Emerging Legal Developments in Sports Betting Law

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January 2020

Sports betting is reaching a fever pitch in the United States. With recent legal developments in the sports wagering field, gaming entrepreneurs across the nation are racing to get a piece of the action. Numerous states have legalized some form of sports betting, and legislation is pending in many others. However, the nuances of sports betting law are tricky, requiring careful attention to detail.

Prior to 2018, the Professional and Amateur Sports Protection Act (“PASPA”) made it illegal for a person or state to sponsor, operate, advertise, or promote a betting, gambling, or wagering scheme based on amateur or professional athletes or games, except in certain locations. In layman’s terms, the law prohibited all states except Nevada, Oregon, Delaware, and Montana from offering legal sports betting. As a practical matter, only Nevada took full advantage of the exemption in a timely fashion and held a virtual monopoly on U.S. sports betting for decades. That began to change when New Jersey passed a law to begin offering legal sports betting, but the NCAA sued to enjoin the law under PASPA. New Jersey fought back and argued that PASPA unconstitutionally violated its state sovereignty and the anticommandeering principle, which says that the federal government cannot require states or state officials to adopt or enforce federal law. In 2018, the Supreme Court of the United States agreed with New Jersey and invalidated PASPA on constitutional grounds, holding:

The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not. PASPA regulates state governments' regulation of their citizens. The Constitution gives Congress no such power.

Legal Intrastate Sports Betting

In striking down PASPA, the Supreme Court opened the door for states to begin offering legal sports betting within their borders. Many states now offer legal intrastate sports betting in some form, including Nevada, New Jersey, Delaware, Mississippi, West Virginia, Pennsylvania, Rhode Island, Arkansas, New York, Iowa, Indiana, New Mexico, and Oregon. Other states including Illinois, Montana, New Hampshire, North Carolina, Tennessee, Colorado, Michigan, Maine and Washington D.C. have passed bills to allow legal intrastate sports betting in the future. Opportunity awaits as each state develops the necessary licensing and regulatory scheme sufficient to allow sports betting operators to begin offering legal sports betting services.

In the select few states with legal intrastate sports betting, regulations vary widely. Each state imposes different rules as to what sports and leagues may be bet on, what taxes are imposed on bets, whether bets may be placed in-person or online, and more. Those looking at business opportunities in this developing area must be familiar with the variety of statutes, rules, regulations, and enforcement polices of each jurisdiction.

Interstate and International Sports Betting

The Supreme Court’s ruling in Murphy v. NCAA was limited to the validity of PASPA and did not impact other federal laws that may be used to prohibit interstate and international sports betting, including the Wire Act and the Unlawful Internet Gambling Enforcement Act (“UIGEA”). In other words, interstate and international sports betting are still subject to additional restrictions.

While federal law does not specifically prohibit individuals from placing bets on sporting events, the Wire Act makes it a crime for a company or individual to engage in the business of sports betting or wagering while using the Internet, telephone, or other interstate wires to transmit bets or wagers. The statute also prohibits transmitting certain information that assists the placement of bets or wagers but makes exemptions for news and entertainment services. The courts have specifically held that this law applies extraterritorially. For example, in 2006, the offshore BetOnSports was indicted on twenty-two counts of racketeering, conspiracy, and fraud, and the founder was arrested less than a year later. In 2013, an indictment was brought against thirty-four individuals and twenty-three entities that operated another offshore sports betting site. Furthermore, the UIGEA prohibits the acceptance of money for purposes of illegal Internet gambling, though an exemption exists for intrastate gambling that is authorized by state law.

Conclusion

With PASPA overturned, states are free to begin offering legal sports betting in-person and online within their borders, and many states have passed laws to do just that. With each passing day, more and more Americans are legally able to place sports bets at licensed casinos in their state or from mobile apps and websites in the comfort of their own homes. Many others seek out betting opportunities with offshore sports books. While the licensing rules and regulations are evolving, this new era is opening a wealth of new opportunities for individuals and businesses that seek to expand into the world of sports betting.