legal-scales-of-justice

The Professional and Amateur Sports Protection Act is also known as the Bradley Act, named after the law’s main sponsor, former Sen. Bill Bradley of New Jersey. The goal of the bill was to stop the spread of sports betting in the United States.

This response was due not just to the expansion of sports betting, but to gambling legalization and expansion throughout the country. South Dakota, Iowa, Colorado, Illinois, Mississippi, Louisiana and Missouri all legalized casinos in the three years before Congress visited the sports betting issue. Legal casinos were about to launch in Indiana at the time the bill became law.

Before South Dakota legalized casinos in 1989, only Nevada and New Jersey had legalized commercial gaming. There was a 13-year difference between when New Jersey became the second casino state and South Dakota became the third.

PASPA passed the U.S. Senate on June 2, 1992. The House of Representatives passed it on October 6, 1992. President George Bush signed the bill into law on October 28, 1992. It went into effect on January 1, 1993.

Four states exempted had legal sports betting

The language in PASPA stopped new states from legalizing sports betting. It exempted states that already had sports betting laws on the books. Nevada, Oregon, Delaware and Montana are the states that were grandfathered into PASPA.

These states were exempted because of past laws related to legal forms of sports betting. Each had a different form of legal sports betting.

Laws on the books in the four states exempted from PASPA

Here is what is allowed in the four states grandfathered into PASPA:

Nevada

Nevada legalized all forms of sports betting in 1949. It included all professional sports and many amateur ones. Nevada is the only state where single-game sports betting is permitted. It is also the only state where parlay and teaser cards are available on all sports.

Oregon

The Oregon Lottery operated Sports Action. This was a parlay card system that started in 1989. The NFL was the only sport offered in its first year. NBA was added in 1990 for a single season.

The Portland Trail Blazers were not offered on NBA parlay cards. The combination of the lack of sales and a lawsuit by the NBA prompted Oregon to discontinue Sports Action parlays on professional basketball.

The NFL and NCAA were also unhappy with sports betting in Oregon. The NFL stated that Oregon would not get a team as long as it offered betting on professional football. The NCAA refused to permit tournament games to be held in the state. This kept March Madness games from being held in Oregon.

A bill was introduced in 2005 to outlaw Sports Action in Oregon. It eventually passed. Sports Action ceased NFL betting after the 2007 season. NCAA basketball tournament games returned to Oregon the next year.

Delaware

The Delaware Lottery offered three-team or more parlay cards on NFL games in 1976. It was not successful and was discontinued after just one NFL season. The law remained on the books. In 2009, the recession took its toll on Delaware’s traditional lottery ticket sales as well as the state casinos that pay 43.5 percent of gaming win to the state.

The state legislature and governor came up with a plan that would have permitted Nevada-style sports betting. The NFL, NHL, MLB, NBA and NCAA were not impressed and took the case to federal court. The Third Circuit Court of Appeals ruled that Delaware’s exemption under PASPA only applied to forms of sports betting it offered before the law went into effect. This ruling meant that Delaware could only offer NFL parlay cards, not full sports betting like Nevada may legally spread.

Montana

Unlike the other three states exempted from PASPA, Montana never offered any form of house-banked sports betting. Montana received an exemption through a sports pool law that permits licensed alcoholic beverage establishments to create betting squares contests. The boards may have up to 100 squares and payouts must include the outcome of a full sporting event. Partial sporting events outcomes may also be considered if not the only payout for the contest.

The house may not take any portion of the prize pool. All entry fees must be returned to players. There is also language that permits sports pools to apply to races involving pigs, hamsters and gerbils in cities of less than 100 people or outside and city limits.

In 2007, Montana legalized pari-mutuel fantasy sports betting operated by the state lottery. It was rolled out in 2008. Only NASCAR and NFL fantasy contests are offered. The house holds 26% of the pool.

Most of this money goes to the horse racing industry. It has only been marginally successful. In its first year of fiscal 2008, the handle was $87,505. Even with the explosive growth of fantasy sports betting, that number only grew to $192,705 in 2014. The Montana Lottery had total sales of $53.1 million in 2014. Montana gaming law expressly forbids online fantasy sports contests, presumably to protect its lottery.

