By Alexander S. Boros
With the passage of recent legislation, North Carolina is about to place a safe bet that could have a huge payoff. As government spending has ballooned, states have increasingly been on the lookout for new opportunities to raise revenue. In the aftermath of the Supreme Court of the United States’ decision in Murphy v. Nat’l Collegiate Athletic Ass’n.,[1] several states turned to legalized sports betting as the solution to their budgetary woes. On July 26, 2019, Governor Roy Cooper signed NC S154 into law, legalizing betting on sports and horse racing at two casinos owned and operated by the Eastern Band of Cherokee Indians.[2] With the Governor’s signature, North Carolina joins a list of 16 other states and the District of Columbia in legalizing sports betting within their borders.[3] While many of these states developed schemes allowing wagers to be placed anywhere within their borders, North Carolina limited wagers to only two casino locations.[4]
States that are currently in the process of legalizing, or have already legalized, sports betting owe their thanks to the state of New Jersey for making the legislation possible. In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA)[5] that made it “unlawful for a State to ‘authorize’ sports gambling schemes.”[6] PASPA did not make sports gambling a federal crime, but instead allowed the U.S. Attorney General and other interested parties to seek civil injunctions against any government entity authorizing sports betting.[7] States that were interested in legalizing sports betting were allowed a one-year period to pass legislation authorizing a wagering scheme that would then be grandfathered in to the new era of regulation.[8] New Jersey declined the opportunity to authorize sports betting at that time.[9]
Following the Great Recession, Atlantic City casinos fell on increasingly hard times. From 2007 to 2011, Atlantic City casinos saw yearly revenues drop by over 32%[10] and lawmakers in Trenton were looking for solutions to keep the industry afloat. In 2011, New Jersey voters felt that one way to revitalize Atlantic City was to approve an amendment to the state’s Constitution granting legislative authority to the state’s government to legalize sports gambling.[11] Almost immediately the New Jersey legislature utilized its new power and affirmatively authorized sports betting at all Atlantic City casinos.[12] Each of the major sports leagues and the NCAA filed suit pursuant to 28 U.S.C. § 3703 and the New Jersey authorization of sports gambling was struck down as a violation of federal law.[13]
This legal setback, however, did not end the fight to legalize sports betting. In the Third Circuit’s denial of New Jersey’s initial authorization attempt, the court hinted that the repeal of a law outlawing sports gambling would not amount to an “authorization” running afoul of PASPA.[14] In 2014, the New Jersey legislature passed a law “repeal[ing] the provisions of state law prohibiting sports gambling insofar as they concerned the ‘placement and acceptance of wagers’ on sporting events by persons 21 years of age or older at a horseracing track or a casino or gambling house in Atlantic City.”[15] After losing in both the district court and the Third Circuit, New Jersey’s petition for certiorari was granted.[16] While rebutting the Third Circuit’s prior signaling, the Supreme Court found that even a repeal should be construed as counter to PASPA because “it ‘authorizes’ that activity.”[17] New Jersey’s only remaining argument before the Court was that PASPA violated the “anticommandeering principle.”[18]
The anticommandeering principle is a restatement of the limitations placed on the federal legislature.[19] Essentially, there are no powers granted to Congress by the Constitution to dictate to state governments how they shall regulate within their state.[20] The Court held that “[t]he PASPA provision at issue [before the Court]—prohibiting state authorization of sports gambling—violates the anticommandeering rule.”[21] Further, the Court noted that “Congress cannot issue direct orders to state legislatures,” hinting that there was no legally significant distinction here between affirmative authorization of sports gambling and repeal of pre-existing prohibitions of the activity.[22] While Congress is free to implement federal regulations related to gambling, states are not precluded from developing their own regulatory schemes in the meantime.[23] On June 14, 2018, New Jersey Governor Phil Murphy placed the first legal sports wager in New Jersey.[24]
North Carolina is just the latest state to legalize sports gambling, joining 16 other states and the District of Columbia, that legalized sports betting in some form.[25] States have enacted various regulatory schemes when it comes to sports betting. Some states—i.e., New Jersey—allow both in-person and mobile wagering, while others—i.e., Mississippi—only allow in-person gambling.[26] In each instance, states taxed winnings seeking to get in on the action themselves. In North Carolina, proponents anticipate the newly created wagering scheme will increase revenue for the Cherokee tribes by $14 million, with a boost in state tax revenues up to $1 million.[27] This may be on the conservative side of estimates for what sports betting can mean for state revenues. Gaming-focused research firm Eilers & Krejcik assert that legalization of sports betting in all 50 states would open a new market worth $7.1 to $15.8 billion.[28] Moreover, the North Carolina legislation authorizes sports wagers to be placed exclusively at two Cherokee casinos in the south-western corner of the state.[29] Limiting the availability of sports betting will naturally depress revenues that would otherwise be available if the wagering were more broadly allowed.
