August 23, 2009

NFL Suit to Stop Delaware Sportsbook Hearing Monday - Download the NFL's Complaint

We have copies of the Complaints filed by the NFL, MLB, NBA, NHL and NCAA to stop Delaware from offering state-run sports betting starting this fall. In my city, Baltimore, billboards are already advertising the sportsbook at Dover Downs.

Download the Complaint here. (PDF Format)

At issue is the Professional and Amateur Sports Protection Act (PAPSA) passed by Congress in 1993 to ban state-sanctioned betting on professional sports. That law provided an exception for states that ran a sports-betting program or lottery between 1976 and 1990. Four states qualified, including Delaware.

The leagues specifically challenge two aspects of the program:

1) The Delaware Constitution prohibits gambling except for four inapplicable exceptions (games of chance, etc.).

2) The 1976 Delaware sportsbetting operation only involved parlay tickets, not single-game betting. If they didn't offer single-game betting between 1976 and 1990, that type of gambling is not within the PAPSA exception.

Delaware Supreme Court Finds Most of Proposed Betting Constitutional

As for the first issue, the Governor of Delaware requested an advisory opinion from the Delaware Supreme Court. The State wanted to ensure that the sports betting program is constitutional before sinking money and resources into it. They issued their opinion in May (Download the opinion here in PDF Format).

In relevant part, the Delaware Supreme Court determined that some aspects of the system are constitutional. Despite the fact that third-party contractors will implement much of the system, there is sufficient state control within the meaning of the Delaware Constitution. Also, the legislature has not delegated its power to the Lottery Director.

Most importantly for people who fancy themselves good football handicappers, the Supreme Court found that the Delaware Constitution permits games "in which chance is the predominant determining factor." They also found that in parlay games "chance is the predominate factor." Our advertisers would disagree.

As for single-game bets, though, the Delaware Supreme Court refused to issue an opinion, stating:

That said, because we lack the benefit of actual evidence concerning single game bets and the extent to which “the line” introduces chance and causes it to predominate over skill or merely manages the money flow, we cannot opine on the constitutionality of single game bets.

NFL and Other Leagues Sue to Stop State-Run Sportsbook

Fast forward to Monday's hearing before the United States Court of Appeals for the Third Circuit (which includes Delaware). The NFL moved for a preliminary injunction to stop the Delaware sportsbetting program in the District Court. That court denied the motion, and the NFL appealed, putting the issue before the Third Circuit.

The leagues are seeking an injunction to stop Delaware from unveiling its single game, over-under and parlay sports betting programs this fall.

The first count of the leagues' complaint is that the sports betting violates PAPSA. In relevant part, PAPSA prohibits state-run sports betting except:

A lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or other governmental entity at any time during [1976 to 1990].

The bolded section is critical. Delaware only ran parlay-based programs in the late 1970's. Now they want to run single-game and over-under betting. How will the Federal District Court interpret "extent"? We'll find out after Monday's hearing.

The second count alleges violations of the Delaware Constitution, as discussed above.
Other Issues
In federal courts, a party must have "standing" to enforce a legal right. Proper standing requires that a party have an injury-in-fact and a recognized cause of action that can be corrected by the courts. Part of the requirement is that the party not have a generalized grievance that affects all citizens. In my view, the PAPSA does not create a cause of action that can be enforced by private entities. Also, I do not believe the leagues can sue to enforce the Delaware Constitution absent a show of actual injury.
I will be curious to see how the NFL and other leagues claim to be injured by sports betting. If anything, I would imagine increased interest in the sports. If they cannot allege an injury, their claims will be dismissed.

What Is at Stake?

Delaware is trying to stake a claim to some of Atlantic City's business. Delaware currently authorizes slot machines (Delaware Park, Dover Downs, Harrington Raceway) and has tried to make Dover Downs a slots and entertainment site. Sportsbetting would almost certainly establish Delaware as the go-to sports gambling destination for so many sports-crazy East Coasters. A short drive from Baltimore, Washington, Philadelphia and New York? The state is seeing dollar signs.

The leagues just know that sports gambling is a potential headache for them. They cannot really profit on it directly.

Hey, college kids like gambling, right? Check out my other blog, The Law on Campus.

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