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The Rise of Legal Sports Betting: Challenges and Opportunities

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The Rise of Legal Sports Betting: Challenges and Opportunities

For many years, sports betting was solely considered an amenity at casinos and racetracks. Today, it is a multi-billion dollar industry legal in many U.S. states. In this course, we examine landmark cases and statutes that shaped the world of sports betting, and also look ahead to future policy and legal concerns.

Presenters

Dan Lust
Podcast Host & Attorney
Conduct Detrimental
Dan Wallach
Founder
Wallach Legal LLC

Transcript

- Hello, and welcome to our presentation today, The Rise of Legal Sports Betting: Challenges and Opportunities. My name is Dan Lust, alongside Dan Wallach. We are the co-hosts of the Conduct Detrimental: Sports Law Podcast. We cover anything and everything at the intersection of sports and law, including of course, for today, sports betting legislation. As I mentioned, my name is Dan Lust. I am an attorney at the law firm of Geragos and Geragos. I practice in the sports and entertainment realm. Alongside me, my fellow Dan, we'll say is the sports betting, sports gaming guru. Dan, how about a little bit of an introduction for yourself and your practice? 

 - Yeah. Thank you, Dan. I'm Daniel Wallach. I am the founder of Wallach Legal, which is a law firm that spawned or rose up in the aftermath of the Supreme Court decision, which created the pathway for legal sports betting nationally. We're gonna get into that in a little while, but I devote nearly the entirety of my legal practice to the regulated sports betting and gaming industries. I teach sports betting law and regulation at University of Miami School of Law, and at the University of New Hampshire School of Law, where I am the co-founder and co-director of the Sports Wagering and Integrity Online Certificate Program. And I've testified in front of a number of state legislative bodies, concerning sports betting legislation and related policy issues. 

 - I have not testified in front of any sports gaming issues or, or anything like that. But Dan, I will call myself a recreational bettor in the state of New York, where sports betting is legal. So, what we are going to do today is explain the history of sports betting in our country, where it is going, and some of the interesting issues on a really nuanced level of what we see in each state, why some states you're allowed to bet on college sports, for example, and other states, there are really no restrictions on that. And vice versa, why some states, you can only bet at a casino, and, you know, actually in person, and other ones you can bet mobile across the state, like where I am in New York. So with that said, we have some very specific course objectives for today. Just I guess we can lay it out here. If, you know, obviously for many years, sports betting was considered an amenity at casinos and racetracks, and today it is a multi-billion, with a B, dollar industry, legal in many United States. In this course, we'll examine the landmark cases and statutes that shape the world of sports betting, and also look ahead to future policy and legal concerns. So, you know, I don't think it's any concern, Dan, when you just watch television, you turn it on, there's an ad for sports betting everywhere you look. It is a very different landscape than maybe even 5, 10 years ago, a very different world, and that's because of the law. So it takes attorneys like yourself to kind of help fill in the blanks here. It's obviously fun for sports bettors to see betting being legal in their state, but there are obviously some pitfalls and obstacles to the legalization. It's not just, you know, the drinking age is 21. If you're over 21, you can drink. There are a lot more, you know, obviously nuances to that. Okay. So go ahead, Dan. 

 - Yeah, I mean the growth of the legal sports betting industry has only intensified and increased the number of legal issues and legal concerns that face the industry. The Supreme Court decision, which opened up the floodgates for legal sports betting, simply outsourced the policy-making to state governments. And now we have regulatory issues, compliance issues, and yes, even legal issues, as to whether sports betting can be legislated under state law. And we're going to discuss the role that state constitutions play, and tribal gaming compacts. There are a number, a growing number of legal issues that confront attorneys that focus their time on the sports betting and gaming industry. So the need for lawyers and the demand for lawyers with concentration, specialization, and sophistication in this space has only grown. And we'll try to touch on some of the high level legal issues today. 

 - Okay, so for breaking down our specific learning objectives. Number one, as we've discussed, we're gonna examine the background and the history of sports betting law and regulation. Number two, we're gonna explore important stakeholders, and the current sports betting climate, as we are trending towards even further, states legalizing sports betting. Obviously we're not at all 50 states, but we are, you know, in a world where we are obviously moving a little bit closer to that each day, and really each year. And lastly, we're gonna consider the future policy concerns, and the specific legal battles that are occurring on a state-by-state basis for the legalization of sports betting. Okay, so I think that's really a good place to start. We've alluded to it a couple times, the meteoric rise of United States sports betting. Now Dan, on our podcast over the last two years, Dan, you and I came together on the podcast really in June of 2020. And we were alluding in as many different ways that because of the COVID 19 pandemic, and because of the, you know, the shortage of revenue in certain states because of the COVID 19 pandemic, perhaps possibly that would speed up the legalization of sports betting across our country. Now I'm not gonna say that's the sole reason, but I do think that that certainly plays a role. We have gone from one state having sports, legalized sports betting, that's obviously Nevada, to 34 states in less than four years. So certainly we were trending in that direction, Dan, as we're gonna talk about, you know, the Murphy case that happened long before, you know, the COVID 19 pandemic, but to get to 34 states that quickly, certainly some different factors had to change in our country. So here are the numbers. $135 billion have been wagered since May 14th, 2018. When we talk about a revenue generator, during the COVID 19 pandemic, right? Obviously the revenue wasn't what it was in years past. And I think that has expedited the conversation in certain states. So when you have $135 billion wagered, and then we're not just talking about the Super Bowl, we're not just talking about March Madness, that's money that's being bet all across all 12 months, it is a lot of money and it is giant revenue generator for these states. The question is which will be a large focus today, obviously to get from point A to point B, to legalized sports betting, and result in revenue, is something that I think all states would like to do. It's just a matter of how to particularly do it. And the nuances that each state will take. One of the points of contention, 1.5 billion in state tax collections since May 14th, 2018. So just a obvious point, obviously it's a massive revenue generator on that level. So originally, if you go back to sports betting, it was conceived as an amenity for casinos and race tracks. I think the thought process being that people could only bet when they were onsite at those casinos and those race tracks is a way to draw in those additional sports bettors and maybe have them wager at the casinos and wager at the tracks. But obviously it's since evolved into being able to bet from your couch, where I can tell you from experience, you are legally allowed to bet from your couch in many states, including obviously New York, but there are obviously certain states, we can go through them, but that do not allow you to wager in the state, unless you are at a physical location, be it a casino or a racetrack. You know, but as we have gone further into this era of sports betting, you can now bet at professional sports stadiums, arenas, bars, and obviously, of course, from your couch via the worldwide web. You know, at least according to some facts and figures, online wagering accounts account for nearly 85% of all legal sports bets. So that's telling you that these in person, you know, putting, getting a ticket at the window like you used to do at the Vegas sports book, you know, that maybe is a thing of the past, that we are moving more and more towards online wagering every day. Dan, I'll kick it to you. 

