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Monday, November 28, 2016
Sizing Up Mississippi as the Next Likely PASPA Challenger

Recent speculation has started to center on Mississippi being the next state that will step up to the plate to challenge the federal ban on state-sponsored sports betting. Over the weekend, the Mississippi Sun Herald published an editorial titled "States should control sports betting," which supported Mississippi Attorney General Jim Hood's decision to sign on to an amicus brief filed by five states (West Virginia, Wisconsin, Louisiana, Arizona, and Mississippi) backing New Jersey's efforts to challenge the constitutionality of the Professional and Amateur Sports Protection Act ("PASPA"). New Jersey is asking the U.S. Supreme Court to review a recent federal appeals court decision blocking New Jersey from implementing a state law that would have permitted sports betting to take place at the State's casinos and racetracks. New Jersey, backed by the amici states and several other groups (including the American Gaming Association), argues that PASPA violates the Tenth Amendment's anti-commandeering principle by requiring states to maintain unwanted state-law  prohibitions against sports betting and by preventing states from repealing their own laws on sports betting (even in part). Mississippi's backing of New Jersey's efforts came several seeks after Mississippi's newly-appointed Commissioner of Revenue, Herb Frierson, introduced a list of tax reform suggestions that were highlighted by his statement that legalized sports betting could bring an additional $100 million into the state's coffers annually. These recent events have served to heighten speculation that Mississippi will be the next state to challenge PASPA in court.

Such speculation is well-founded. But it is far from a recent development. Over the past year, I have frequently touted Mississippi as the state most likely to take the baton from New Jersey. In a recent Deadspin piece titled "How To Legalize Sports Betting," I identified Mississippi as the "state to watch" on the PASPA front. I wrote that a number of states loomed as potential PASPA challengers, but that "Mississippi, in particular, is worth watching. With 28 commercial casinos, but declining gaming revenues, the Magnolia State may represent the perfect storm for a successful PASPA challenge." I highlighted the fact that the Fifth Circuit (which covers Mississippi) is among the most conservative federal appeals courts in the country, and, as such, might be more receptive to a states' rights argument for overturning PASPA. And during my appearances at gaming conferences (including the Southern Gaming Summit in Biloxi, Mississippi), and, of course, on Twitter (see here and here), I have pointed to Mississippi as the state most likely to challenge PASPA next. There are many reasons for my belief. Suffice it to say that Mississippi's path to sports betting legalization has been at least several years in the making. As far back as March 2014, the Mississippi State Legislature commissioned a task force to study the possibility of legalizing online gaming and sports betting. The state task force produced a report in December 2014 which summarized the New Jersey sports betting litigation and posited that if New Jersey were to succeed in court, "Mississippi (and other states) may be able to fall in line and take similar action." However, the task report cautioned that it "would seem prudent to take a wait and see approach at this point." Shortly thereafter, a Mississippi lawmaker, Chuck Espy (a former Democratic member of the state House of Representatives), introduced a bill (HB 806) that would have permitted the state's casinos to offer sports betting as soon as the Mississippi Gaming Commission determined that it became "permissible under federal law." Unfortunately, HB 806 never got out of committee, and has not been re-introduced.

But, perhaps, most importantly, Mississippi's longstanding interest in legalized sports betting is based on urgent financial considerations. In that regard, it shares many characteristics with New Jersey. Like New Jersey, Mississippi's once-thriving gaming industry has suffered a steep and steady decline in gross revenues over the past decade, and, much like New Jersey, it has experienced its share of casino closures too (e.g., Harrah's Tunica Casino). To put it in perspective, in 2008, Mississippi's casino industry generated approximately $2.7 billion in gross gaming revenues. Since 2008, however, Mississippi's casino gross gaming revenues have steadily declined each year, reaching a nadir of approximately $2.068 billion in gross revenues in 2014, a drop-off of more than twenty percent (20%) from just six years earlier (although it should be noted that gaming revenues have inched up slightly over the last two years, but still far off of the 2008-09 levels). The effects of such a decline are far-reaching: the state collects less tax revenues ($250 million in 2015, as contrasted with nearly $312 million in 2009), and Mississippi's tourism industry, which is so heavily dependent on its casino industry, suffers as well. If sports betting were to become legal in Mississippi, this downward trend would obviously be reversed. This more than anything else explains the state's renewed interest in sports betting.

But even going beyond financial reasons and the potential forum advantages of the Fifth Circuit, Mississippi may possess an important strategic advantage in any prospective PASPA lawsuit: it is one of only a handful of states to have legalized fantasy sports. The recent state measures to legalize fantasy sports may provide state challengers with a creative new argument for toppling PASPA. While PASPA is commonly understood to prohibit “state-authorized” betting or wagering schemes on the outcomes of professional and amateur sporting events, it also prohibits state-authorized betting or wagering schemes that are based “on one or more performances of athletes in such games.” This language arguably encompasses state legislation authorizing daily fantasy sports contests, which are tied to the “performances” of athletes. A plausible argument can be made that the sports leagues are “selectively enforcing” PASPA by opposing state efforts to legalize traditional sports betting, as in the case of New Jersey, but taking no action against those states which have authorized fantasy sports contests (which presumably also violates PASPA). Such an argument could serve to undermine the leagues’ assertion 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. Since the leagues would need to demonstrate irreparable harm in order to obtain a preliminary injunction (as that is one of the essential elements that must be proven), the ability of future state challengers to rebut that element through evidence of the leagues’ selective enforcement of PASPA could be the key to avoiding a preliminary injunction in the early stages of a case. This would be a significant development, as it could enable a state challenger to offer sports betting throughout the pendency of a case, including any and all appeals, without having to wait for the final resolution of the lawsuit on the merits. While such an argument is not guaranteed to succeed, it provides another possible tool in a state’s legal arsenal to topple PAPSA.

Each of these factors points to Mississippi being the next state most likely to challenge PASPA in court. In my view, it's a matter of when, not if. 

-- Daniel Wallach


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