Sports Gambling and U.S. Constitution: The Ball is Back in Congress’s Court (Murphy v. NCAA)

By: Donald L. Swanson

Football fan: “You just cost me $1,000.”
Coach Tom Osborne: “I didn’t make the bet.”

Steven M. Sipple, Lincoln Journal Star, May 15, 2018.

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The ball is in their court

Question: Can Congress command a state’s lawmakers to outlaw sports gambling?

Answer: The U.S. Supreme Court says:

“No,” Congress has no such authority under the U.S. Constitution; but

Congress can regulate sports gambling directly.  The ball is back in Congress’s court.

The Case and the Statute

The case is Murphy v. National Collegiate Athletic Assn., Supreme Court Case No. 16-476 (opinion issued May 14, 2018).

28 U.S.C. § 3702 [Fn. 1] is a section of the Professional and Amateur Sports Protection Act (the “Act”) that prohibits sports gambling.

It does not make sports gambling a federal crime.  Instead, it requires a state to outlaw sports gambling.  And it allows the Attorney General and sports organizations (like the NCAA) to enjoin violations through civil lawsuits.

Some History — from the Supreme Court’s Opinion

Sports gambling is an exception to the rule that “Americans have never been of one mind about gambling.” This is because gambling scandals have damaged the reputation and threatened the future of professional and amateur sports. For example:

Professional gamblers, in 1919, allegedly “paid members of the Chicago White Sox to throw the World Series”; and

Several college basketball players were convicted, in the early 1950s, of shaving points.

Accordingly, professional sports leagues and the NCAA have long opposed legalization.

However, gambling revenues have become important for state budgets, and some states want to legalize sports gambling. So, sports gambling opponents lobbied for the Act and stressed the need to safeguard the integrity of sports.  Congress passed the Act into law in 1992.

New Jersey Creates The Issue

In 2011, New Jersey voters amend their State Constitution to allow sports gambling. And in 2012, New Jersey’s legislature authorizes sports gambling at casinos and horseracing tracks—in violation of § 3702(1) of the Act.

So, NCAA and professional sports leagues sue New Jersey officials in Federal Court to enjoin New Jersey’s new law. In response, New Jersey argues that the Act unconstitutionally infringes on its sovereign authority under the U.S. Constitution’s “anticommandeering” doctrine.

The Federal Court found no anticommandeering problem and upheld the Act’s sports gambling prohibition. The Third Circuit Court of Appeals affirmed, and the U.S. Supreme Court granted certiorari.

The Supreme Court

The Supreme Court reverses, declaring the Act unconstitutional under the anticommandeering doctrine. This is a seven-Justices majority decision (Justice Alito wrote the opinion, joined by Roberts, Kennedy, Thomas, Kagan and Gorsuch, with Breyer concurring on all issues except severability).

–The majority’s rationale

The anticommandeering doctrine is this: Congress does not have constitutional authority to command the states to take or withhold action. Here’s how it works:

When the original states declared their independence, they claimed the powers inherent in sovereignty, and the Constitution limited but did not abolish those sovereign powers;

Both the Federal government and the states wield sovereign powers—the Constitution confers on Congress certain enumerated powers, with all other legislative power reserved for the states; and

Conspicuously absent from the list of powers given to Congress is the power to issue direct orders to the governments of the states, and the anticommandeering doctrine recognizes this limit on congressional authority.

The anticommandeering doctrine is relatively new. The pioneering Supreme Court case is from 1992, which held that Congress could not order a state to either take title to or regulate low-level radioactive waste. The Supreme Court explained in 1992:

–The Constitution “confers upon Congress the power to regulate individuals, not States”: Congress may not “commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.”

Here are some reasons why this is important:

1. “The Constitution does not protect the sovereignty of States for the benefit of the States or state governments as abstract political entities.” Instead, “the Constitution divides authority between federal and state governments for the protection of individuals” because a “healthy balance of power between the States and the Federal Government reduces the risk of tyranny and abuse from either front.”

2. The anticommandeering doctrine “promotes political accountability”—when Congress regulates, “the responsibility for the benefits and burdens of the regulation is apparent. Voters who like or dislike the effects of the regulation know who to credit or blame.” Conversely, when a State imposes regulations “only because it has been commanded to do so by Congress, responsibility is blurred.”

3. The anticommandeering doctrine prevents Congress from shifting the costs of regulation to the States.

Why not leave constitutionally-permissible prohibitions in place?

