Dealing another setback to New Jersey’s long running battle to implement sports betting at casinos and racetracks in the state, the Third Circuit Court of Appeals has again ruled that the state’s latest effort to implement sports betting runs afoul of the federal Professional and Amateur Sports Protection Act (PASPA).

Briefly, PASPA prohibits a state from “authorizing by law” sports betting.   New Jersey previously challenged the constitutionality of the statute, arguing that PASPA impermissibly commandeers a state to implement a federal regulatory scheme because the state legislature has no choice but to keep sports betting illegal in the state.  The Third Circuit concluded that states had options, even considering that a state may repeal its prohibitions in whole or in part.

New Jersey then repealed its criminal prohibitions on sports betting to the extent those apply to casinos and racetracks.  New Jersey took the position that this partial repeal did not amount to a prohibited “authorization” because there is a distinction between authorizing and repealing.  The Third Circuit disagreed, but later agreed to review the case en banc.

Today, the en banc court, in a 10-2 vote, reaffirmed its prior position that New Jersey’s partial repeal amounts to an authorization prohibited by PASPA.  The court backpedaled from its earlier opinion:  “To the extent that in Christie I we took the position that a repeal cannot constitute an authorization, we now reject that reasoning.”  The court also continued to hold that states have more options under PASPA other than a total repeal of prohibitions on sports betting and maintaining those prohibitions as they currently exist.  “To be clear, a state’s decision to selectively remove a prohibition on sports wagering in a manner that permissively channels wagering activity to particular locations or operators is, in essence, “authorization” under PASPA. However, our determination that such a selective repeal of certain prohibitions amounts to authorization under PASPA does not mean that states are not afforded sufficient room under PASPA to craft their own policies.”

But the Court did not illustrate any meaningful options that a state has, other than to repeal its prohibitions on sports betting to the extent that they prohibit small bets between family and friends.  This is not an economically meaningful option, nor is stopping small bets among friends and family members a law enforcement priority.  “We need not, however, articulate a line whereby a partial repeal of a sports wagering ban amounts to an authorization under PASPA, if indeed such a line could be drawn. It is sufficient to conclude that the 2014 Law overstepped it.”

In dissent, Judge Julio Fuentes, the author of Christie I, concludes that the state’s repeal comports with the Court’s direction in Christie I and is therefore not a violation of PASPA.  He opined that there is a meaningful legal difference between authorizing and repealing and that New Jersey’s law does not grant any permission to anyone to do anything; instead it is a “self-executing deregulatory measure.”

Judge Thomas Vanaskie authored a separate dissent, arguing that PASPA is unconstitutional.  In probably the most powerful language anywhere in the majority or dissent, Judge Vanaskie states:

This shifting line approach to a State’s exercise of its sovereign authority is untenable. The bedrock principle of federalism that Congress may not compel the States to require or prohibit certain activities cannot be evaded by the false assertion that PASPA affords the States some undefined options when it comes to sports wagering.

Judge Vanaskie concludes that PASPA was intended to have the states implement a federal legislative program, and is, therefore, unconstitutional.

It remains to be seen whether New Jersey will seek certiorari from the US Supreme Court or try another means of repealing, or whether these decisions lead to a federal dialogue on a solution to sports betting.  With a multi-billion dollar unregulated and untaxed sports betting market in the United States, and a federal statute that dates back to before the prevalence of internet wagering, it is probably time to consider whether the status quo remains the best option.