 - Yeah, well, I mean, what we're gonna highlight today during our presentation is that states are not, you know, bound to follow a specific framework that's laid out by the federal government . Under well settled case law and federal statutes, states are the primary determinant of what forms of gambling shall be legal, you know, within state borders, and state governments are considered the ultimate laboratories of experimentation. So the type of sports betting regime you see in New Jersey or Pennsylvania, New Hampshire, Massachusetts, other states are not bound to follow that. But while states today are free to devise what they think is the best public policy framework for sports betting, it wasn't always that way. Prior to May 14th, 2018, and I refer to that date as sort of the dividing line between the prohibition era for sports betting. and then the post PASPA era. May 14th, 2018 was when the United States Supreme Court rendered its decision in Murphy versus NCAA declaring that the federal ban, it was a federal statute, known as the Professional and Amateur Sports Protection Act that that law violated the 10th amendment of the US Constitution. And in particular, impermissibly commandeered state governments in violation of the constitution. But before we look forward, we need to take a step backward, and understand the legal underpinning for how sports betting became as prevalent as it is today in as many as 34 states. And by the time some of you may be listening to this, the number might even be higher, but four years after that Supreme Court decision, we've gone from one state to 34 states. And it is not inconceivable that by 2024, 40 or more states will have legal sports betting, but it all comes back to PASPA. PASPA was the law that was on the books beginning in 1991, the Professional and Amateur Sports Protection Act, because of that federal law, state governments were forbidden to license, legalize, or authorize any sports betting schemes within their border. So I want to talk for a few minutes about the PASPA law, which just dominated the conversation between 1991 and 2018. And it really, you know, we're talking about 27 years of basically a prohibitive era, in which states as desirous as they were of raising revenue, and how much they wanted to bring sports betting within their borders, they simply could not do that because the federal law prohibited it in under the US Constitution. We have the supremacy clause, federal law preempts state law, governing the same subject matter. So let's talk for a little bit about PASPA, and I'll take you through the evolution of the case law that led to the ultimate Supreme Court decision, which struck down PASPA. 

 - Can I jump in very quickly, 'cause I wanna just set the stage here. This is the, what I think is the part, if people have their, you know, pens and papers handy. Just think for a second where we are right now, when you're listening to this in 2022. Everywhere you look is a sports betting commercial, right? I think the eyeballs on the product, and the ratings of football and basketball have been directly impacted by something like, you know, fantasy sports, but sports betting obviously is a big driver of that. And you go back to, Dan is gonna talk about the landscape in 1991, we are coming off a number of point shaving scandals in the college sports ranks, you know, and I think obviously the Pete Rose conversation was happening, and sports betting was very much taboo back then, and now, I mean, Dan, I'll address the elephant in the room. I was the ripe old age of three in 1991, right? It's a very different era than the one that I've grown up in, when sports betting is not really frowned upon, it's done out in the open, but you can look back to comments from, you know, the late great NBA commissioner, David Stern. He was asking for, you know, PASPA to be passed. He was asking for federal legislation to protect professional and amateur sports, so that's what the commissioners were asking for. They were asking for a real protection on this. So, you know, I just wanna set the stage here. It is night and day, what we are looking at at the early 1990s, and what we're looking at now in 2022. So it makes a world of difference in this in PASPA, and Murphy, which we're gonna get into are entrenched in the sports law history books for a reason. You have to kind of look at them in their context, but Dan, I want you to set the stage, but this is, this is our whole conversation right here. What happened in '91 and how we got. 

