Symposium: Lift the harmful, failing federal ban on sports betting (Corrected)

Stacy Papadopoulos is general counsel and senior vice president of industry services at the American Gaming Association, which filed a cert-stage amicus brief in support of the challengers in Christie v. National Collegiate Athletic Association.

In 1992, Congress enacted the Professional and Amateur Sports Protection Act, which prohibits all but a few states from legalizing and regulating sports betting. A quarter of a century later, sports fans, state policymakers, the law-enforcement community and even some professional sports leagues agree that PASPA is misguided and failing. During its next term, the Supreme Court will decide whether PASPA is also unconstitutional.

There is no dispute that Congress could, as a matter of federal law, prohibit or regulate interstate sports betting, and in the process pre-empt any state law on the subject. But PASPA does not do that. Instead, PASPA forces states to continue prohibiting sports betting as a matter of state law – and, presumably, to enforce those prohibitions using state resources. State governments are required to maintain their sports-betting laws as they existed in 1992, but have no power to amend, strengthen or repeal those laws. The effect of PASPA has been to freeze in place state law as it existed in the early 1990s and to interfere with states’ police powers and authority to regulate local matters of economic development and public morality.

For over a century, however, the Supreme Court has made clear that Congress may not require states to require or prohibit certain acts, even when the federal government could require or prohibit those acts in the first instance. Under this “anti-commandeering doctrine,” the court has repeatedly struck down laws that coopt the states’ law-enforcement apparatus and treat states as mere outposts of the federal government. Thus, in New York v. United States, the Supreme Court held that Congress could not force states either to take title to low-level radioactive waste generated within their borders or to adopt federal standards regulating such waste. Similarly, in Printz v. United States, the court determined that Congress could not compel state law-enforcement officials to perform background checks for would-be purchasers of firearms. Simply put, Congress may not command states to “promulgate and enforce laws and regulations,” control or influence the manner in which states “regulate private parties,” or “require the States … to regulate their own citizens.” This is because, as the Supreme Court has recognized, a state’s ability to decide what its own law is (or is not) is a “quintessential attribute of sovereignty” and “precisely what gives the State its sovereign nature.”

PASPA violates these core principles of American federalism by compelling almost every state to continue prohibiting sports betting, regardless of what is in the best interest of the state and its citizens. The harm of such federal overreach is more than purely structural. Preserving a state’s autonomy to enact, enforce, modify and repeal its own laws as it sees fit protects individual rights and promotes democratic accountability. PASPA’s effect on New Jersey’s long-running effort to legalize and regulate sports betting is a prime example of what happens when the people who are required to enforce a law are prohibited from changing that law to reflect new circumstances or evolving public opinion.

As a policy matter, PASPA is a failure. Passed with the salutary purpose of protecting problem gamblers and shielding the integrity of sports, PASPA has fueled a thriving black market that operates beyond the reach of law enforcement or regulatory oversight. My organization, the American Gaming Association, estimates that each year, Americans illegally wager more than $150 billion on U.S. sporting events. The prevalence of illegal sports betting is particularly concentrated around the nation’s most popular sporting events. Earlier this year, Americans bet an estimated $15 billion on the Super Bowl and the NCAA men’s basketball tournament; an estimated 97 percent of those bets were illegal.

This black market exists only because of PASPA. When given a choice between a black market and a legal, regulated market, consumers invariably choose the latter. In Nevada, the United Kingdom, and other places with legal sports betting, there simply is no demand for illegal betting. Because PASPA forces almost all sports betting underground, the statute has failed to protect consumers or local communities. In an unregulated market, bettors cannot rely on consumer-protection laws or even basic principles of contract enforcement. As a result, those citizens – particularly low-income and otherwise disadvantaged individuals – are susceptible to exploitation. Illegal sports revenue not only exacts personal costs on individuals, it also inflicts broader social damage: Illegal sports-betting revenue funds organized crime and other illicit activity, such as drug and human trafficking, money laundering and racketeering. PASPA prevents states from redirecting that revenue to lawful, productive means. A recent report by Oxford Economics estimates that repealing PASPA and creating a regulated market for sports betting would create up to $26.6 billion in annual economic impact, including up to $14.2-billion growth in gross domestic product, $5.3 billion in tax revenue and $7.5 billion in wages.

It also is unclear that PASPA even protects the integrity of professional and amateur sports. In countries with legalized sports betting, law-enforcement agencies, sports leagues and betting operations can use aggregate data to identify suspicious betting patterns. Just last year, a legal sports book alerted authorities to suspect betting patterns on doubles matches at the Australian Open. By contrast, in the United States, if point-shaving or match-fixing is uncovered, it is almost always by accident and as the result of an unrelated investigation. Given these facts, it is not surprising that a majority of sports fans and even the commissioner of the National Basketball Association now support a legal, regulated sports-betting market.

Sports fans, law-enforcement authorities and state governments demand change. In 2011, the voters of New Jersey – recognizing the failure of prohibition and seeking to capture the tremendous economic potential of a safe and regulated betting market – overwhelmingly passed a ballot initiative authorizing the state legislature to legalize sports betting. The state has taken this cause all the way to the Supreme Court. Should New Jersey succeed in its effort, more states are likely to follow. As of July 24, there are currently 23 bills in 13 other states that could potentially legalize sports betting. Once PASPA is overturned or repealed, federal and state government, law-enforcement agencies, the gaming industry and the sports leagues will be able to devise a 21st-century regulatory framework that protects bettors, generates revenue for local communities and protects the integrity of our national pastimes.

[Correction: This post has been corrected to remove a sentence comparing the amount spent on illegal sports betting in the U.S. to the revenues of companies on the Fortune 500 list.]