12/06/2017 2:56PM

Lines being drawn, set anticipating PASPA repeal

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TUCSON, Ariz. – The Supreme Court is likely to strike down a federal law that prohibits states from authorizing sports wagering next spring, leading perhaps a half-dozen states to legalize the practice in the next five years, according to lobbyists and experts in gambling law who appeared on a Wednesday panel at the University of Arizona Global Symposium on Racing.

The experts predicted that the Supreme Court will issue a lopsided ruling in the case based on questions posed by the justices during oral arguments concerning the federal law Monday. The law is being challenged by the state of New Jersey, which has sought for six years to authorize sports betting but has been thwarted multiple times by lower courts.

Whether the invalidation of the 1992 federal law, known as the Professional and Amateur Sports Protection Act, will have a positive impact on racing is a question being intensely debated in the racing industry, which has a poor record over the past two decades of holding its own against new gambling competition. But, according to the panelists, racing may not face a full-frontal attack from sports wagering for some time, with only a handful of states, mostly in the mid-Atlantic, considered likely to fully embrace the practice in the next half-decade.

“We will have a limited sports wagering rollout, probably six or seven states in five years,” said Marc Dunbar, an experienced gambling lobbyist who counts The Stronach Group as a client.

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The states are expected to be concentrated in the Northeast, with New Jersey leading the way and its neighbors following suit, dominos falling in a densely populated part of the country. Pennsylvania has already filed legislation authorizing sports wagering if PASPA is invalidated, and legislators in New York, Maryland, Connecticut, West Virginia, and other mid-Atlantic states are in the midst of developing their own enabling legislation.

But while the experts were relatively confident about their predictions of the Supreme Court decision and the scope of legal sports wagering, they were far less certain about how state legislatures would regulate the process, including whether racetracks and offtrack betting locations would be allowed to run their own sports-betting operations (at least outside of New Jersey, where racetracks were identified early on as licensees).

“We’re going to be dealing with a different set of regulatory systems, a different set of concerns in every state,” said Jessica Fiel, an associate attorney at Ifrah Law. “But in every state, you are going to face two questions: How do we keep the games and citizens safe, and how do we make money off of it?”

The desire by states to tax the activity, coupled with the stated desires of sports leagues to begin receiving cuts on wagers made on their product, also has led to questions over whether the standard business model used in Vegas will suffice in the future. Under that model, bettors generally must put up 11 dollars to win 10 dollars, which, coupled with existing taxes, results in an approximate margin of 4.5 percent for a bookmaker who balances the books correctly and successfully mitigates risk.

But with other actors now expected to demand their own cut, that has led to speculation that the Vegas model will have to be modified significantly if bookmakers are to make a profit.

“The imbalance caused by burdensome taxation and payments to all the entities seeking entitlements, or ‘slivers,’ will cause New Jersey sports book operators to move from the existing 11-10 relationship to betting odds that are 12-10 or even 13-10,” wrote Vic Salerno, a longtime sports-betting executive who is president of two online sports-betting companies, in an editorial for CDC Gaming Reports, an online gambling publication. “In this scenario, the black market will flourish, and the casinos will flounder under the crushing weight of taxes and open palms.”

On the panel, Dunbar said there is no question that the leagues will be seeking a significant share of bets on their games, citing recent meetings with NBA officials and the league’s lobbying in Washington D.C.

“The NBA is the one that is very aggressive on the Hill, staffed very well, very active,” Dunbar said. “Everybody is going to be paying the NBA, whether you are a vendor or a bet-taker. That’s their model.”

And how might the leagues seek to enforce their rights? The panelists believed that the leagues might seek shelter under the Wire Act, a law that currently prevents gambling over interstate lines, or the sports leagues’ own federal version of racing’s exemption to the Wire Act. That could lead to a convoluted legal battle in Washington and state legislatures that could take years to untangle.

In addition, Dunbar said that there also is concern that the Justice Department, which is headed by the ultraconservative Jeff Sessions, might attempt to step in and stop betting on sports contests that are not located in the states where betting is legal, also using the Wire Act.

“I think the Wire Act makes this whole area ripe for litigation,” said Alex Waldrop, president of the National Thoroughbred Racing Association, which conducts federal lobbying efforts on behalf of racing.