 - Well, let's take it back to 1991. Let's look at the world as it existed back then. You had the Pete Rose scandal. You had a manager of a professional baseball team betting on his own team. And from the ashes of that investigation, the four commissioners of the major professional sports leagues and the NCAA actively lobbied Congress to pass a sports betting prohibition law that would prevent the further growth of state-sponsored sports wagering. I mean, the commissioners were concerned over the possibility of fixed matches, and most importantly, that their customers, their fans would begin to perceive that the games weren't on the level. So all the leagues, you know, public polling and private polling indicated that there was significant public, you know, antipathy towards expanded gambling. And at that time, there wasn't any daily fantasy sports. There wasn't even a casino gambling environment that exists today, where you have over 40 states with legal casinos. Back in 1991, only two states, New Jersey and Nevada had legal casino gambling. So it was just a different time and a different place. And the scandals that permeated major league baseball, and even some of the math fixing scandals in college basketball led the, you know, stakeholders in the sports industry to push for federal legislation. So back in 1992, Congress passed PASPA to stop the spread of state sponsored sports gambling, and to maintain the integrity of professional and amateur sports. You know, the report of the Senate judiciary committee identified a number of harms that would be caused by sports gambling. They thought that sports gambling threatened the integrity of, and public confidence in amateur and professional sports. And they believed that widespread legalization would inevitably promote suspicion about controversial plays, and lead fans to think that the fix was in whenever their team failed to beat the point spread. And additionally, the Senate Judiciary Committee was concerned about the potential effect of legalized sports betting on America's youth, noting that all these technological advances, you know, presaging the internet, have made gambling more accessible to minors, who at the time comprised millions or several million of the nation's approximately 8 million compulsive gamblers. So against that backdrop, Congress enacted PASPA. Now, what did PASPA provide? PASPA was not a prohibition on sports betting. PASPA was directed only at state government apparatuses. So rather than expressly prohibit sports wagering, and get rid of what Nevada had at the time, which was single game sports wagering, what PASPA accomplished was forbidding state governmental entities, such as states, and even federally recognized Indian tribes from doing any of six things. They could not sponsor, operate, advertise, promote, license, or authorize sports wagering schemes based upon the outcome of one or more performances within any professional or amateur sporting contest. So what did that mean? States couldn't pass laws authorizing sports gambling. They couldn't license it. They couldn't sponsor, operate, promote, advertise. It was hands off. It restricted state governments from having any discretion or decision making authority when it came to the realm of sports gambling. And this was a very unique federal statute in that it gave enforcement authority not just to the federal government, but it also, it empowered the Attorney General of the United States, as well as professional sports organizations to go into federal court, to seek an injunction against any state government which violated PASPA. So this very unusual enforcement tool, which empowered private actors to enforce federal law against state governments, you know, began to preview some of the down the road legal battles. When the professional sports leagues went into federal court to block New Jersey from implementing its sports wagering framework in the 2012, 2013 and '14 era. So from my understanding, it is the only federal law which empowers private actors to seek injunctions against state governments. And that raises a whole host of federalism concerns that began to rear their head about 25 years after the fact. So in the first 15 to 20 years of PASPA's history, it was never challenged in court. It became the law of the land between 1991 and 2009. And during that 18 year period, state governments were prohibited from authorizing any kind of sports wagering scheme, but there were several exemptions or exceptions that that statute created. PASPA contained a number of exemptions, the most important of which, were two grandfathering provisions or grandfather clauses, which exempted or preserved preexisting sports wagering schemes in Nevada, Delaware, Oregon, Montana, and possibly a few other states. And the grandfather clause provided that PASPA did not apply to any lottery sweepstakes, or other betting, gambling, or wagering scheme in operation, in a state during the period between January, 1976 and August 31st, 1990. That grandfathering provision was intended to permit states like Delaware, Oregon, and Montana, to continue the limited sports lotteries and parlay cards that they had previously conducted. However, that exemption was limited just to those sports wagering schemes that were in existence during that 14 year time window, and then only to the extent that they were actually conducted, meaning they could have what they had before, but they couldn't expand beyond those parlay cards, and you know, pool games where we had to bet on multiple games, and win three or four of them in order to have a successful bet. Well, back in 2008, the state of Delaware began to test the limits of that exemption, when it sought to expand its sports lottery, which had been limited to multi-game parlay bets on NFL games to include point spread bets. Point spread bets, and over under bets on major professional and collegiate sporting events, and that led to litigation. So in 2009, in a case called Office of the Commissioner versus Markell, which was a suit by major league baseball against the governor of Delaware, the third circuit court of appeal held that Delaware's proposed lottery expansion to single game betting, violated PASPA as the exemption provided under PASPA for preexisting sports wagering schemes only applied to the extent that such schemes were actually conducted between 1976 and 1990. And the court found that the only form of sports wagering conducted by Delaware between 1976 and 1990 involved multi-game parlay bets on NFL teams. So the court ultimately concluded that Delaware was barred from offering single game sports betting, since it had not conducted such wagering during the relevant statutory timeframe. So as a result of the Markell decision, Delaware's version of legal sports betting remained limited to multi-game parlays involving only NFL teams. And it remained that way until roughly 2012, when three, four years later, New Jersey began to get in on the action. And during the first decade of the 21st century, states were undergoing severe budgetary problems and budgetary deficits, and began to look for new ways to raise revenue. And during Governor Chris Christie's regime as governor of the state of New Jersey, New Jersey tried to sort of push the door open, and test the constitutionality of PASPA, in an effort to bring legal sports betting to New Jersey. So back in 2011, New Jersey voters approved an amendment to the state constitution to allow the legislature to authorize sports betting by statute. And following that lead, the New Jersey legislature passed a sports wagering law, which permitted New Jersey regulators to license sports wagering at its casinos and race tracks. Governor Chris Christie signed that legislation into law in 2012 and shortly thereafter, the New Jersey Division of Gaming Enforcement passed rules and regulations setting forth the procedures by which the state's casinos and racetracks could obtain licenses to conduct sports wagering. So that's the calm before the storm. Immediately thereafter, once the regulations get passed, back in 2012, the four major professional sports leagues and the NCAA filed lawsuits, or filed one lawsuit against New Jersey in the US District Court for the district of New Jersey seeking to prevent the state from implementing its new sports wagering law. That case is known as Christie One. And Christie One and Christie Two ultimately led to the decision that was rendered by the Supreme Court back in 2018, which just basically blew the floodgates open. But we wanna take a step back and now focus on Christie One. So in Christie One, the four sports leagues were successful in persuading a federal court to conclude that the New Jersey law violated PASPA, and the federal court granted summary judgment to the leagues and enjoined New Jersey for moving forward with a sports wagering law, and New Jersey raised a commandeering argument under the 10th amendment. And the argument that New Jersey raised, which was a novel constitutional argument, was that the federal law impermissibly interfered with state sovereignty, in violation of the anti-commandeering doctrine under the 10th amendment, and the court in Christie One, at least the district court held that the anti-commandeering doctrine applies only when the federal government forces states to engage in affirmative activity. And here that wasn't occurring. The federal government passed the law, which forbid the state from acting, but didn't force the state to do anything about it. So the Christie One case ultimately went to a US Federal Court of Appeals decision. And the majority in Christie One for the third circuit observed that it is hard to see how Congress can commandeer a state or how it can be found to regulate how a state regulates, if it does not require the state to do anything at all. And on that basis, the third circuit affirmed the district court's decision in Christie One, and put an end to New Jersey's efforts to create a regulatory regime around sports wagering. But there was some language in the Christie One decision that ultimately became crucial and became the linchpin for how sports betting ultimately became legal throughout the state of New Jersey. And this dicta in Christie One fueled the later lawsuit called Christie Two, and ultimately led to the US Supreme Court overturning PASPA. So in Christie One, the third circuit gave PASPA a savings interpretation that would afford states considerable leeway in crafting their own policies, including the ability to repeal their own sports betting prohibitions under state law. I mean, New Jersey had argued in that case that as a state we're prevented from even repealing our own law, because if we were to repeal sports betting prohibitions, the leagues would run into court and accuse us of giving the state's imprimatur to sports wagering, and in essence authorizing it, which is a forbidden activity under PASPA. So the third circuit disagreed with that argument, and said PASPA's straightforward prohibition on state sponsored sports betting can be recast as state, as providing states with two choices, it would leave much room for the states to make their own policy. On the one hand, a state could repeal its sports wagering ban, a move that would result in no, or a move that would result in the expenditure of no resources or effort by any state official, or on the other hand, the state could choose to keep a complete ban on sports wagering, but it is up to each state to decide how much of a law enforcement priority it wants to make of sports gambling or what the exact contours of the prohibition will be. So there it is. And the third circuit's decision in Christie One, it's leaving open the possibility that state governments would be able to repeal their own laws in whole, or in part in order to decriminalize sports wagering without violating PASPA. And that became the hot button issue in the Christie Two case, because what did New Jersey do back in 2014? The state of New Jersey, through its legislature and governor Christie, they accepted the third circuit's invitation, and relying on that majority opinion, which left it to a state to decide what the exact contours of the prohibition would be, the state of New Jersey enacted a partial repeal law on October 7th, 2014, which repealed all state laws and regulations prohibiting sports wagering, but only in certain circumstances. And that law, which was enacted in 2014 only repealed those laws to the extent that they apply, or maybe construed to apply to sports wagering at consenting casinos and race tracks. In other words, the partial repeal only affected two classes, casinos, and racetracks. In all other respects, New Jersey's ban on sports wagering remained intact throughout the state. But unsurprisingly, the sports leagues viewed this as a circumvention of PASPA, and the third circuit's prior decision in Christie One, and in October, 2014, the league sued New Jersey, once again, arguing that the 2014 partial repeal law violated PASPA, because it is tantamount or was tantamount to an authorization of sports betting, which is prohibited by PASPA. And it's this second case and the ensuing appeal that are commonly known as Christie Two. So in November of 2014, the district court agreed with the major sports leagues once again, and granted summary judgment in favor of the leagues, and issued a permanent injunction, barring New Jersey from giving operation or effect to its partial repeal law. And the district court interpreted Christie One as holding that PASPA provides states only with a binary choice. A state may either maintain its complete prohibition on sports betting, or may completely repeal its prohibition. Anything outside of those two binary choices, the district court added would leave states too much room to circumvent the ultimate intent of Congress. So viewed through that lens, the district court concluded that the partial repeal law was an authorization of sports betting, in violation of PASPA, because it was a partial repeal, not a complete repeal, and sought to achieve the same end as the law that was invalidated in Christie One, allowing sports betting in New Jersey's casinos and racetracks, New Jersey appealed that decision yet again to the third circuit, which affirmed the district court's decision by a two to one vote. The third circuit's opinion, however, was vacated after New Jersey successfully petitioned for rehearing en banc before the full court. And the grant of rehearing en banc is a rarely invoked process. Only one or two cases per year out of hundreds ever get that designation. But doesn't matter, the result was still the same. When the third circuit's en banc panel affirmed the district court's decision by a nine to three vote this time, describing the 2014 law as an attempt to skirt PASPA, and ultimately the en banc panel concluded that the partial repeal law authorizes sports gambling in violation of PASPA. So going through this federal court system, the state of New Jersey ultimately racked up two lawsuits in seven consecutive defeats. They went 0 for 7 in advancing this constitutionality argument. They were defeated at every turn in the district court, the appellate court, in Christie One, the US Supreme Court denied certiorari in Christie One, and they went through a similar spate of failure in Christie Two up, but with one critical difference. This time, the US Supreme Court entertained certiorari in Christie Two, and in late 2016, New Jersey sought Supreme Court review of the third circuit's decision in Christie Two, and lo and behold, despite the very long odds for granting certiorari, the Supreme Court decided to entertain the merits of New Jersey's constitutional challenge in June of 2017, making the Christie Two case one of only 26 cases that would be reviewed by the Supreme Court during its 2017 term. So with that as the backdrop, we head now to the ultimate decision entered by the US Supreme Court in Murphy versus NCAA. And the names of the plaintiffs changed to the reflect the fact that the governor of New Jersey became Murphy, from Christie. Christie was term-limited. So when his term of office ended, Governor Murphy took the reins, not only as the governor of the state of New Jersey, but the lead plaintiff in the New Jersey sports betting case. 

