On May 14, 2018, the Supreme Court of the United States released its opinion in Murphy v. NCAA, striking down the Professional and Amateur Sports Protection Act of 1992 (PASPA) as unconstitutional federal commandeering of state legislative powers in violation of the Tenth Amendment. Most importantly, by repealing PAPSA, the decision permits all state legislatures to legalize, regulate, and profit from sports gambling.
In the decision, authored by Justice Alito, the Court explained that the Tenth Amendment reserves all power not directly conferred to Congress to the states, and that the power to issue direct orders to the governments of the states is one of the powers not directly conferred to Congress.
Because §3702(1) of PASPA made it unlawful for a state to license or authorize sports gambling (unless the state’s gambling regime was in existence prior to 1992, per §3704 of PASPA), the Supreme Court determined PASPA “unequivocally dictates what a state legislature may and may not do,” and thus is an unconstitutional commandment to state legislatures.
The Court further ruled that §3702(1) could not severed from the remainder of PASPA, and thus the entirety of PASPA must be struck down.
As reported by Bloomberg Tax’s Ryan Prete, the immediate impact of the decision is anything but certain. Some experts expect people will be able to place sports bets in New Jersey—the state party involved in the Murphy case—by the end of this week, while others do not think New Jersey sports books will take bets for several months.
In addition to New Jersey, there are a number of other states that are poised to launch sports gambling regimes in the wake of Murphy. Below is an overview of the states that are most prepared to take immediate action.
The Garden State is at the center of the sports gambling world.
New Jersey was the focal point of the Supreme Court case, and New Jersey’s governor is the named party in the suit. However, the state did not actually legalize sports gambling before this suit was brought; rather, as explained in Bloomberg Tax’s analysis of the oral arguments, New Jersey repealed certain prohibitions on sports gambling.
In effect, the repeals legally permit persons aged 21 or older to place wagers at horse tracks throughout the state, or on sports events at casinos in Atlantic City, as long as the events do not involve a New Jersey college team or a collegiate event within the state.
Because New Jersey simply repealed prohibitions on sports gambling, the East Coast state currently seems more akin to the Wild West: sports gambling is no longer illegal, but there are no sets of laws or regulations to guide, license, regulate, or tax sports gambling businesses.
On May 7, 2018—perhaps anticipating the Supreme Court’s decision—New Jersey Assemblyman Eric Houghtaling (D) introduced N.J.A 3911, which would provide a broad framework for functional sports gambling within the state. Specifically, the act would allow for licensing of casinos and racetracks that wish to permit sports gambling, in addition to imposing an 8 percent tax on the gross revenue from income received at casinos and/or racetracks. Online sports gambling revenue would be taxed at 12.5 percent.
In contrast to New Jersey, Delaware’s sports betting landscape must be examined through the lens of history.
When PASPA was enacted in 1992, §3704 of the act grandfathered certain forms of sports gambling at the state level if the gambling “scheme” was already in effect prior to PASPA’s passage, or if the scheme was in effect at any time between Jan. 1, 1976, through Aug. 31, 1990.
Notably, in 1976, Delaware experimented with permitting one type of multi-game NFL bet (also known as a parlay) within the state. However, per the New York Times, after concerns over potential “undue influence” on betting patterns and NFL games, Delaware halted its state-sanctioned sports gambling scheme the same year.
Fast-forward to 2009.
Delaware’s legislature passed H.B. 100, which enabled sports betting on individual games as well as multi-game parlay bets; and on May 14, 2009, then-Gov. Markell (D) signed the bill into law. Subsequently, the MLB, NBA, NCAA, NFL, and NHL brought suit against Markell and Wayne Lemons, then-Director of the Delaware State Lottery Office.
The ultimate opinion in the suit came from the United States Court of Appeals for the Third Circuit, which ruled that Delaware could only allow multi-game parlays, per Delaware’s 1976 parlay experiment, as applied to §3704 of PASPA. However, the Third Circuit did not actually strike down any of Delaware’s laws, so the provisions of H.B. 100 remained—and still remain—on the books.
With the decision in Murphy, Delaware may now automatically resume single-game wagering per H.B. 100, and very well may enact additional legislation to ensure it remains in the forefront of sports wagering on the East Coast.
On March 13, 2017, Gov. Phil Bryant (R) signed H.B. 967 into law. The legislation generally concerns the daily fantasy sports industry; however, the law also amended Miss. Code Ann. § 75-76-33(3) to essentially delete the provisions outlawing sports wagering within the state.
Similar to New Jersey, Mississippi simply repealed its prohibition on sports wagering but still does not have any legislation related to licensing, regulation, and/or taxation of sports betting. The Mississippi state legislature adjourned April 1, 2018.
In 2013, Gov. Anthony Cuomo (D) signed the Upstate New York Gaming Economic Development Act of 2013 into law. Section 1367 of the act provides that casinos may begin to accept sports gambling wagers upon a change in federal law authorizing such wagers, like Murphy; however, casinos must wait until they receive licensing from the New York Gaming Commission, in addition to waiting for applicable regulations to be promulgated by the Commission.
Oregon is another state, in addition to Delaware and Nevada, that had a certain form of grandfathered betting permitted under §3704 of PASPA.
According to the Legal Sports Report, Oregon used to offer a parlay-style bet, similar to those currently available in Delaware, though Oregon has not offered the wager for roughly 10 years. Still, the Chief Gaming Operations Officer for the Oregon Lottery, Farshad Allahdadi, states that the lottery is “interested in getting back into the sports wagering market,” and further states that his agency does not need to wait for legislative authority to begin single-game wagers (though he also concedes that a sports gambling framework would not advance without conversations with the legislature).
On Oct. 30, 2017, Pennsylvania passed its omnibus gaming legislation, H.B. 271, which authorizes sports wagering when “a Federal court decision is filed that permits a state to regulate sports wagering.”
The legislation also establishes a fairly comprehensive sports wagering system, including a requirement that the Pennsylvania Gaming Control Board must issue sports wagering licenses before sports betting may legally commence within the state.
The law additionally includes a 36 percent tax on sports wagering revenue, permits online wagering in addition to wagering at licensed casinos, and imposes a $10 million one-time fee on hopeful sports wagering licensees.
On March 10, 2018, West Virginia S.B. 415 became law. The legislation authorizes sports gambling within the state for facilities licensed by the West Virginia Lottery. Each facility must already hold a racetrack video lottery license, or be a "historic resort hotel" licensed to operate video lottery and table games, and each facility must pay a $100,000 application fee. Finally, the state also imposes a 10 percent tax on each licensee’s adjusted gross sports wagering receipts.
The states discussed above represent just a sample of the current affairs of state legislation related to sports wagering in the wake of Murphy. Additional legislative bodies, such as Connecticut’s General Assembly, per the Hartford Courant, are considering calling special sessions to establish sports gambling regimes within their jurisdictions.
Given the immense complexity of this area of law, be sure to follow Bloomberg Tax’s products to stay abreast of all applicable news and updates as states look to clarify their existing laws and enact new provisions following the Supreme Court’s opinion.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Which state do you think will be the first to permit sports wagering in the wake of Murphy?
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