Sports betting now legal; ban struck down as N.J. wins Supreme Court case
In a decision that is monumental for the gaming industry, the Supreme Court struck down a federal ban on sports betting, paving the way for states including New Jersey and Pennsylvania to launch sports wagering.
Sports betting is now legal in the United States, the Supreme Court ruled Monday in a blockbuster decision that amounts to a stunning victory for the State of New Jersey and the gambling industry.
In a 6-3 ruling that means sports betting could likely start within weeks in New Jersey and months in Pennsylvania, the Supreme Court overturned a federal law that had banned sports gambling outside of Nevada. It opens the door for an estimated $150 billion industry to take legal root, although legalizing betting is up to each state.
The decision sent shock waves through many states, from New York and West Virginia, where preliminary legislation is in place, to Delaware, which had the only legal parlay betting in the East, to Nevada, where the question is how this will affect tourism and revenue.
"Some states will move faster than others, but I do think that you will see a critical mass get on board with sports betting faster than you've seen any other type of gaming expansion," said Geoff Freeman, president and CEO of the American Gaming Association.
The decision ended New Jersey's seven-year battle to legalize sports wagering, fought by the NCAA and major professional sports leagues — and caused jubilation among state lawmakers, who believe sports betting will boost the state economy and help revive Atlantic City. The casino town's mayor predicted sports wagering could bring in "millions."
"This is a decisive and extremely gratifying victory for New Jersey. We are on the right side of history with this case with a decision that will allow us to follow through with legally sanctioned sports betting," New Jersey State Senate President Stephen Sweeney said Monday.
By Monday afternoon, New Jersey lawmakers had moved swiftly to introduce legislation to authorize and regulate sports betting.
The 50-page decision came five months after oral arguments. Writing for the majority, Justice Samuel A. Alito Jr., a New Jersey native, said the federal sports-betting ban's "defect" was that "it issues a direct order to the state legislature," which Congress does not have power to do.
"A more direct affront to state sovereignty is not easy to imagine," he wrote.
In her dissent, Justice Ruth Bader Ginsburg said, "Congress permissibly exercised its authority to regulate commerce by instructing states and private parties to refrain from operating sports-gambling schemes." She said the court had no need to strike down the entire law. "The court wields an ax to cut down [part of the federal ban] instead of using a scalpel to trim the statute."
In New Jersey, lawmakers have proposed an 8 percent tax on in-person betting and 12.5 percent on online bets, which would be funneled to programs for senior citizens and the disabled. An additional 1.25 percent tax would go to host municipalities and counties.
Betting would not be allowed on any competitions involving a New Jersey college or on collegiate athletic events taking place in New Jersey. Betting on high school events would be prohibited.
Analysts predicted that at least some sports books in the Garden State could be open by June's NBA finals, and the industry could be fully operational by the next NFL season.
"They have existing casinos and racetracks that have been retrofitted already and are just waiting to open their ticket counters," said Andrew Brandt, director of the Moorad Center for the Study of Sports Law at Villanova University's law school. "It's built, it's just waiting for the go-ahead, and I would think the go-ahead was 10 o'clock this morning," added Brandt, a former Green Bay Packers executive.
As other states rush to consider or implement sports betting, it will be up to each state's lawmakers to decide what sporting events are exempt, along with other questions, including whether wagering will be offered on online or mobile devices.
At least one casino in Pennsylvania — SugarHouse in Philadelphia — said it was ready to add sports betting "as soon as possible."
Lower courts had ruled against New Jersey, saying the state's plan violated federal law. New Jersey had passed laws attempting first to legalize sports betting in the state, then to repeal any prohibition on the activity; the state was then sued by the NCAA along with the NFL, NBA, NHL, and Major League Baseball.
"While we are still reviewing the decision to understand the overall implications to college sports, we will adjust sports wagering and championship policies to align with the direction from the court," NCAA chief legal officer Donald Remy said in a statement Monday.
The sports leagues want a cut of profits, the ability to veto certain types of bets or bets on certain kinds of games, and an assurance that sports books use only data sources they approve, said Chris Grove, a gaming analyst at Eilers & Krejcik Gaming. They have submitted legislation in several states, and will have to negotiate with each one that passes sports betting. Freeman said the American Gaming Association would work with all parties to come to compromise.
Sports betting won't be a reality in most of the U.S. for months or years. Eighteen states introduced or passed sports betting bills in the current legislative session and four have passed bills, according to the American Gaming Association. Sixteen legislatures are still in session, with the potential to quickly bring sports betting to the table.
Pennsylvania is among states, including New York, Mississippi, and West Virginia, that already have legislation enabling sports wagering. With much of the framework needed to make sports betting happen put in place last year, Pennsylvania lawmakers now just need to pass a plan for how sports wagering would operate. Rep. Jeff Pyle (R., Armstrong), chair of the House Gaming Oversight Committee, said Pennsylvanians could be making sports bets in six months to a year.
"We were prepared for this," he said of the Supreme Court decision. "We've just got to figure out how we're doing it."
Proposals include allowing sports betting to be run out of the casinos or out of separate Pennsylvania locations, he said.
"We'd rather not rely on something out of state," Pyle said. "We would like to see a static Pennsylvania location so that we can tax it. The only reason we're doing this is to draw revenue, and to give people pretty much what they want — and that's a win-win."
The Pennsylvania Gaming Control Board does not yet have a timetable, spokesman Doug Harbach said, but will need to draft and approve regulations.
Pyle predicted that sports betting would be part of this year's budget discussions. The current legislation includes a 36 percent tax rate, which analysts say is exorbitant, and a $10 million one-time fee for casinos wanting to host sports wagering.
Grove said that tax rates of 10 percent to 20 percent have been successful in international markets. Pyle said lawmakers haven't discussed details of the tax rate yet. But Freeman of the American Gaming Association cautioned that such requirements could slow progress, calling it "some very bad policy."
The state must "go back and clean up that policy to ensure they can build a business that can thrive," Freeman said.
Nationally, legalization will bring significant change to what has been an illegal activity for nearly three decades, said Villanova's Brandt.
"The whole goal of this is to bring it out into the light, away from the darkness," he said. "You're not needing to go to your backroom bookie anymore. Sports betting will be legal, sports betting will be done in the light of day."
"This has been a development that the gambling industry has been waiting for for so long and has been convinced for so long that it was never going to come to pass," Grove said. "There will be something of a state of shock across the gambling industry for a few days."
Staff writer Rob Tornoe contributed to this article.