 - So yeah, Dan, that was a fantastic breakdown. And you know, I think that, you know, answers probably some questions, right? Christie One, Christie Two, and they say, as I was growing up, my mom used to say that bad things come in three, and Dan, maybe that's why their fortunes turned all of a sudden, because there was no Christie Three, we switched over to Murphy. So here's the big decision. This is the case, obviously, you know, Murphy, you know, Governor Phil Murphy takes over. And that's the case that becomes known in the history books. So here at the end of the day, right? I think people know where we're going with this. Dan explained obviously the Supreme Court grants certiorari in 2017, unlikely that they were going to do it, especially after they had, they had denied it three years earlier, but the Supreme Court ultimately reverses the third circuit by a seven to two vote. And they invalidate PASPA on 10th amendment grounds. So, the quote that we can take from this quote, Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own. So the 10th amendment Dan is, you know, as he eloquently explained, speaks to this concept of federalism. To the extent that the federal government acts and has a law, an affirmative law in a particular area, the states cannot act in that regard. But if you are to invalidate a federal law, the states can do what they want. We're having, you know, a similar conversation that we talk about in our show is what's going on right now in college sports right now, there is no federal law regulating the world of college sports. And each state, as we're seeing now in sports gambling, is creating their own laws. Now, will there be a federal law at some point in the college sports ranks to regulate and legislate the world of name, image, and likeness? We will see, but you know, obviously they're looking over to an analogous world of sports betting, and obviously the caption of this case that we're about to talk about and get into, Murphy vs National Collegiate Athletic Association. No coincidence, right? That's an NCAA case. So obviously NCAA legislatures are looking to it. And this history kind of repeating itself now in 2022, 30 years after the commissioners, you know, were speaking to get a federal bill, you have that happening now at the college sports rank with, you know, NCAA President, Mark Emmert, conference commissioners asking for a federal bill on NIL, so obviously following these two very closely. You know, obviously the impact of the Murphy case on the legalization of sports betting, you know, you can see it. And we talked about a lot of those facts and figures at the beginning. You had Nevada, obviously, you know, maybe on a personal note, a lot of the, you know, our listeners, you know, listening to this right now, you know, back in the day, you would go to Vegas If you wanted to have a weekend of sports betting, right? That is not the world we live in anymore. There are 34 states as of today. And again, you might be listening to this. There might, we might get to 35, 36, 37. That's not the world we live in anymore. And that's directly traceable to the world of Murphy, which invalidated PASPA and let states act on their own. We're not gonna get into a political conversation, but there are people in the world that like states to have that level of control. And that's where we got to in this sports betting world. So yeah, Murphy is a complete, an absolute game changer in the world of sports betting. And I think it's, you know, you wanna say it directly or indirectly, really helped grow the sports that we know and love. Some of these sports have now, are now looking at billion dollar television deals because of the rise in popularity. And I think directly attributed, you know, at least my opinion to the gambling element to this, that they adds another level of must watch television in the world of DVRs and, you know, watching stuff on tape delay, sports is and remains one of the most watched events on television in the entire year. And a lot of that I think can be attributed to the efforts of Murphy and the lawyers behind that. And obviously the state of New Jersey, Dan I'll kick it over to you. 

