3rd Circuit Explains Why It Sacked Delaware Sports Lottery

Shannon P. Duffy

The Legal Intelligencer

In the closely watched court battle over Delaware's scotched plan to launch a sports betting lottery, a federal appeals court on Monday handed down a 23-page opinion that explains why the judges permanently blocked the lottery last week in a ruling from the bench.

In its decision, the unanimous three-judge panel of the 3rd U.S. Circuit Court of Appeals sided with all the major sports leagues -- the NFL, the NBA, the NHL and Major League Baseball -- and declared that the proposed expansion of Delaware's gaming would violate the federal Professional and Amateur Sports Protection Act.

Although Delaware qualified for an exemption under PASPA in which four states were allowed to continue sports betting under a grandfather clause, the appellate court found that Congress explicitly prohibited any of those states from expanding the programs.

In Delaware's case, the judges said, that meant limiting sports betting to an NFL football pool in which contestants must wager on at least three games at once.

Delaware went too far, the court said, when it planned to launch a sports lottery that would allow single-game betting and betting on other professional sports -- baseball, basketball and hockey -- as well as college sports.

"Any effort by Delaware to allow wagering on athletic contests involving sports beyond the NFL would violate PASPA," U.S. Circuit Judge Thomas M. Hardiman wrote in the Office of the Commissioner of Baseball v. Markell.

Hardiman, who was joined by Judges Theodore A. McKee and Julio M. Fuentes, found that because single-game betting was not "conducted" by Delaware between 1976 and 1990, "such betting is beyond the scope of the exception in PASPA and thus prohibited under the statute's plain language."

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.

The Aug. 24 bench ruling was a surprising twist in the case because the lawyers on both sides had expected the court to limit its decision to whether the lottery should be temporarily enjoined while the lawsuit went forward.

In a rare move, the appellate judge 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 multigame 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.

A spokesman for Gov. Jack Markell issued a statement Monday saying the state's attorneys were reviewing the opinion and officials would discuss their legal options.

"While we are disappointed the decision does not provide the flexibility we had hoped for, Delaware is still the only state east of the Rocky Mountains that can offer a legal sports lottery on NFL football," the statement read.

Delaware's lawyers, Andre G. Bouchard and Joel Friedlander of Bouchard Margules & Friedlander, said Aug. 24 after the bench ruling that they were awaiting the court's written opinion and that no decision had been made about whether to seek reargument before all 12 active judges on the 3rd Circuit.