Why should Nevada have all the fun?

Photographer: Glenn Pinkerton/Las Vegas News Bureau via Getty Images

Sports Gambling Law Is Unfair to New Jersey

Noah Feldman is a Bloomberg View columnist. He is a professor of constitutional and international law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “Cool War: The Future of Global Competition” and “Divided by God: America’s Church-State Problem -- and What We Should Do About It.”
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The New Jersey public, not to mention Governor Chris Christie, wants to reinstate sports gambling in Atlantic City in the hopes of reversing the trajectory of a place that “totally cratered,” as Donald Trump memorably put it in the first Republican presidential debate. But the U.S. Court of Appeals for the 3rd Circuit has said no -- twice. The most recent decision struck down a state law that repealed the ban on sports gambling in Atlantic City while keeping it in place elsewhere in the state. The deciding vote came from Trump’s sister, Judge Maryanne Trump Barry, who didn’t recuse herself, presumably because she has no stake in Atlantic City properties.

The basis for the appeals court’s decision is a federal law with the unfortunate nickname “Paspa,” which stands for the Professional and Amateur Sports Protection Act of 1992. As an interpretation of Paspa, the court’s decision is arguably correct. But Paspa itself seems unconstitutional to me -- notwithstanding that the 3rd Circuit upheld it in 2013 and the U.S. Supreme Court refused to hear the case.

To understand this week’s decision, you need to start with the 2013 case and Paspa itself. The nominal justification for the federal law that effectively banned sports gambling in the U.S. was protecting professional and amateur sports against the taint of gambling, and hence of point-shaving or game-throwing.

But the reality of Paspa was, and is, totally different from the theory. The law exempted Nevada’s legalized sports gambling. It also grandfathered sports lotteries in three states. Finally, it gave New Jersey the option of reinstating sports gambling in Atlantic City -- provided that it did so within a year from the passage of federal law. New Jersey didn’t take advantage of the option within the time limit.

Whatever its original motives, Paspa today serves as guarantor of Nevada’s pre-eminent position in the vast U.S. sports gambling industry. (The size of the industry is hard to estimate, but it’s mega-big. National Basketball Association Commissioner Adam Silver has put it at $400 billion, but that statistic has been questioned.) Unless a state can convince Congress to change the law, it’s stuck without sports gambling.

New Jersey’s efforts to allow sports gambling included a 2011 statewide referendum that endorsed a change in the laws; Christie signed a bill decriminalizing such betting in 2012. The 2013 decision blocking that initial effort grew out of litigation by the National Collegiate Athletic Association, as well as the National Football League, the National Hockey League and Major League Baseball to block  that law. The leagues, at least the professional ones, rather obviously want to restrict New Jersey because their long game is to monopolize betting and its enormous revenue for themselves.

In response, New Jersey argued that Paspa violates the Constitution. They put most of their eggs in the wrong basket, emphasizing the claim that Congress lacked the authority to “commandeer” state resources for federal objectives. This was a poor argument, rejected properly by the 3rd Circuit, both because the law doesn’t require the states to do anything affirmative and because Congress could, if it wanted, just ban sports gambling throughout the country.

But New Jersey also had a better argument, which should have won although it didn’t: Paspa blatantly discriminates between states with respect to their ability to pass laws that effectuate the sovereign will of their citizens. Until June 2013, this problem hadn’t really been given a name by the Supreme Court. But in the highly controversial case Shelby County v. Holder, which struck down a crucial part of the Voting Rights Act, the court gave it one. In that decision, Chief Justice John Roberts wrote that the “equal sovereignty” of the states was violated by a part of the Voting Rights Act that subjected some states and some localities to onerous “preclearance” requirements before they changed voting districts.

Roberts’s argument was that such differential treatment of states required a strong justification, which existed when the Voting Rights Act was passed in 1965 but no longer existed today. This claim was strongly criticized, and the eminent and acerbic Judge Richard Posner commented that he’d never heard of the “equal sovereignty” doctrine because it didn’t exist. But equal sovereignty is now the law of the land.

Paspa treats states differently from one another by enshrining Nevada’s special gambling preserve -- and hence violates the equal sovereignty of New Jersey voters by denying them the right to do what Nevada does. This isn’t just a matter of constitutional doctrine. It also makes constitutional common sense. One of the main purposes of the Constitution from the beginning was to ensure that federal laws treated the states uniformly rather than allowing some states to take advantage of others.

Sure, many laws may have differential effects in the real world. A coal mining regulation will affect West Virginia more than it affects Hawaii. And the courts shouldn’t be in the business of reviewing every federal law to see whether it helps some states over others.

But a law that explicitly gives some states rights that others lack goes too far. And it’s worse when the public in one state wants to change its laws to compete with another state -- and is denied that right by the federal law in question.

The 3rd Circuit rejected the equal sovereignty argument in September 2013, claiming that the point of Paspa was to wipe out sports gambling nationwide and that Congress needn’t justify laws that have differential effects. And it said that Congress wasn't treating 49 states worse than Nevada; it was treating Nevada better than 49 states.

According to the Third Circuit, New Jersey could permissibly repeal all its sports gambling laws everywhere in the state -- just not in Atlantic City alone. That’s fair enough, because Paspa clearly functions today to facilitate Nevada’s monopoly.

But that’s exactly what makes the law bad policy -- and should make it unconstitutional. A full panel of the Third Circuit should reconsider -- and if it doesn’t, maybe the Supreme Court will weigh in and save Atlantic City.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Noah Feldman at nfeldman7@bloomberg.net

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net