 - Yeah. I mean, to many of the stakeholders PASPA was an outdated law. It was anachronistic because it was, it was enacted at a time before the internet age, you know, back in the early 1990s, the concern was, you know, people would be able to, you know, place bets, and there wouldn't be a way to, you know, kind of track that activity. But once the internet became so prolific, where it became a staple of our everyday life, we order items and shop and engage in commerce over the internet, I think that I think the sports leagues began to realize that legal sports betting over the internet could play a very important role in maintaining and preserving integrity, because now you would have a digital, you know, fingerprint. Anybody who would be able to make a legal sports bet online has their, we know their identity, we know where they wagered, when they wagered, what they wagered on. And rather than view sports betting as a sort of a vestige of the bygone era of like bookmakers, and, you know, paying athletes off, we began to appreciate that there was this vibrant, illegal black market for sports betting that was generating billions of dollars of handle every year, without any ability of leagues, states, or the federal government to track that activity because it occurred on the periphery, or outside of US borders. But by legalizing it, I think what the leagues began to appreciate is not only would that generate a lot of new revenues for the leagues, the teams, through bigger TV deals, increased fan engagement, sponsorships, but it would actually, you know, preserve or strengthen the integrity of sports by providing a sort of an early warning detection system. And once the leagues began to come around on that idea, I think with Adam Silver's oped in the New York Times, back in October, November of 2014, that became the catalyst for a push among all industry stakeholders, the gaming industry, the sports industry to eventually move to this new environment where sports betting could be broadly legal. But there was this inconvenient federal law on the books that the leagues felt duty bound to enforce because they were afraid that sports betting would lead to a regulatory race to the bottom, with states employing or implementing all these different frameworks without any kind of cohesion. So while the leagues wanted it, while the leagues wanted to have the opportunities from sports wagering, more equally important, they wanted to maintain control. And the sports leagues are just one of many stakeholders in this space. And we're gonna, we're gonna talk about the different stakeholders shortly, but for several years prior to the Supreme Court decision, I think there was this broad consensus that PASPA became obsolete, outdated, anachronistic, because of, you know, the increasing acceptance of gambling, the number of states that now allow casino gambling, the rise of daily fantasy sports, which became prolific in so many different states, which is sort of the first cousin to sports betting, and the increasing use of the internet by vast sections of our society. So all those factors really seemingly pointed in favor of changing the law, or at least allowing sports betting in the future, but we still had to overcome this PASPA hurdle. And now that that has been achieved, we're now in the new era of sports wagering, and going forward, it is be, it is gonna become the rule or the norm rather than the exception, which it had been in the past. 

 - Yeah, just, just quickly before we get to, you know, where our landscape is today, Dan, and you address it very well, right? The world of sports betting was seen as this underground world, right? And, you know, we haven't addressed it, but for many years there were illegal entities, right? Offshore entities generating significant profits. And I think when the conversation was happening around New Jersey, I think Cantor Fitzgerald did a study that New Jersey was losing upwards of $600 million in revenue. So in addition to cleaning up the sport, it was a tremendous revenue generator for the states. And I think, you know, when you bring something like that out into the open, you tend to clean up, right? Some of the bad players in the space. So I think from the state's perspective of the argument was we can actually protect consumers, understanding that obviously PASPA stands for protecting professional sports and amateur sports. But as long as you're going to criminalize it, you're actually not protecting the consumers. And I think that was the argument around this, and we can get into it a little bit at the end, right? Even a mechanism, Dan, you talk about the first line of defense. We had a situation in 2022 now, you know, 30 years after PASPA was enacted, where an NFL football player, Calvin Ridley was found out and was identified as gambling that very brief window, where Florida sports betting was legal, but he was found on one of these legal apps, and they vetted his address, and they found out who it was. In the old days prior to legalization, I'm not sure you would've had the technology, right? Or the players to have identified that an active NFL player was placing bets on games. So that's just one of the mechanisms. It's not just a revenue generator. It is protecting the sport, while it's also protecting consumers. So bringing something to light, bringing it from beneath the table, outside of the shadows, into the light, I think it'll only help the industry. So as we kind of move on, the important stakeholders today, the players that we are looking at, still casinos, horse, and race tracks, online gambling companies, we can talk about Draftkings and Fanduel, and we can go through a whole host, Native American tribes, state lotteries, professional sports leagues, professional sports teams, depending on your state. It certainly college teams and the NCAA, bars and restaurants and trade associations. It's a whole host of players, which blends a little bit into why as much as I think sports betting is a no brainer to make its way across all 50 states. There are a lot of different entities here that have to have their say in the conversation, which, you know, Dan, you and I have spoke about this on the podcast. You know, we've had on different lawmakers in different states. I think everybody agrees, right, by and large, I don't wanna say everybody, but that sports betting should be legal because of all the benefits that it brings. The problem is you have so many different competing interests from different entities, and it's very tough to find the right bill, the right balancing act between these different operators so that everyone can get their appropriate piece of the pie, the appropriate level of control, sometimes easier said than done. But all the players that we just mentioned from casinos to the professional sports teams, and the Native American tribes, they all have different interests to play. And it makes it kind of, you know, a tough cosmopolitan of, you know, interest and personalities to manage. 