“Severability” is the concept of striking out of a statute the parts that are constitutionally impermissible and leaving the remainder intact. On severability, the six-Justices majority opinion (Breyer dissented on this issue) explains the legal issue and standard like this:

The question is whether the unconstitutionality of State authorization “dooms the remainder of the Act”—i.e., whether other prohibitions in § 3702 against “a person” promoting sports gambling can remain in effect; and

The legal standard is this: the other provisions will remain in effect, unless it is evident that Congress “would not have enacted those provisions which are within its power, independently of those which are not.”

–Majority Opinion on Severability

Part (1) of § 3702 contains the unconstitutional commands-to-states, but the prohibition in part (2) on sports gambling by “a person” is constitutionally permissible.

Yet, the six-Justices majority strikes down § 3702 in its entirety.  On severability, the majority opinion provides a lengthy and detailed description of how Congress intended §3702(1) and §3702(2) to work. For example:

If a State authorized sports gambling for private entities, the State could be sued under §3702(1) and the private entity sued under §3702(2)—the two provisions would be deployed in tandem to stop sports gambling; but

By contrast, if §3702(2) is severed from §3702(1), it implements a perverse policy that undermines whatever policy is favored by the people of a State.

Further, Justice Gorsuch says in oral arguments:

part (1) of § 3702 makes the regulation of sports gambling “free” for the Federal government–it costs nothing to implement; so,

“how do we know Congress would have passed” part (2) of § 3702 without part (1), given that,”if (1) is fine, (2) comes for free?”

–Dissenting Opinions on Severability

There is no cause to deploy a wrecking ball destroying the Act in its entirety, declare Justices Ginsburg, Sotomayor and Breyer. The portions of § 3702 directed at “persons” should remain intact, they say. Here’s why:

Congress has power to regulate gambling on a nationwide basis;

It is scarcely arguable that Congress would have preferred no statute at all over one that simply stops everyone from operating sports-gambling schemes; and

The majority opinion “wields an ax to cut down §3702 instead of using a scalpel to trim the statute.”

Judge Breyer adds:

Subpart (1) of § 3702 says a state cannot authorize sports gambling schemes under state law—this provision is unconstitutional;

Subpart (2) says (just in case a state finds a way to do so) sports gambling schemes that a state authorizes are unlawful—this provision is perfectly fine; and

Subpart (2) can live comfortably on its own without subpart (1).

The Ball is Back in Congress’s Court

The seven-Justices’ majority opinion concludes with this:

“The legalization of sports gambling requires an important policy choice, but the choice is not ours to make”;

Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own” [emphasis added]; and

“Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution.”

In other words, Congress is free to enact a new version of § 3702 that makes sports gambling unlawful throughout these United States. However, it must do so in a way that is constitutionally permissible. The ball is back in Congress’s court.

A Bankruptcy Angle

Bankruptcy issues percolate these days on whether the Bankruptcy Code preempts certain areas of law. One example is the § 546(e) avoidance defense: see, e.g., Deutsche Bank v. McCormick, Supreme Court Case No. 16-317.

The Supreme Court, in Murphy v. NCAA, discusses preemption rules, generally. So, any bankruptcy preemption argument should, hereafter, start with Murphy v. NCAA. Here’s a summary of that discussion.

There are “three different types of preemption—‘conflict,’ ‘express,’ and ‘field,’” that work this way:

“Congress enacts a law that imposes restrictions or confers rights on private actors”;
“a state law confers rights or imposes restrictions that conflict with the federal law”; and
“therefore the federal law takes precedence and the state law is preempted.”

Here are examples of the three types:

“Conflict preemption”—a State’s tort law adding label requirements for drug manufacturers impermissibly conflicts with FDA labeling requirements that preempt the field.

“Express preemption”—the Airline Deregulation Act of 1978 lifted federal regulations on airlines and declared that States could not add regulations of their own.

“Field preemption”—Federal statutes governing alien registration “confer a federal right to be free from any other registration requirements.”

In Murphy v. NCAA the Supreme Court emphasizes that preemption cannot apply because § 3702(1) is “a direct command to the States,” rather than to “private actors.”

Conclusion

A seven-Justices majority on the U.S. Supreme Court declares, in Murphy v. NCAA, this:

Congress lacks constitutional authority for its command that New Jersey lawmakers outlaw sports gambling.

Those same Justices also declare that “Congress can regulate sports gambling directly.”

So, the political sports-gambling ball is back in Congress’s court. The question, now, is whether Congress will act.

Footnote 1: 28 U.S.C. § 3702 provides:

It shall be unlawful for—

(1) A governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or

(2) a person to sponsor, operate, advertise, or promote, pursuant to the law or compact of a governmental entity,

a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games.

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