The initial legalization of sports wagering in North Carolina is not the end of its growth within the state or nationally. Several proposals have already been offered before the North Carolina legislature to alter the newly created regulatory regime. While the bill was before the North Carolina General Assembly, an amendment was proposed that would have excluded gambling on college sports.[30] Additionally, members of both chambers of North Carolina’s legislature have been appointed to work out differences on Senate Bill S574 (H548)—a bill that would set up a state gaming commission for non-tribal gaming.[31] Finally, lawmakers suggested that placing geographic limitations on sports wagering in North Carolina actually improved the authorization’s passage through the General Assembly.[32]
Only time will
tell what the advent of sports betting will mean for the Tarheel state. Based on the experiences elsewhere, the odds
are good that sports wagering will find success in North Carolina and will continue
to spread nationwide. In fact, I’d bet
on it.
[1] 138 S. Ct. 1461 (2018).
[2] Andrew Westney, NC House Approves Cherokee Sports Betting Bill, Law360, July 16, 2019.
[3] Ryan Rodenberg, United States of Sports Betting: An Updated Map of Where Every State Stands, ESPN, https://www.espn.com/chalk/story/_/id/19740480/the-united-states-sports-betting-where-all-50-states-stand-legalization (last updated Aug. 15, 2019).
[4] 2019 N.C. Sess. Laws 163.
[5] 28 U.S.C. § 3701-04.
[6] Murphy, 138 S. Ct. at 1468 (citing 28 U.S.C. § 3702(1))
[7] Id.; 28 U.S.C. § 3703.
[8] 28 U.S.C. § 3704(a)(1)-(3).
[9] Murphy, 138 S. Ct. at 1471.
[10] David G. Schwartz, Atlantic City Gaming Revenue 2 (2019), https://www.library.unlv.edu/center_for_gaming_research/2019/01/updated-annual-atlantic-city-gaming-revenues.html.
[11] See N.J. Const. art. IV, §7, para. 2(D), (F)
[12] 2011 N.J. Laws 1723.
[13] See Nat’l Collegiate Athletic Ass’n. v. Christie, 730 F.3d 208 (2013).
[14] Murphy, 138 S. Ct. at 1472 (citing Christie, 730 F.3d at 232).
[15] Id. (citing 2014 N.J. Laws 602).
[16] Id. at 1472–73.
[17] Id. at 1474.
[18] Id. at 1475.
[19] Id. at 1476.
[20] Id.; see New York v. United States, 505 U.S. 144 (1992); Printz v. United States, 521 U.S. 898 (1997).
[21] Murphy, 138 S. Ct. at 1478.
[22] Id.
[23] Id. at 1484–85.
[24] Darren Rovell, New Jersey’s Governor Phil Murphy Places State’s First Sports Bets, ESPN (June 14, 2018), https://www.espn.com/chalk/story/_/id/23791949/new-jersey-governor-phil-murphy-places-state-first-sports-bets
[25] Rodenberg, supra note 3.
[26] Id.
[27] Westney, supra note 2.
[28] Wayne Parry, Report: 32 US States Could Offer Sports Betting in 5 Years, Associated Press (Oct. 1, 2017), https://apnews.com/9dc02076034f49e9a617df18763cb047.
[29] Westney, supra note 2.
[30] Id.
[31] An Act Creating a State Gaming Commission, S574, 2019 Sess. (N.C. 2019), https://www.ncleg.gov/BillLookUp/2019/S574.
[32] Westney, supra note 2.