 - Yeah. I mean, the irony now is that most bills that fail or don't get passed into law fail because of disagreements among competing stakeholders. I mean, with the exception of maybe Utah and Hawaii, I don't think there's any, or maybe Alabama, that there's no antipathy towards legalizing or expanding sports betting. It simply comes down to the stakeholders, you know, sort of jockeying for control, you know. In California, Florida in particular, the Indian tribes want to have complete control over sports betting in Massachusetts, and a number of other states, the casino industry is always jockeying with the online gaming industry for who gets to control, you know, those valuable online sports betting licenses, because online sports betting is really where all the action is. 85% of the wagering made in states that have both retail, meaning land-based sports betting and online slash internet sports betting. The allocation is like 85, 15 in favor of online sports betting, so you have all these, like, you know, intrastate, intramural battles over who gets to operate, market access, tax rates, issues such as collegiate wagering, and whether there should be any safeguards or guardrails around that. So we've now come to the point where the disagreements among stakeholders are driving so much of the conversation. That's why it's important to identify who these stakeholders are, because to some respect, they all want a piece of the pie. Some want a larger share than others, and some want to control it to the exclusion of some of the others. So, you know, that going forward, that helps drive the debate around the different regulatory models that you're seeing pop up around the country, where states don't necessarily all do things the exact same way. There are different regulatory models, driven in part by the gaming infrastructure that exists within that state. No two states are gonna be exactly the same. And as a consequence, we've seen various different regulatory models implemented in the post PASPA era, which is everything after 2018, or after May 14th, 2018, we're now at 34 states. And the critical takeaway from the Supreme Court decision in Murphy was that Murphy didn't legalize sports betting. Murphy simply eliminated the federal statutory impediment that stood in the way of states passing sports betting laws. So it really pushed the decision now to state governments to decide whether, when, and under what circumstances they wanted to have legal sports betting regime. So in the aftermath of the Murphy decision, we've really seen four different, I'll put them in categories, four different sports betting regulatory models emerge. I'll refer to them as such, the casino licensing taxation model, the lottery state run model, the tribal controlled model, and then there's the hybrid model. And, you know, turning to each one, the casino taxation model is essentially a framework that favors in-state casinos and horse race tracks. In many states, such as New Jersey, Pennsylvania, Massachusetts, among others, who were some of the first movers around legal sports betting. The gaming industry in those states are dominated by the land based casinos, and horse race tracks. Those are the dominant stakeholders in those early mover states. And initially the casino licensing taxation model favored casinos and horse race tracks, where all the land-based sports bets could only be made at those types of facilities. So, you weren't really seeing retail sports books on every street corner. You didn't see them in bars and restaurants, or professional sports stadiums and arenas. They were largely confined to brick and mortar casinos and horse race tracks. And the online sports betting licenses were controlled by those entities, in that they were tethered, you know, meaning affiliated with the brick and mortar sports book. So in order to be able to operate an online sports book in a state like Pennsylvania or New Jersey, you would need to enter into a market access agreement with one of the land based casinos and racetracks, because they were the ones who controlled market access and the online sports betting environment. So to be able to offer your betting platform to the general public over the internet, you had to have a deal in place with one of the casinos or racetracks, and New Jersey, Nevada, and Pennsylvania are the prime examples of what I refer to as the casino licensing slash taxation model. The next primary regulatory framework or model that I, you know, I'm gonna point to is the lottery state run model. Those are usually implemented in states that do not have a robust casino or horse racing environment, where much of the gaming in the state is funneled through the state lottery. So in those states, when you're doing business with the state lottery, you've gotta go through competitive bidding requirements. So in order for a state run agency, like the state lottery to enter into deals with sports books, they have to go through a competitive bidding RFP process, which are requests for proposals, and essentially put it out for bidding. And what has emanated or resulted from these types of competitive bidding models in New Hampshire, Rhode Island, and New York is that you have limited access or either exclusivity in the hands of a single operator, or a small segment of operators. And that the lottery chooses the operators who get to offer sports wagering. So in states like New Hampshire and Rhode Island, you have a single operator, one operator. District of Columbia, another lottery jurisdiction, a single operator offering sports betting to the public, New York is the outlier that's done through competitive bidding, but they've chosen nine operators as opposed to just a single operator. And one of the salient characteristics of the state run model is that it results typically in a higher tax rate or revenue share, generally along the lines of 50/50, whereas in the casino and horse race track model, the tax rates are generally driven by lobbying influences from the casinos and racetracks. And they're kept down artificially low in the high single digits, low teens. But once you introduce competitive bidding into the environment, through the lottery run model, those tax rates slash revenue shares begin to inch up significantly because then it becomes an all out bidding war. The third model is what I refer to as the tribal controlled model, where in states such as Florida, Maine, California, the Native American tribes exercise significant outsized influence over the gambling landscape, and essentially control gambling within those states. So unlike the other models that I referred to previously, where it becomes a function of state statutory legislation, in the tribal controlled model, the governor of those states will enter into compacts or agreements with the Indian tribes under a federal framework known as the Federal Indian Gambling Regulatory Act, which governs the conduct of gaming on Indian land pursuant to state law. So those frameworks generally are the byproduct of negotiations between the governor and the tribes, those result in agreements, which have to be ratified by the state legislature, and then approved by the US Bureau of Indian Affairs. The salient characteristics of this model are essentially tribal exclusivity and or control over sports betting. The last model is sort of this hodgepodge, which I refer to as the hybrid model, which includes a broader class of stakeholders, where you're beginning to see not only casinos, racetracks, and Indian tribes participate in the framework, along with state lotteries, but now sports venues in-stadium sports books, in-arena sports books, bars and restaurants are beginning to participate as stakeholders and licensees in a broader sports betting framework that provides room for everybody under the tent. And examples of that hybrid model, which allows for greater participation by more stakeholders would be Arizona, Maryland, and Ohio. And by way of example, Maryland and Ohio each allow in excess of 100 sports betting licenses, whereas in New York state, they only allow nine licenses. New Hampshire, Rhode Island, one license. So the trend that I see happening nationally is for the hybrid model to begin taking hold, to allow for much more intensive participation by not just tribes, tracks and casinos, but by other types of commercial retail establishments. 

