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Murphy v. NCAA: Supreme Court leaves sports betting up to states. But Congress isn’t done.

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Here’s what you need to know, including Orrin Hatch’s plans to reinstate sports gambling bans

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PASPA

About two decades ago, in a fit of “think about the children-ism” pique, Congress began to legislate nearly everything you could imagine on the internet: From speech to taxation. Many of these laws died painful deaths in committee or at the hands of federal judges. But one that squeaked through, led by former NBA player and Senator Bill Bradley, was one grandfathered in before the thunderdome of the internet age: The Professional and Amateurism Protection Act of 1992. (PASPA or the Bradley Act.)

Bolstered by hearings and testimony of professional sports commissioners and the NCAA, Congress found that sports gambling was “a national problem.” In response to this problem, the Bradley Act prohibited states from legalizing sports betting. Seems straight forward enough, right?

Even at the time, PASPA was a deeply unpopular law: it prohibited not just parimutuel betting and sports gambling for states not already grandfathered, but was also eventually expanded to include the monitoring of financial institutions and prohibited transactions, and it directly killed American online sportsbooks. As with most prohibitory legislation, all that happened by trying to destroy a growing $150 billion industry was that PASPA drove that commerce underground, primarily overseas and into Caribbean graymarket havens.

Federalism

At the time of the challenge in Murphy, five states (including Mississippi) had pending legislation to permit gambling on sports, with another 13 well on their way. And this is where the constitutionally-dubious part of the Act comes into play. Though yesterday’s opinion begins with statutory construction of one particular phrase (one word, in fact,) the general thrust is that PASPA, under the guise of Congress’ Commerce Clause powers, prohibited states from passing legislation regarding sports gambling outside of its powers to do so by interjecting itself into statehouses across the country.

Ordinarily, these laws are regarded as “police powers” and they are left to the provenance of states: these are your general morality laws regarding gambling, prostitution, obscenity, and the like. That’s why Nevada can regulate prostitution, why Jersey has legal horse racing, why Alabama refuses to have an education lottery, and why Tampa has a burgeoning pornography industry.

But, by claiming effects on interstate commerce, Congress cut the states off at the knee and occupied a field that is traditionally left to localities. We generally know about Federalism (or, states rights, if you will): What laws and powers are not delegated to the federal government are left to the states under the 10th Amendment. And, it does make a certain sense: Alabama and Nevada aren’t the same places, community norms will be applied to police powers.

But, there is a flipside to that general principle under federalism: The feds also cannot compel the states to enforce federal laws. While that is a gross oversimplification and isn’t universal, it is certainly the case that like unfunded mandates, Congress can’t “commandeer” the states or deputize them into being enforcers for its legislation (This is why there has been ongoing fights between states and the Trump administration over so-called “sanctuary cities/states” — the localities are being commandeered.)

PASPA was deeply offensive to New Jersey, for one. The Garden State felt that the PASPA was nothing more than federal morality legislation which commandeered the state resources. Jersey and Mississippi and others could not even write their own laws regarding powers generally reserved to them.

Murphy vs. NCAA

So, New Jersey picked a fight. It intentionally wrote a law permitting sports gambling, then sued everyone under the sun and dared the Supreme Court to overturn PASPA on federalism grounds.

Needless to say, with the composition of the Court, the argument found a sympathetic audience.

Writing for a 7-2 majority, here is the money shot from Justice Alito’s opinion:

The PASPA provision at issue here — prohibiting state authorization of sports gambling— violates the anticommandeering rule. That provision unequivocally dictates what a state legislature may and may not do. And this is true under either our interpretation or that advocated by respondents and the United States.

In either event, state legislatures are put under the direct control of Congress. It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine.

And, you know what? The Court was right.

If you’re up for a light read, the slip opinion is here (pdf).

What next?

Did the opinion make sports gambling legal?

No, it didn’t.

All Murphy does is properly take the matter out of Congress’ hands under this law and put it back into the control of the states. It will be up to your local legislatures to determine the legality of sports betting. For the Red States, this is likely to be a huge tussle. Cash-strapped, with low taxes and a poor tax base, this is an instant way to fill local coffers. But, in some places, those efforts are apt to meet resistance from social conservatives. One certain place with the nation’s best football team comes to mind. And what Montgomery chooses to do will always be a crap shoot.

For now, more than a dozen states have passed sports betting legislation: with Connecticut, Delaware, Mississippi, Pennsylvania and West Virginia join New Jersey as the states being the furthest along in the process. So, you’ll still have to legally go to Nevada or use offshore operators...for now. The graymarket is still alive.

Moreover, we have no idea whether the financial regulations that prohibit certain transactions will remain in place. So, there’s no clear direction for those wanting to start up a local online sportsbook.

And, don’t think Congress is going to go gently into that sweet goodnight.

Within hours, Utah’s Senator Orrin Hatch, long one of the NCAA’s biggest hammers in Congress and one of the four original authors of PASPA, decided that he will try to push back:

“At stake here is the very integrity of sports. That’s why I plan to introduce legislation in the coming weeks to help protect honesty and principle in the athletic arena,” Hatch said in a statement.

“[The] problems posed by sports betting are much the same as they were 25 years ago,” when PASPA was originally passed.

”But the rapid rise of the Internet means that sports betting across state lines is now just a click away. We cannot allow this practice to proliferate amid uneven enforcement and a patchwork race to the regulatory bottom,” Hatch said.

And, one of the reasons for Hatch’s defiance is the very language in the Court’s order, which suggests to Congress that there are ways that it could permissibly legislate against gambling:

Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not. PASPA “regulate[s] state governments’ regulation” of their citizens, New York, 505 U. S., at 166. The Constitution gives Congress no such power.

Still, given the sweeping language of the court’s preemption, federalism, and commandeering analysis, the entire act was declared unconstitutional. And, since PASPA was struck down on constitutional terms, and not on the narrower issue of statutory language, I’m not sure how Hatch & Co. can craft federal legislation that wouldn’t expressly run afoul of the very concerns the Alito majority had in Murphy.

There are good days ahead for gaming and regulatory attorneys, that’s for sure.

This isn’t over, not by a longshot.