Tony Soprano and the rest of the New Jersey underworld had reason to celebrate recently, when a lawsuit challenging the constitutionality of the federal law banning sports betting was tossed out of court.  On the other side of the table, the proponents of legalized sports gambling in New Jersey are in the red, but not quite out of chips yet. It remains to be seen whether they will stay in the game and ante up again, or cut their losses and walk away.

The law in question, the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), makes it unlawful for a government entity, or an individual acting pursuant to a law authorized by a government entity, to sponsor, operate, advertise or promote “a lottery, sweepstakes, or other betting, gambling, or wagering scheme” based on games played by amateur or professional athletes or the individual performances of amateur or professional athletes in such games.  PASPA includes multiple grandfather provisions which exempt states that had been conducting sports betting prior to the passage of the Act (Nevada, Delaware, Oregon and Montana), and also provided certain states with a one year window to bypass PASPA and institute their own exempt sports betting schemes. 

In case of an alleged violation of PASPA, the United States Attorney General, or the sports organization whose game is alleged to be the basis of the violation, may bring an action for injunction.  When PASPA was enacted, New Jersey lawmakers considered taking advantage of the bypass provision but failed to act within the required time period.

On March 23, 2009, New Jersey State Senator Raymond Lesniak and a group of pro-gambling organizations, including Interactive Media Entertainment & Gaming Association, the New Jersey Thoroughbred Horseman’s Association and the Thoroughbred Breeders Association of New Jersey, brought suit in the United States District Court of New Jersey challenging the constitutionality of PASPA. The complaint alleged that the federal ban on sports betting denies New Jersey the ability to collect millions of dollars that would arise as a result of the taxation of legalized sports betting, and that illegal bookmaking and underground sports gambling represents “incursions of illegal activity which are injurious to athletes and the public…”  Further, the complaint alleged that in a declining economy, many of the businesses represented by the plaintiff organizations, particularly those associated with horseracing “face imminent financial ruin” that could be averted if they were allowed to accommodate additional forms of sports gambling.

In their attempt to invalidate PASPA, the plaintiffs put forth several constitutionally based theories.  First, they alleged that in allowing only select states to have legalized sports betting, PASPA violates the Commerce Clause by failing “to legislate uniformly amongst the several states,” and also the Equal Protection Clause by prohibiting citizens from the remaining states “from enjoying the same privilege of engaging in multiple forms and platforms for Sports Betting.”  Second, the plaintiffs alleged that PASPA is unconstitutionally overbroad and impermissibly vague, in violation of the Fifth and Fourteenth Amendments.  Third, the plaintiffs argued that PASPA violates the Tenth Amendment because the right to raise revenue “by means of state laws authorizing Sports Betting is a right reserved to the individual states.”  Finally, the plaintiffs claim that allowing an action to be brought against the State of New Jersey by a sports organization is a violation of New Jersey’s Eleventh Amendment right to sovereign immunity. 

Unfortunately for the plaintiffs, who were joined in February of 2011 by the New Jersey Senate (represented by Senator Stephen Sweeney in his official capacity as the Senate president), the court did not even review any of their substantive claims.  In March, in Interactive Media Entertainment & Gaming Association, Inc. v. Holder (D.N.J. Mar. 7, 2011), Chief Judge Garrett E. Brown of the United States District Court of New Jersey dismissed the suit for lack of standing, opining that “any civil enforcement action at this stage would be premature, because New Jersey law does not permit the sports gambling sought.”  Because sports gambling is illegal, there is no imminent threat of legal action from the Attorney General or an interested sports organization under PASPA’s enforcement provisions.  Thus, at this point the potential for injury to those wanting to promote or engage in sports gambling remains speculative.  Further, even if the court were to find PASPA unconstitutional, the plaintiffs and their members still would not be able to engage in sports betting.  So a favorable ruling for the plaintiffs would fail to redress the injury plaintiffs claim to suffer.  

Despite this setback, proponents of sports betting in New Jersey may be able to double down and take another shot at PASPA.  In November 2010, the New Jersey legislature passed Senate Concurrent Resolution No. 132, which, if approved by an upcoming referendum of New Jersey voters, would amend the New Jersey constitution to allow the legislature to authorize sports betting at “casinos or gambling houses in Atlantic City” or at “current or former running and harness horse racetracks,” as long as such betting does not include games taking place in New Jersey or involve New Jersey collegiate teams.  So at this point, it is up to the people of New Jersey to make the next move.  If SCR 132 is approved, the plaintiffs and other proponents of sports betting may go from longshot to favorite, giving them the motivation (and procedural standing) they need to throw their chips back into the pot.  Until then, the odds remain stacked against them, and the smart money in New Jersey will be on the sidelines -- or in Vinnie the Goomba’s pockets.