 - So Dan, I'll jump in quick here. Obviously, we talked about four different models, right? We talked about the lottery and state run model, the tribal controlled model, the hybrid model, and I think just the casino licensing taxation model, I'm gonna put you on the spot, Dan, of those four, right? Let's say you were trying to figure out what the ideal model is. Do you have an opinion as to which of those four you personally would, you know, recommend in your personal experience? 

 - Well, I think anything, any model that allows more companies to participate ultimately becomes a better product for the consumer, because more consumer choice, more consumer options, it's ultimately better for the consumer and it spurs innovation, competition, and really is a true meritocracy, as opposed to protectionism that, you know, has set asides for, you know, preferred entities. Of course, I would prefer the more, the greater, the number of stakeholders, because as a consumer in a particular state, it would be great to be able to decide not only between online and land based, but whether I want to go to a casino, or track, a sports facility, a restaurant, play it through the state lottery. So I think from my vantage point from, you know, the greater, the number of, of stakeholders, the better it is not only for the consumer, but ultimately I think that raises the revenue potential for the state government. Because if you provide more points of distribution, more, I guess, you know, areas, and you know, access points for sports wagering, you're gonna make it easier for the customer to find a place to make a wager. And certainly I'm bullish on the advent of in-stadium sports books and licenses being granted to sports teams, while that may raise integrity concerns, that can be dealt with under state law, I think it would be foolish to ignore the millions of people who attend live sport, tens of millions of people who attend live sporting events every year in the United States. And if you could, if you could capture them, and acquire them as customers, you're going to have the greatest potential for growing the pie economically. And by allowing the teams to have direct involvement in the sports betting, you know, environment by either giving them licenses, or allowing them to control licenses, you're capturing that multimillion person, you know, I guess, user base that might not otherwise be the type of customer that walks into a casino or a racetrack. But just because it makes the most sense economically, and from a consumer protection standpoint, that doesn't mean that every state is headed towards, in that direction, because competition, and it's a cutthroat competition where you're gonna see battles between stakeholders to control the market. They're not interested ultimately in providing as much opportunity and distribution points for customers. They wanna make money. And the stakeholders that are dominant in particular states like the tribes in California, the casinos in New Jersey, they're not gonna wanna face competition from non-casinos, because they're the ones who are making a significant infrastructure investment in those states, and provide thousands of jobs. So there are a whole host of different public policy concerns that come into play that are gonna drive the debate around legalization. It's not just simply, what's gonna make the most money for the state, or what's best for the consumer. It's also, what's the fairest soundest public policy in light of who comprises the gaming infrastructure within that state. So it's a complicated question, and an equally complicated answer. 

 - Okay, so as we move to kind of wrap our presentation today, what we do want to talk about are the legal impediments in this post PASPA world, right? We could talk about a number of issues. Dan, you are our resident expert here, but we want to get into the Wire act, the Indian Gaming Regulatory Act can obviously state constitutional limits on gaming expansion. So, Dan, I will hand the baton over to you, you are the sports betting guru for a reason, as I think we've demonstrated today. 

