Sports gambling is always a sexy topic. And the U.S. Supreme Court jumped in, recently, by overturning a federal statute that banned it.
Supreme Court Opinion
The Supreme Court’s opinion is anything but sexy. One reporter says it is, “boring as #@!!”
The opinion deals with issues of constitutional law. But it’s not the exotic stuff that enlivens debates—it’s about state and federal governments working together and coexisting.
That may be dull stuff. Yet, the issues and rulings in the opinion are important. They deal with the authority of Congress to preempt an area of law juxtaposed against its lack of power to command the states.
I’ll try to explain and illustrate the difference between the two, in this article, as demonstrated by the Supreme Court’s recent opinion in Murphy v. National Collegiate Athletic Assn., Supreme Court Case No. 16-476 (opinion issued May 14, 2018).
–I’ll also identify additional-and-subsequent Supreme Court action on similar questions.
The Statute and the Lawsuit
The federal statute at issue is part of the Professional and Amateur Sports Protection Act (the “Act”). The statute, 28 U.S.C. § 3702, provides:
“It shall be unlawful for . . . a governmental entity to . . . authorize by law . . . a . . . betting, gambling, or wagering scheme based . . . on . . . competitive games in which amateur or professional athletes participate.”
The historic backdrop is that New Jersey law, for many years, made sports gambling illegal. It was after Congress adopted the Act that New Jersey changed heart and adopted a new law authorizing sports gambling at casinos and horsetracks.
Since the Act prohibits what New Jersey did, NCAA sued New Jersey to enforce the prohibition. New Jersey countered, contending the prohibition is unconstitutional.
New Jersey lost at trial. So, New Jersey appealed to the Third Circuit Court of Appeals, where it lost again.
Third Circuit Ruling
The Third Circuit Court of Appeals evaluated the prohibition language in § 3702 (“shall be unlawful for . . . a governmental entity to . . . authorize”) and found it to be constitutionally valid. Here’s why:
(i) it “does not impose a coercive either-or requirement” or “direction by the federal government”; and
(ii) it “does not require states to take any action” or “affirmative steps.”
So, New Jersey appealed to the U.S. Supreme Court, which granted certiorari.
Supreme Court Ruling
The Supreme Court reverses the Third Circuit’s decision and declares that § 3702 “violates the anticommandering rule” by “prohibiting state authorization of sports gambling.” The following is a summary of the Supreme Court’s reasoning.
–Meaning of the Statute
The first issue addressed by the Supreme Court is the meaning of these words in § 3702:
“It shall be unlawful for . . . a governmental entity to . . . authorize by law . . . a . . . betting, gambling, or wagering scheme.”
Here are what the parties argue on this issue.
1. New Jersey argues that, (i) such words “command states to maintain their existing laws against sports gambling without alteration,” and (ii) any state law allowing sports gambling is an “authorization” under § 3702.
If this meaning is adopted, both NCAA and United States acknowledge that “imposing” such a command “would indeed violate” the Constitution.
2. NCAA argues that such words should be construed more narrowly. It says:
The Act does not compel states to do anything—it merely prohibits states from authorizing sports gambling; and
States are not prohibited by § 3702 from acting on sports gambling—they could, (i) entirely repeal existing laws that prohibit sports gambling, or (ii) modify such laws.
NCAA offers this hypothetical illustration: if a state had a felony prohibition on all lotteries, it could maintain the law, repeal the law, downgrade the crime to a misdemeanor or increase the penalty; but it could not modify the law to authorize a sports lottery.
What states cannot do, NCAA argues, is precisely what New Jersey did—partially repeal existing prohibitions to authorize sports gambling at casinos and horsetracks.
3. United States argues that such words are constitutionally fine because:
The absence of prohibition is not the same as an authorization: private conduct is not “authorized by law” simply because the government has not prohibited it; and
The “authorize by law” prohibition in § 3702 does not apply to all partial repeals: states are free to allow, (i) anything other than “betting, gambling, or wagering,” and (ii) casual, informal activities like social wagers that aren’t organized “schemes.”
Supreme Court Sides With New Jersey
The Supreme Court adopts New Jersey’s argument on the meaning of § 3702’s “shall be unlawful to authorize” language. The Supreme Court emphasizes, however, that:
“even if the law could be interpreted as respondents and the United States suggest, it would still violate” the anticommandeering rule;
under either view, § 3702 “unequivocally dictates what a state legislature may and may not do” and puts state legislatures “under the direct control of Congress” as if “federal officers were installed in state legtislative chambers” armed with “authority to stop legislators from voting on any offending proposals”; and
“A more direct affront to state sovereignty is not easy to imagine.”
The Supreme Court declares § 3702 unconstitutional under the anticommandeering rule. 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 but one issue).
–The Rule Explained
The Supreme Court explains the anticommandeering rule like this.
Congress does not have constitutional authority to command 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 rule recognizes this limit on congressional authority.
The anticommandeering rule 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.”
–Why It’s Important
Here are some reasons identified by the Supreme Court on why the anticommandeering rule 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 rule “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 rule prevents Congress from shifting the costs of regulation to the States.
Both the NCAA and the United States argue that § 3702 should be upheld as a proper preemption:
NCAA says, § 3702 “is a straightforward exercise of Congress’ power to preempt the operation of state laws that conflict with federal policy on matters within Congress’ purview”; and
United States says, this case “turns on the fundamental distinction between commandeering and preemption,” and while § 3702 “necessarily constrains” the legislative latitude of states, it is not an “impermissible commandeering” because it does not “conscript the States to act as federal agents.”
