On Sept. 17, the U.S. Third Circuit Court of Appeals affirmed a decision of the federal district court in New Jersey enjoining the state’s sports-wagering law, which would have allowed betting on sports events at the state’s existing racetracks and in Atlantic City. On Nov. 15, that same appellate court denied the state’s request to rehear the case. Gov. Christie has publicly vowed to take this “fight” all the way to the U.S. Supreme Court if not successful in the lower courts. Based on the 100-page opinion of a two-judge majority of the Third Circuit, coupled with a solid dissent by Judge Vanaskie, some argue he has a shot. With the denial to rehear en banc in mid-November, the ball’s in Christie’s court to take his shot at the court.

I wrote in an op-ed, in a shore area publication, back in March that Christie’s fight would likely not survive constitutional muster on appeal. This proved to be true when two of the three judges on the appellate panel focused on the same arguments by the sports associations (and the federal government) that persuaded the district court judge.

Those arguments included an analysis of whether the various sports associations have standing to sue the state to stop its sports wagering law; they do. The state also was not successful in arguing that the federal law in the way of New Jersey’s sports wagering law (the Professional and Amateur Sports Protection Act or PASPA) was not within Congress’ power to enact it; it is. Further to that, the state contended that even if Congress did have authority to enact PASPA, it was not afforded the benefit of preemption via the Supremacy Clause. To this, again, the appeals court said no. To allow any one state to legislate sports wagering in “pockets” of PASPA’s prohibitions would undermine the federal government’s obvious goal in enacting the statute—to prevent the spread of sports wagering. With respect to allowing other states like Nevada (as well as our neighbor Delaware) to retain their arrangements, the state said these grandfathering provisions were impermissible; again, no. The last-ditch argument to this “treating states fairly” theory was an attenuated attempt at showing how the court’s recent decision to strike down the preclearance section of the Voting Rights Act should be used as precedent for disparate treatment among the states concerning sports wagering; the appeals court was not persuaded in analogizing voting to gambling.

That left the issue of anticommandeering, whereby the federal government is prevented from having the state do what the federal government should be doing. It is here that the state’s defense seemed to be most persuasive, and what spawned the 25-plus-page dissent. Only twice in the Supreme Court’s history has it struck down a federal regulatory scheme that commandeered the states to perform a federal function—once, to take title to low-level radioactive waste (New York v. United States in 1992), and requiring local law enforcement officers to perform background checks before the purchase of handguns regulated by the Brady Bill (Printz v. United States in 1997).

The appeals court majority made it clear in analyzing both the New York and Printz cases that those cases dealt with federal laws that placed an affirmative burden on the states, forcing them to expend their own funds and take overt actions in furtherance of federal regulatory objectives. It was the subtle difference between telling a state to take an action versus prohibiting it from creating its own laws to allow an action that won the day for the majority. They buttressed this distinction with Reno v. Condon from 2000, wherein the Supreme Court upheld unanimously the states’ obligations not to sell drivers’ personal information under the federal regulatory scheme of the Driver’s Privacy Protection Act (DPPA) of 1994. Being last in this line, and the distinction between affirmative burdens and mere mandates to the states not to take particular action, Reno seemed to win the day in the sports wagering case.

However, it is a line from then Chief Justice Rehnquist’s opinion in Reno v. Condon that may give hope to Christie and the state on sports wagering. The Supreme Court upheld the DPPA because it found that the law did not “require the South Carolina legislature to enact any laws or regulations, and it does not require state officials to assist in the enforcement of federal statutes regulating private individuals.” (Emphasis added.)

The dissent in the sports wagering decision from Sept. 17 focused on the fact that neither the Supreme Court nor any other federal court had directly ruled on a federal scheme that attempted to do the last part of that sentence. It reasoned that the majority’s distinction between commanding a state to take an affirmative action as opposed to not allowing a state to enact a law because of a federal prohibition is the same under Reno, that the end result is an attempt by the federal government to commandeer the states into a federal regulatory scheme. Stated another way, the dissent argued that PASPA’s flaw is that it prevents states from enacting laws aimed at curtailing individual behavior, but it conscripts the state into federal duties, irrespective of an affirmative or negative duty to achieve that end.

More concerning, and unlike the federal laws in all the cases cited above, the dissenting judge noted that there is no federal regulatory scheme under PASPA, there is simply a prohibition. As such, without any plan of enforcement, it is more likely that Washington is simply telling Trenton not to pass a law allowing something, and relying on the latter actor’s enforcement mechanisms to follow through; in this regard, it could be construed as commandeering.

Both sides were mindful of the uncharted waters into which the case may wade. Judge Vanaskie stated in his dissent:

I do not suggest that the federal government may not prohibit certain actions by state governments—indeed it can. If Congress identifies a problem that falls within its realm of authority, it may…properly incentivize states to regulate or comply with federal standards. (Emphasis added.)

Yes, Congress can condition federal funds on certain state action, but there are limits. For example, the court upholding a federal law conditioning federal highway funds to South Dakota on the state passing a uniform minimum drinking age. South Dakota v. Dole, 1987. But, in another case, the court struck down the provision of the Affordable Care Act of 2010 that conditioned states receiving federal funding for Medicaid programs if they did not timely adopt provisions of Obamacare. National Federation of Independent Business v. Sebelius, 2012.

But, here, there are no existing federal funds to incentivize state creation of laws furthering PASPA’s purpose, nor is there direct enforcement, not even under a defined regulatory scheme. This is an unanswered question, one that could (and, New Jersey would argue, should) be answered by the U.S. Supreme Court. Procedurally, the court likes to wait until there is a “circuit split” on legal questions, where at least two appellate courts reach contradictory rulings applying the same law. But no other U.S. appellate court has heard a case concerning PASPA. Indicatively though, three states signed on to New Jersey’s position in the Third Circuit case as amici curiae in support of reversing the federal district court’s injunction. These three states—Georgia, Kansas and West Virginia—while not in the Third Circuit and also not currently involved in active litigation concerning their own proposed sports wagering systems, signal at least an intention to benefit from any further decision that may be favorable to New Jersey in further litigation.

It’s no secret that New Jersey may lose millions of dollars in potential revenue if its sports wagering law is not ultimately found constitutional and is in a rush to have the matter settled before the Super Bowl in February 2014; time is now of the essence. The roll-out of Internet gambling in the state, as a substitute or accompaniment to sports wagering, will need time as well to take off before a benefit will be realized. Has the state determined that the shrinking procedural window to have the court docket the case necessitates the aggressive exploration of the Internet gambling avenue? Despite these considerations, the judges on the Third Circuit were mindful of their limits as a court of law:

It is not our place to usurp Congress’ role simply because PASPA may have become an unpopular law. The forty-nine states that do not enjoy PASPA’s solicitude may easily invoke Congress’ authority should they so desire.

It may be time to rally the New Jersey delegation in Congress to address this problem and tackle PASPA head on, rather than hedging our “bets” on the outcome in the courts. Could Congress act more quickly than the courts? Are the long-term benefits of this fight in the courts worth the risk of legalizing sports gambling? What would these constraints do to Christie’s future national political aspirations, if anything? One thing is for sure, other states are watching New Jersey with regard to this issue, as are those with related interests such as paying college athletes and professional team expansions.

The buzzer’s about to go off for the political and economic considerations of the sports-wagering issue. It’s time to take the shot.■

Next Week…

Internet Law