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New Jersey puts money on legalizing sports betting
Sports fans who have longed to back their favorite teams with their gambling dollars — legally — may soon get their chance as New Jersey Gov. Chris Christie leads a challenge to laws that have limited legal betting on sports to a small handful of states.
The long-running, high-stakes battle over betting on sports in America is coming to a head, and this time supporters are making the case that their fight against the nation's most powerful professional and collegiate sports leagues is not on economic or policy grounds, but is a defense of states' rights under the U.S. Constitution.
Mr. Christie, a Republican backed by many Democrats in his state, has made it clear that he will fight a lawsuit filed last week by the National Football League, Major League Baseball, the National Hockey League, the National Basketball Association and the NCAA designed to block the state's plan to unilaterally dismantle a federal ban on expanded sports gambling.
Analysts say the current system, which for the past 20 years has limited legal gambling on sporting events to Nevada and three other states, could be in jeopardy because of the way New Jersey has framed its challenge, and because the state goes into the fight in the wake of a referendum more than a year ago in which 68 percent of New Jersey voters supported legalized sports betting. Mr. Christie signed it into law in January, legalizing sports gambling in the state’s 12 casinos and five racetracks, but officials knew the ultimate test would be an inevitable federal court case.
"This is what New Jersey was waiting for," said Lloyd Levenson, CEO of the New Jersey-based law firm Cooper Levenson, which specializes in gambling law. "The lawsuit was expected … and the New Jersey contention is that the law is unconstitutional."
New Jersey officials contend that the federal ban, officially known as the Professional and Amateur Sports Protection Act (PASPA), is unfair because it is not applied equally across all states. Enacted by Congress in 1992, the law allowed four states — Delaware, Montana and Oregon, in addition to Nevada — to continue sports betting and allowed a one-year window for any additional state to apply. No other state met the deadline.
Of the four states where sports betting is legal, only Nevada offers direct sports betting. The other three are allowed to offer a limited version known as "parlay betting," in which gamblers must predict the winners in several consecutive games to earn a payout.
"I don’t believe it’s up to the federal government to decide what happens within the borders of a state on this issue, especially when they permit other states to do it," Mr. Christie said last week after the lawsuit was filed.
"If there was a grand nationwide prohibition, there wouldn’t be an argument, but how is it that sports gambling in New Jersey is going to affect the sports leagues more than it already affects the sports leagues in Nevada?"
Mr. Christie has bipartisan backing on the issue. State Sen. Raymond J. Lesniak, a Democrat from Union, is one of the most enthusiastic backers of the legalization drive. He says the sports leagues’ argument that more betting increases the risk of game-fixing has it completely backward.
"Legalizing sports wagering recognizes the inevitable — that people are going to be on sports whether the practice is legal or not …," he wrote in a recent Internet debate on the issue hosted by U.S. News & World Report. "By mainstreaming sports wagering, we can take some of the power away from organized crime and offshore Internet operators, and put it in the regulated hands of existing casino and racetrack operators."
Even so, sports leagues say the ban is necessary to maintain the integrity of competition.
"Sports gambling in New Jersey would irreparably harm amateur and professional sports by fostering suspicion that individual plays and final scores of games may have been influenced by factors other than honest competition," the leagues said in the lawsuit. "Plaintiffs will have been irreparably injured in a manner that cannot be measured in dollars."
New Jersey officials argue that sports betting would generate much-needed revenue in the state. According to the Las Vegas-based Club Cal Neva, it could mean as much as $120 million each year and thousands of jobs for the state, whose traditional casino business has been under assault from surrounding states. In Nevada, where the direct sports-betting industry enjoys effectively a nationwide monopoly, annual revenue in 2010 was only a little more than that, at $151 million. Delaware’s limited sports betting generated only $12.9 million in 2011.
In 2009, Delaware sought to legalize all sports betting, but faced a challenge from the same sports leagues currently suing New Jersey. The 3rd U.S. Circuit Court — the same court in line to hear New Jersey’s challenge — ultimately ruled against Delaware.
But legal analysts say the cases are different.
"The issue has not been decided by the Delaware case," Mr. Levenson said. "The focus of the other lawsuit was whether they could allow individual bets when they were grandfathered to do parlay bets. They didn't deal with the constitutionality question."
If New Jersey succeeds, PASPA would be nullified, opening the door for other states. Such a bill is pending in the California state Assembly, the lower house of its Legislature, and a few other states are closely monitoring the New Jersey legal battle, industry watchers say.
Yet evidence also suggests that not every state will rush to legalize sports betting if the ban is overturned.
Although federal law allows it, neither Oregon nor Montana offers parlay sports betting. Some sports analysts say states are wary of sports betting because it discourages professional sports franchises wary of the effect that legalized betting could have on the team’s integrity — from moving to the city. They cite Las Vegas, one of the largest metropolitan areas without a major-league sports franchise, as the prominent example. Either way, analysts expect the pending court case to be a long struggle that may not be determined until early next year, with an appeal virtually guaranteed from the losing side.
"We're not talking, 'in the next month or so,'" said Joseph Kelly, a business professor at the University of Buffalo and co-editor of the Gaming Law Review, a peer-reviewed scholarly journal. "Generally, it’s quite difficult to overturn a law that doesn’t deal with an absolute right. New Jersey has a difficult hurdle."
Still, some are cautiously optimistic.
"Nobody has an advantage going into court. It always depends on how they set forth their arguments," Mr. Levenson said. "But I think New Jersey has some great arguments."
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