that the professional sports leagues (the plaintiffs and appellees in the Christie II case) "continue to reap enormous profits on daily fantasy sports--wagering based on the performances of players in the Leagues' sports contests--where the Leagues are actively promoting such betting and/or owning daily fantasy betting platforms that are now authorized by law in numerous states despite the fact that PASPA may prohibit daily fantasy wagering." (The italics are mine to note that the NJTHA would obviously prefer not to jeopardize a prospective future DFS law in New Jersey).

In this scintillating final section of the petition (covering three pages), the NJTHA also urges Supreme Court review based on the "selective enforcement" of PASPA by the professional sports leagues due to their failure to challenge the recent spate of state laws authorizing daily fantasy sports, which the NJTHA suggests are also encompassed by PASPA (as I have long maintained; see here and here). The NJTHA petition asserts that the Third Circuit's decision has "nationwide significance" because "it casts a long shadow over numerous state laws and regulations authorizing daily 'fantasy' sports wagering" (royalty owed here to Joe Asher, the CEO of William Hill US, for originally coining the phrase "daily fantasy sports 'betting'").

Noting that there are currently nine states that have laws authorizing daily fantasy sports "wagering" on athletic performances, the NJTHA petition cautions that the Third Circuit's decision "calls into question the laws and regulations of numerous States that have enacted regimes regulating daily fantasy sports betting." Correctly observing that the provisions of PASPA "apply both to wagering on the outcome of sports games as well as wagering on the performances of the athletes in such games," the NJTHA contends that "all States that are currently licensing or authorizing 'by law' daily fantasy sports (as well as DFS operators in those States) are, under the Third Circuit's decision, at some risk under PASPA." Here, the NJTHA petition stresses that Supreme Court review is necessary to resolve the "uncertainty" as to whether the state laws authorizing daily fantasy sports may also violate PASPA:
The Third Circuit's decision creates uncertainty as to whether the efforts of the numerous States that have licensed or authorized DFS by law may violate PASPA. A determination by this Court as to whether PASPA is constitutional or not eliminates that uncertainty across the nation.
The NJTHA petition also highlights the sports' leagues' economic self-interest in refusing to invoke PASPA to block state DFS laws, while selectively wielding it as billy-club against states like New Jersey that dare attempt to legalize a different form of sports gambling over the leagues' objections. The petition questions the wisdom of allowing the sports leagues (the de facto "gatekeepers" of PASPA) to determine the question of the enforceability and constitutionality of PASPA, instead urging the Supreme Court (and the Supreme Court alone) to resolve that crucial question:
Whether PASPA is a constitutional statute should not be left in the hands of the Leagues. They have already shown that they seek to enforce PASPA only when it suits their economic interests. It is emphatically the province of this Court, not the Leagues, to decide whether PASPA is constitutional or not. . . . Under PASPA, the only entities hat have the authority to commence suit enjoin a violation of PASPA are the United States and the "sports organization whose competitive game is alleged to be the basis of such violation." . . . As evidenced by this action, the United States is not independently seeking to enforce PASPA. And the Leagues have no interest in seeking to enforce PASPA with respect to DFS because the Leagues are significantly involved in DFS--indeed, the Leagues have equity stakes in DFS operators such as FanDuel and DraftKings.
Finally, in an interesting footnote sure to spark some debate among DFS aficionados, the NJTHA petition contends that paid DFS contests are not immune from the same "integrity" concerns that have caused the leagues to historically oppose traditional single-game sports betting. On this score, the NJTHA posits that "if sports betting on the Leagues' games somehow causes irreparable injury to the integrity or the appearance of the integrity of such games[,] then a fortiori[,] daily fantasy games where each individual performance is at issue would [likewise] cause irreparable injury."

The NJTHA petition is the first of three certiorari petitions that are expected by the appellees in the Christie II case. The other petitions--one from New Jersey Governor Chris Christie and the other from the President of the New Jersey Senate and Speaker of the New Jersey Assembly--are expected to be filed later this week.


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