National Collegiate Athletic Association v. Governor of New Jersey, etc., Nos. 13-1713, No. 13-1714, No. 13-1715; Third Circuit; opinion by Fuentes, U.S.C.J.; partial dissent by Vanaskie, U.S.C.J.; filed September 17, 2013. Before Judges Fuentes, Fisher and Vanaskie. On appeal from the District of New Jersey, No. 3-12-cv-04947. [Sat below: Judge Shipp.] DDS No. 10-8-xxxx [128 pp.]

After the New Jersey Legislature held hearings at which testimony indicated that regulated sports gambling would generate much-needed revenues for the state’s casinos and racetracks, and legislators expressed a desire to staunch the sports-wagering black market in the state, a referendum was held that resulted in an amendment to the state constitution permitting the Legislature to authorize wagering on the results of any professional, college, or amateur sport or athletic event. The Sports Wagering Law, N.J.S.A. 5:12A-2, was then enacted. It permits state authorities to license sports gambling in casinos and racetracks and casinos to operate sports pools.

Plaintiffs, the NBA, MLB, NCAA and the NHL, filed suit alleging that the SWL violated the Professional and Amateur Sports Protection Act of 1992, 29 U.S.C. § 3701 et seq. The district court upheld PASPA’s constitutionality, granted summary judgment to the leagues and enjoined New Jersey from licensing sports betting. Defendants, the governor, the director of the N.J. Division of Gaming Enforcement and the executive director of the N.J. Racing Commission, appeal, arguing that plaintiffs lack standing, PASPA is beyond Congress’ Commerce Clause powers to enact, and it violates the anti-commandeering doctrine and the equal sovereignty principle.

Held: PASPA is aimed at an activity that is quintessentially economic and that has substantial effects on interstate commerce and is within Congress’ power under the Commerce Clause. PASPA does not violate the anti-commandeering doctrine or the equal sovereignty of the states. Plaintiffs have standing to enforce PASPA’s prohibition on state-licensed gambling on their athletic contests.

PASPA makes it unlawful for states or persons to sponsor, operate, advertise or promote gambling based directly or indirectly on professional or amateur sports. It also makes it unlawful for a governmental entity to authorize by law or compact gambling on sports. A grandfather clause excludes Nevada from PASPA.

As to whether plaintiffs have standing to bring this action, the court notes that the leagues assert the SWL will result in a taint on their games and that it is a law that by definition constitutes state action to license conduct that would not otherwise occur. Thus, it says causation and redressability are satisfied.

As to an injury-in-fact, the leagues argue the law makes their games the object of state-licensed gambling and that they will suffer reputational harm if such activity expands. The court says that since one of the main purposes of the law is to use the leagues’ games for profit, the leagues are essentially the object of the SWL. Further, the leagues assert reputational harm, a very real and very redressable injury and there is evidence in the record to support the district court’s conclusion that reputational harm will occur as a result of increasingly associating the leagues’ games with gambling. The court therefore concludes that the leagues have standing.

As to whether PASPA is within Congress’ power under the Commerce Clause, the court notes that the Commerce Clause has been construed to give Congress considerable latitude and that it may regulate an activity that substantially affects interstate commerce if it arises out of or is connected with a commercial transaction. Both wagering and national sports are economic activities. There can be no serious dispute that the professional and amateur sporting events at the heart of the leagues’ operations “substantially affect” interstate commerce. It follows that placing wagers on sporting events also substantially affects interstate commerce.

The court rejects appellants’ claim that PASPA unconstitutionally regulates purely local activities, such as a casual bet on a Giants-Jets football game between family members. PASPA on its face does not reach such intrastate activities as it prohibits only gambling “schemes” carried out “pursuant to law or compact.” Even if it reaches these activities, congressional action over them is permissible if Congress has a “rational basis” for concluding that the activity in the aggregate has a substantial effect on interstate commerce. There is no doubt that Congress had a rational basis to conclude that such intrastate activities substantially affect interstate commerce, given the reach of sports and sports wagering.