 - Yeah, yeah, thanks Dan. The irony of PASPA being overturned is that that didn't end the legal debate around sports wagering. It just removed the major federal impediment to same. We still have all these flash points under other federal laws, and even under state laws. So there are a number of lawsuits that are pending around the country over the right and entitlement to sports betting. We've only begun to scratch the surface of some of the legal issues. So as a lawyer in this industry, what I think are some of the, you know, I guess the key legal issues going forward are the Wire Act. Now, the Wire Act is sort of it remains the primary federal anti-gambling law in the United States. I mean, it was enacted back in the, you know, Kennedy administration in the early 1960s to combat organized crime and to aid states in the enforcement of their gambling laws. Well, a law that was enacted back in the early sixties, before there was ever any expanded legal sports wagering has become very relevant today because the Wire Act is essentially a bar or a prohibition on any type of wagering or betting on sporting events across state lines. The Wire Act prohibits anybody engaged in the business of betting or wagering, and that would be sports books, from knowingly utilizing a wire communication facility to transmit bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contests through the channels of interstate or foreign commerce. So it prohibits a number of things. It prohibits those engaged in the business of betting or wagering from being involved in betting or wagering across state lines. Why is that a big deal? Well, as the internet becomes so prominent in the usage and commercial activity around sports betting, the internet inherently is interstate commerce. A bet placed in one state doesn't remain entirely within one state. It goes out into the ether, and crosses state lines inadvertently through, I guess, a term known as intermediate routing. So the use of the internet implicates a lot of potential Wire Act concerns, because the Wire Act prohibits any kind of placing of bets across state lines, and while sports, while licensed sports betting operators take, you know, great caution to ensure that the customer is located in the right state, and that the sports book is receiving the bet in the same state. It has little control over what happens to the wager once it goes through the channels of interstate commerce. So that's certainly a concern going forward, that the rising and increasing use of the internet could create legal issues relating to, you know, online sports betting. And this prohibition really limits the liquidity of the market, because a customer in Pennsylvania can't bet with a state licensed sports book in Illinois, He can only bet with a state licensed sports book in the same state in which he resides or is physically located. So it limits the ability of states to pool their wagers and to allow for cross state wagering, as you're beginning to see with online poker and igaming, you know, states begin to enter into these compacts, which allow the pooling of customers across state lines. So that's one critical issue under the Wire Act. Another is what does it mean to be in the business of betting or wagering? That's one of the core elements of a Wire Act prosecution, and it's always been understood that a sports book, which takes the other side of the bet, is a traditional, you know, being in the business of betting or wagering. But how do you treat peer to peer betting platforms that provide or facilitate bets between customers, where the house doesn't take any part of the action? Are they engaged in the business of betting or wagering? So that's one major issue that I think is going to become, you know, just a key part of the discussion on the Wire Act going forward. Another, one other major legal consideration is the Indian Gaming Regulatory Act, which is the federal law that governs the conduct of gaming on Indian lands. And where does the internet fit into all of that? Because IGRA, you know, which is the acronym for the Indian Gaming Regulatory Act, limits gaming to Indian land only, and nowhere else, and Indian land is defined by the statute to mean the reservation, or certain types of after acquired trust property, which is a very complicated process that involves the US government taking Indian land into trust for the benefit of the tribes. But for all intents and purposes, IGRA is limited to gaming activity within the four walls of the reservation, or four corners of the reservation, meaning that under my interpretation and the interpretation of many others, internet wagering is not permitted under IGRA, which essentially means that states and tribes can't include online sports betting within their class three gaming compacts, which has led to the biggest lawsuit of the day, which is West Flagler versus the state of Florida, and the department of justice, which in that case, the state of Florida and the Seminole tribe of Florida entered into a tribal gaming compact to give the Seminole tribe of Florida exclusivity over online sports betting statewide. And in order to satisfy or not trigger a violation of IGRA, they declared within the compact that the bet is made at the location of the server processing the bet. And as long as the server is located on Indian land, the bet is deemed to be made on Indian land. Well, a federal district court in late 2021 ruled that that concept was a legal fiction, and that the bet should be evaluated from the perspective of the gambler and from the location of the gambler, and not from the location of where the processing software is located. Now, that case is currently on appeal to the DC circuit, but it underscores the anachronism that underlies IGRA, in that IGRA was enacted in the late 1980s before there was ever an internet. And it has this built-in limitation to gaming on Indian land, and it might need to be modified, amended, or brought current going forward, but it becomes a statute that no longer has any juice in the internet era. And then of course, the last legal impediment that I've identified are state constitutional limits on gambling expansion, and several state constitutions, such as those in Florida, California, and Georgia ban the legislative authorization of casino style gaming. And the issue raised there is whether the ban on casino gambling encompasses sports wagering. And that's a legal controversy that may play out, as Florida, California, and Georgia begin to embrace legal sports wagering and the manner in which they do so. And because of these state constitutional limits, that's why you may see ballot measures and ballot initiatives whereby the state electorate decides the question of legal sports wagering instead of the legislature doing it. So those are the three, what I consider new legal impediments in the post PASPA era. 

 - Okay, so I'll jump in here just very quickly as people are trying to figure out what the next issues are in sports betting, we've identified a few. The question is should online licenses be tethered to land-based licenses? Obviously some states do that differently. The question of whether remote versus in-person registrations for online accounts, a question, which, you know, we do have, obviously in the Northeast should wagering be allowed on collegiate games? Why does it make sense that only the home teams, right, the New York based teams are, and New Jersey teams are excluded from sports betting wagers, whether integrity fees and official data mandates for sports leagues. I know that's right now, an ongoing conversation at the collegiate level, whether that data should be able to be sold, and how lucrative that really is. And then really who should be overseeing sports betting? Should it be the federal government or the states, a question that has been ongoing since 2018. And advertising restrictions. How far should they go in the college sports world? We are starting to see, you know, athletes starting in schools being able to advertise sports betting, Charlie Blackman, major league baseball player has now some affiliations on the advertising level with some sports betting operators. How far should they go? So we are just identifying some issues to look forward to, but we have had a pleasure speaking with you all today, and outlining the world of sports betting. And if you do have any further questions on sports betting, sports gambling issues, Dan Wallach was being very humble. His practice, Wallach Legal, specializes in the, you know, review consulting, and with these particular issues. Dan is being very modest. The companies he does work with, and the issues he does consult on. This is Dan's bread and butter, so if you do have any questions, certainly reach out to him. And if you are interested in our podcast, we cover all these issues to the extent that they come up, and there is a legal issue that brews, we do, you know, tend to spend a lot of time on it. So if you are interested in those issues, certainly subscribe to the Conduct Detrimental podcast. For Dan and myself, we've had a pleasure explaining and walking through the landscape of sports gaming issues today, and yes, we hope you enjoyed our lecture, and should you have any questions, please feel free to reach out to both of us. Dan, any words before we officially sign off? 

 - Yeah. Yeah. I mean, one of the, I guess, difficult things to, or one of the quandaries we face as sports lawyers and sports betting lawyers is that the law is constantly evolving in this area. You know, we could really do a different CLE every two years. The issues that we're confronting today are not gonna be the same issues we confront in two years, which makes it very challenging as a sports betting attorney in that you have to really remain on top of these issues, on not only your state, but all states around the country, both under state law, federal law, regulations enacted under state law. It is one of the most all encompassing regulatory landscapes that really requires constant vigilance. So if you have any questions in that regard, I'm happy to you know, address them, you know, directly, but it, it is an evolving and constantly changing area. 

 - Well, thank you everyone. And we will see you on another edition of our Quimbee Conduct Detrimental partnership. It's always our absolute pleasure.
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