The decision of Murphy v. National Collegiate Athletic Association

Background

Before sports betting became legal across the US, every state banned were from participating in this activity except for Nevada, Delaware, Oregon, and Montana. The state of New Jersey endeavoured to legalize sports betting, which led to a case “Murphy (formerly Chris Christie) vs. National Athletic Association.

The parties involved in this case were:

  • Chris Christie who was then the governor of New Jersey;
  • The National Athletic Association;
  • National Football League;
  • National Basketball Association;
  • National Hockey League;
  • The Office of the Commissioner of Baseball.
Murphy v. NCAA – Explained

Loss of Tax Revenue Because of Illegal Betting

New Jersey aspired to legalize sports betting because they realized that the better part of their revenue came from sports betting. However, a law passed in 1992 forbade them from doing so. The Professional Amateur Sports Protection Act (PASPA) stated that “No government may authorize, license, endorse, or promote sports betting by law or compact.”

Although the US was fully aware of this law, the citizens went for a referendum on 8th November of 2011. They voted overwhelmingly in favour of making sports betting legal.

Consequently, the legislature then passed it, and the governor signed the new “Sports Wedging Act” of 2012 into law, now making sports betting legal in casinos and racetracks. 

Opposition From National Collegiate Athletic Association

Nevertheless, the National Athletic Association, together with other prominent associations, in both amateur and professional sports, was not for it at all. They decided to jump into a legal battle with New Jersey by suing them in a court of law. 

They argued that by New Jersey legalizing sports betting, they were going against the PASPA law, which was pretty obvious.

But New Jersey had one more trick under their sleeves. They clapped back by mentioning that although the Act was unconstitutional, they had the Tenth Amendment in their favour.

The Tenth Amendment to the United States Constitution

The Tenth Amendment to the American constitution ratified on 15th December of 1791, stated that the role of the Federal government is to exercise only the power given to them by the constitution. The people and the states hold all the other remainder power.   

The Supreme Court had recently established an “Anti-Commandeering Doctrine” on two separate cases involving the United States of America, New York, and Printz. This law practically supported the constitution’s tenth amendment.

Online gambling and sports betting

As a result, the Federal government had no power to force the state or its officials to adopt a Federal Law, which in this case, was the PASPA Law. New Jersey still had another undeniable weapon to fight these associations in this battle.

However, New Jersey still lost the case twice to these associations. After years of pushing back and forth between these associations and the state of New Jersey, the Supreme Court finally accepted to hear the case on 27th June of 2017. By that time, New Jersey had already elected a new governor, Phil Murphy. 

New Jersey still upheld their argument that the tenth amendment allowed them to legalize sports betting.

Well, the judges finally reached their verdict. 7 out of 9 judges voted in favour of New Jersey, with one partially siding with the majority group. The state finally won the case and made sports betting legal.

Will Murphy v. National Collegiate Athletic Association Decision Affect Illegal Betting

Of course, it will affect illegal betting but somehow in a positive way. Right after the ruling struck down the PASPA rule, other states followed suit and began pursuing to make sports betting legal as well. 

The study by the American gaming organization estimates that on average American illegally bet at least $150 billion annually on sports. However, since the Supreme Court ruling came out, the state of New Jersey has wagered nearly $2 billion. Hence, the tax revenue will be going to the state rather than being lost to illegal betting.

Strict Regulations 

This ruling brought forth a lot of questions surrounding the issue of sports betting and gambling. For starters, and to be very clear, the decision did not automatically make sport betting legal in all the other states. If any state wanted to make it legal, then they had to follow the same procedure that New Jersey used (not precisely).

Furthermore, launching an individual sporting website is not legalized automatically. If an individual or an organization opens a sports betting website, they would have to follow their relevant state laws.  

With all this, sports betting entrepreneurs seem to be seeing a brighter future for this business. 

High Licensing Threshold

But this is not precisely the case. For example, in Pennsylvania, the legislation had proposed a license fee of up to $10 billion on betting and gambling agencies and a tax of close to 34% on their earnings. This will definitely discourage potential entrepreneurs. 

When the ruling was indirectly in favour of legalizing sports betting, these associations sought to push the proposal of a 1% integrity fee on the state’s revenue from the business. This fee will be deducted directly from the earnings, even before the government gets to tax the operators.

Although these associations claim to do so to try and curb corruption, it makes a massive dent in states’ revenue that legalizing sports betting will look like a total waste of time.

Even after the Supreme Court’s decision to Legalize Sports Betting, this business has not taken off yet?

It is good news that New Jersey set the pace for other states to push towards legalizing this activity. Well, not all the states seem to welcome this idea. The main reason why they are not embracing sports betting or gambling is because of the hefty deductions (“tax”) mounted on the revenue made. 

Some of these states also argue that it will be an immense hassle to uphold customer protection in the course of these operations. In states like Louisiana, the issue has brought up a significant controversy among members of the state’s government. The opponents of the Supreme Court’s decision are skeptical and believe that the ills of gaming outweigh the benefits. 

Conclusion

Finally, while many parties argue that the revenue made from sports betting and gambling could be channelled towards education, others have objected to the idea saying that it will exploit the poor. These, among many other reasons, prove why it is not clear enough if sports betting and gambling will remain booming across the United States, now and in the future.

References

https://www.forbes.com/sites/marcedelman/2018/05/16/explaining-the-supreme-courts-recent-sports-betting-decision/#5da422ea537c

https://www.usatoday.com/story/sports/2018/05/14/supreme-court-sports-betting-paspa-law-new-jersey/440710002/

https://www.usatoday.com/story/money/2019/06/23/sports-betting-gambling-states-legal-supreme-court-ruling/1542110001/

Additional Analysis to Watch

The Future of Sports Gambling in the U.S. – Analysis and impact of Christie v. NCAA

LEAVE A REPLY

Please enter your comment!
Please enter your name here