As to whether PASPA’s operation violates the “anti-commandeering” principle, which bars Congress from directly compelling state legislatures to enact and enforce a federal regulatory program, the court says the import of this argument is that impermissible anti-commandeering may occur even when all a federal law does is supersede state law via the Supremacy Clause. However, the Supreme Court’s anti-commandeering jurisprudence has never entertained this position, let alone accepted it.

The court says that applying the Supremacy Clause to invalidate a state law contrary to federal proscriptions is not tantamount to direct regulation over the states, to an invasion of their sovereignty, or to commandeering. When Congress passes a law that operates via the Supremacy Clause to invalidate contrary state laws, it is not telling the states what to do, it is barring them from doing something they want to do. Anti-commandeering challenges to statutes worded like PASPA have thus consistently failed.

Appellants assert that PASPA imposes an affirmative requirement that the states act, by prohibiting them from repealing anti-sports wagering provisions. The court does not read PASPA to prohibit New Jersey from repealing its ban on sports wagering. All that is prohibited is the issuance of gambling licenses or the affirmative authorization by law of gambling schemes.

Alternatively, the court says that to the extent PASPA coerces the states into keeping in place their sports-wagering bans, that coercion may be upheld as fitting into the exception drawn in anti-commandeering cases for laws that impose federal standards over conflicting state rules, in areas where Congress may otherwise pre-empt the field.

PASPA does not violate the anti-commandeering doctrine. There is nothing in the anti-commandeering cases to suggest that the principle is meant to apply when a law merely operates via the Supremacy Clause to invalidate contrary state action. PASPA operates simply as a law of pre-emption, via the Supremacy Clause; it only stops the states from doing something; and, its policy of stopping state-sanctioned sports gambling is confirmed by the independent prohibition on private activity pursuant to any such law.

Finally, the court holds that PASPA does not violate the equal sovereignty of the states by allowing only Nevada to maintain broad state-sponsored sports gambling. While the guarantee of uniformity in treatment among the states cabins some of Congress’ powers, no such guarantee limits the Commerce Clause since Congress’ exercises of Commerce Clause authority are aimed at matters of national concern and finding national solutions will necessarily affect states differently. Moreover, that New Jersey seeks Nevada’s preferential treatment, and not a complete ban on the preferences, undermines appellants’ invocation of the equal sovereignty doctrine.

Judge Vanaskie, dissents in part, saying that he agrees that the leagues have standing to challenge the SWL, PASPA does not violate the principle of equal sovereignty, and that ordinarily Congress has the authority to regulate gambling pursuant to the Commerce Clause. However, he dissents from that part of the majority’s opinion that upholds PASPA as a constitutional exercise of congressional authority.

For appellants — Theodore B. Olson Matthew D. McGill, Ashley E. Johnson and Robert E. Johnson, of the D.C. bar (Gibson Dunn & Crutcher) and John J. Hoffman, Christopher S. Porrino, Stuart M. Feinblatt, and Peter M. Slocum (Office of the Attorney General of New Jersey). For intervenors Stephen Sweeney and Sheila Oliver — Michael R. Griffinger, Thomas R. Valen and Jennifer A. Hradil (Gibbons). For Intervenor New Jersey Thoroughbred Horsemen’s Association Inc. — Ronald J. Riccio and Eliot Berman (McElory, Deutsch, Mulvaney & Carpenter). For appellees National Collegiate Athletic Association et al. — Paul D. Clement, Candice Chiu, William R. Levi and Erin E. Murphy, of the D.C. bar (Bancroft), William J. O’Shaughnessy and Richard Hernandez (McCarter & English), and Jeffrey A. Mishkin, of the N.Y. bar (Skadden, Arps, Slate, Meagher & Flom). For intervenor United States — Paul J. Fishman (Office of the U.S. Attorney), Peter J. Phipps and Scott McIntosh, of the D.C. bar (U.S. Department of Justice, Civil Division). For amici curiae West Virginia et al. — Christopher S. Dodrill and Elbert Lin, of the W.Va. bar (Attorney General of West Virginia).