The Supreme Court rejects such arguments with a simple observation: preemption can’t apply here because the words “shall be unlawful to authorize” in § 3702, are “a direct command to the States,” rather than to “private actors.”
–A Preemption Primer
The Supreme Court provides the following primer on preemption law.
Preemption works like this: “Congress enacts a law that imposes restrictions or confers rights on private actors,” then “a state law confers rights or imposes restrictions that conflict with the federal law,” and “federal law takes precedence and the state law is preempted.”
Here are three types of preemption and an example of each:
“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; and
“Field preemption”—Federal statutes governing alien registration “confer a federal right to be free from any other registration requirements.”
To illustrate, the Supreme Court cites four contrasting preemption opinions. It distinguishes them by showing how “none” had “commanded state legislatures to enact or refrain from enacting state laws.” Here are summaries of the four cases and their precedence value.
1. In South Carolina v. Baker, 485 U.S. 505 (1988), Congress requires registration of bearer bonds and removes the federal tax exemption for violation. This law addresses tax-evasion practices involving bonds issued by state governments, by the U.S. government and by corporations. The Supreme Court upholds the law because it, (i) treats state bonds the same as private bonds, and (i) pressurs states only indirectly.
2. In Reno v. Condon, 528 U.S. 141 (2000), Congress regulates confidentiality of personal information that state DMVs obtain when citizens apply for drivers licenses and vehicle titles—states were selling such information to others. The law also applies to private persons who obtain such information from states. The Supreme Court upholds the law because it applies “equally to state and private actors” and does not affect states’ “sovereign authority to regulate their own citizens.”
3. In Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264 (1981), Congress regulates surface coal mining to “protect society and the environment” from adverse effects. The Supreme Court upholds the law because it allows, but does not require, states to implement a federal program—if a state does not “‘wish’ to bear” the burdens of the law, the “full regulatory burden” will be “borne by the Federal Government.”
4. In FERC v. Mississippi, 456 U.S. 742 (1982), Congress regulates the electricity generation industry to limit the consumption of oil and gas. The law directs state regulators to “consider” adopting federal standards. The Supreme Court upholds “this modest requirement” but warns that it had never explicitly sanctioned “a federal command to the States to promulgate and enforce laws and regulations.”
Supreme Court’s Summary
The seven-Justices’ majority opinion concludes with this summary of its anticommandeering and preemption opinion:
“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”; and
“Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution.”
Subsequent Supreme Court Action on Preemption / Commandeering Questions
1. New Denial of Certiorari
On June 4, 2018, the U.S. Supreme Court denies certiorari in a preemption case with anticommandeering implications: J.B. Hunt Transport, Inc. v. Ortega, Supreme Court case no. 17-1111.
The “Question Presented” in the J.B. Hunt v. Ortega Petition for a Writ of Certiorari begins like this:
“The Federal Aviation Administration Authorization Act of 1994 (FAAAA) provides that ‘a State . . . may not enact or enforce a law . . . related to a price, route, or service of any motor carrier . . . with respect to the transportation of property’” [emphasis added].
So, how does this prohibition on State action mesh with the Supreme Court’s anticommandeering decision in Murphy v. NCAA? Presumably, the answer is this:
The Federal Government, under the FAAAA, regulates the entire motor carrier transportation industry and, thereby, preempts the field and can prevent State action thereon; but
The sports gambling industry, on the other hand, is not regulated by the the Federal Government, which wrongfully attempted to compel State action (or inaction) anyway.
2. New Grant of Certiorari
On May 21, 2018, the U.S. Supreme Court granted certiorari in another preemption case: Virginia Unranium, Inc. v. Warren, Supreme Court case number 16-1275.
The Petition in Virginia Uranium provides this explanation of the case:
“The State of Virginia has banned the mining of the largest deposit of uranium in the United States. Because the ban . . . was motivated by concerns about the radiological safety of activities regulated by the federal government pursuant to the Atomic Energy Act,” the ban is “preempted”; but
The Fourth Circuit Court of Appeals upheld the ban anyway.
So . . . the question the Supreme Court agreed to hear is described like this:
The Atomic Energy Act occupies the entire field of nuclear safety and has “defined the preempted field, in part, by reference to the motivation” behind the challenged state law. So, “a state cannot use its authority” over activities indisputably subject to State regulation” as a “pretextual” means of regulating radiological hazards.
In this case, a divided panel of the Fourth Circuit upheld the challenged state law, saying that a court may not “conduct a pretext analysis” to “decipher whether the legislature was motivated” by radiological safety concerns.
Does the Atomic Energy Act “preempt a state law that on its face regulates an activity within its jurisdiction (here uranium mining),” but “has the purpose and effect of regulating the radiological safety hazards of activities entrusted” to the Nuclear Regulatory Commission “(here, the milling of uranium and the management of the resulting tailings)?”
It will be interesting to see how the Supreme Court handles this new Virginia Uranium case and what it will add to our current understanding of preemption law.
While anticommandeering and preemption rules under the U.S. Constitution are not very sexy, they are important.
Kudos to the U.S. Supreme Court for tackling the issues head-on and reaching a principled ruling in Murphy v. NCAA.
And it will be interesting to see what the newly-granted certiorari in Virginia Uranium will add to the current body of preemption law.
Note: This is the second of two articles on the Supreme Court’s Murphy v. NCAA opinion. The first is:
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