It's game over for Delaware's planned Sept. 10 launch of a state-sponsored sports lottery now that a federal appeals court has ruled that the proposed expansion of its gaming would violate the federal Professional and Amateur Sports Protection Act.
In a rare move, the appellate court not only found that a lower court judge had erred in refusing to issue a preliminary injunction, but declared that the answer to the ultimate question in the case was indisputably clear -- and that a permanent injunction must be issued.
Lawyers for Delaware had urged the appellate court to greenlight the new lottery, arguing that it was protected under a PASPA exemption that grandfathered in the existing sports betting statutes in four states.
But lawyers for the sports leagues argued that Delaware was strictly limited to restarting the sort of sports betting it had conducted for a few months in the mid-1970s -- a multi-game football pool limited to betting on at least three NFL games at once.
Anything more than that -- either single-game betting or betting on any other sports -- isn't covered by the grandfather clause, the leagues argued.
As a result, they said, Delaware should be blocked from launching a sports lottery at three racetracks or "racinos" that allows for single-game betting on any sport other than games played by Delaware college teams.
Delaware won the first round of the court battle when Chief U.S. District Judge Gregory Sleet of the District of Delaware refused to issue any injunction and said the leagues failed to show any "irreparable harm." But now the 3rd U.S. Circuit Court of Appeals has ruled that there was no need for any injunction hearing because the leagues had a slam-dunk case on the merits.
The unanimous three-judge panel announced its ruling at 1:30 p.m., about an hour after concluding an oral argument in an emergency injunction request brought by all of the major professional sports leagues -- Major League Baseball, the NFL, the NHL and the NBA -- as well as the National Collegiate Athletic Association.
Announcing the decision from the bench, 3rd Circuit Judge Theodore A. McKee said the panel had concluded that there were no factual issues to be decided and that, "as a matter of law," Delaware's planned launch of a sports lottery that included single-game betting and sports other than football would violate PASPA.
As a result, McKee said, the court concluded there was no need to dwell on whether the leagues could satisfy the four-prong test for winning a preliminary injunction that would have blocked the lottery's launch while the court challenge was under way.
The ruling is a major victory for attorney Kenneth J. Nachbar of Morris Nichols Arsht & Tunnell in Wilmington, Del., who argued the appeal for all of the leagues.
Delaware's lawyers, Andre G. Bouchard and Joel Friedlander of Bouchard Margules & Friedlander, said they are awaiting the court's written opinion and that no decision has yet been made about whether to seek reargument before all 12 active judges on the 3rd Circuit.
It was a stunning setback for Delaware Gov. Jack Markell, who had asked for and won an advisory opinion from the Delaware Supreme Court that said that the new sports lottery would not violate the state constitution.
The federal suit began in late July when the leagues complained that any expansion of sports betting beyond an NFL football pool would violate PASPA.
After losing at the injunction hearing before Sleet, the leagues persuaded the 3rd Circuit to expedite the case, with briefs filed just a week after the appeal began and oral argument slated for one week after that.
During the two-hour argument, it seemed at first that the leagues might have difficulty clearing all of the legal hurdles needed to win an injunction.
McKee began by chiding Nachbar for waiting so long to come to court.
If the leagues had sued promptly after the Delaware Supreme Court's advisory opinion in May, McKee said, the federal courts would have had an extra 10 weeks to rule on the case and "wouldn't be in this situation where we have a gun to our heads." Nachbar insisted that the leagues weren't sure what Delaware's plans were until the state passed regulations in June and feared that any suit they lodged before that would be rejected as not yet ripe for review.
Judge Julio M. Fuentes wondered how the leagues would be harmed by gambling.
Nachbar said the "integrity" of the sports comes into question, and that the leagues want to ensure that "nobody thinks the games are fixed." Judge Thomas Hardiman came to Nachbar's aid, explaining that the problem with gambling is that players or officials might engage in "point shaving" if they "have skin in the game." Nachbar told Fuentes that Congress allowed only strictly limited exceptions when it passed PASPA that limit a state to continuing the sports gambling it had already "conducted" since the mid 1970s.
"If we had our druthers, there'd be no exceptions, but that's the law that Congress passed," Nachbar said.
But Delaware was asking for too much, Nachbar said, by claiming that it was free to begin any sort of gambling that was "authorized" under the prior Delaware law.
Hardiman seemed to agree, saying the state's arguments were urging the court to conflate the terms "conducted" and "authorized." Later in the hearing, it became clear that all three judges were leaning toward ruling in favor of the leagues on the ultimate question of whether the new lottery would violate PASPA.
When Friedlander began his argument, Hardiman interrupted and said he believed the burden was on Delaware to show that its new lottery qualifies for the exemption in PASPA.
Hardiman focused on the language of the federal statute which, he said, created an exception only "to the extent" that a state was already conducting sports gambling, and that Delaware was seeking to expand the scope of the exemption to include any sports betting that was already "authorized" by Delaware statute.
Friedlander insisted that the exemption was designed to protect any state statute on the books at the time.
But Fuentes seemed unimpressed, saying: "Why shouldn't we take into account the purpose of the law, which was to contain the spread of gambling?" Friedlander pressed his point, saying Congress was intent on making sure that none of the other 46 states started sports gambling and not that the four existing states stick to the existing betting schemes they had in place.