The Montana fantasy lottery is not without controversy. For example, the NCAA is opposed to the activity and has threatened to not play collegiate tournament events in the state due to this, even though college sports are not included. There is also controversy pertaining to the 2009 Delaware case that found that only existing betting was grandfathered under PASPA.

A 2009 discussion between the Montana Lottery and NCAA was about this point as the state did not offer fantasy sports before PASPA was enacted. The NCAA does not have standing to bring a PASPA case against Montana. Only NASCAR and the NFL could. NASCAR is not averse to gambling. The NFL generally stands behind the daily fantasy sports industry.

New Jersey could have legalized sports betting after PASPA

There is a clause in PASPA that would have permitted sports betting to expand before going into effect.

It allowed for states that had commercial gambling for 10 years to legalize sports betting during the first year that PASPA was in effect. New Jersey was the only state that would have qualified at the time. It failed to pass a sports betting law in 1993.

New Jersey PASPA legal battle

In November 2012, New Jersey voters instructed state lawmakers to legalize sports betting in a nonbinding referendum. The New Jersey Senate got on the matter immediately behind the efforts of State Senator Raymond Lesniak. The law would have permitted the state’s racetracks and Atlantic City casinos to offer Nevada-style sports betting.

The bill was signed into law by New Jersey Governor Chris Christie in January 2013. The NFL, NHL, NBA, MLB and NCAA immediately sued to stop New Jersey’s sports betting industry before it ever started. The sports leagues were successful in district court. The Third Circuit Court of Appeals affirmed the lower court’s decision. It was found that New Jersey could not regulate sports betting. The ruling included that states could decriminalize the activity. The U.S. Supreme Court refused to hear the case.

The ruling against New Jersey was based on PASPA. This law prohibits the regulation of sports betting, not the actual legalization of it. PASPA was found to be constitutional, even though it gives four states more rights than the other 46.

New Jersey went back to the drawing board. Another bill backed by Sen. Lesniak removed the regulatory aspects. It passed in June 2014. The district court once again ruled against New Jersey. The Third Circuit Court of Appeals again affirmed the lower court in a 2-1 decision.

New Jersey appealed for an en banc decision in the Third Circuit. This means a full appeal to all judges in the circuit. That appeal was granted. A hearing is expected in February 2016. A decision may come during the summer of 2016.

Sports leagues and PASPA, sports betting

New Jersey has obviously led the charge in attempting to render PASPA moot via passing laws and its ongoing court case.

The highest profile figure to ask for PASPA to be taken off the books is clearly NBA Commissioner Adam Silver, who penned an op-ed in the New York Times in 2014. He wrote the following:

Times have changed since PASPA was enacted. Gambling has increasingly become a popular and accepted form of entertainment in the United States. Most states offer lotteries. Over half of them have legal casinos. Three have approved some form of Internet gambling, with others poised to follow.

He then went on to call for PASPA to be repealed:

In light of these domestic and global trends, the laws on sports betting should be changed. Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.

The NFL remains steadfastly against sports betting, while Major League Baseball, and commissioner Rob Manfred, seemed to be inching toward wanting to see legalized sports betting. More on all of the pro leagues’ stances here.

PASPA and daily fantasy sports

Generally, legal experts have argued that PASPA does not affect the DFS industry, as currently constructed, as long as the contests offered are legitimately games of skill. (Of note, there are some DFS products that look a lot like sports betting but take cover under the “fantasy sports” label for cover.)

Of course, as more and more jurisdictions consider whether DFS contests are games of skill or games of chance under state law — notably, the attorneys general in both Nevada and New York have called DFS gambling — that position could change.

The bigger issue with PASPA in regards to DFS might be as more and more states consider regulation of the industry via legislation. It is very possible that PASPA, which is being used to block authorization and regulation of sports betting via the courts, could be applied to any attempts to regulate DFS.

PASPA: Frequently Asked Questions

PASPA is an acronym for the Professional and Amateur Sports Protection Act. It is a federal law that passed in 1992 and went into effect on January 1, 1993. PASPA preempts states from regulating sports betting. The four states with sports betting laws on the books were grandfathered.

Which four states are exempted from PASPA?

Delaware, Montana, Nevada and Oregon are exempted from PASPA. Only laws on the books in 1992 are exempted, as ruled by the Third Circuit Court of Appeals in 2009.

Why is Delaware permitted to sell NFL parlay cards?

Delaware spread NFL parlay cards through its state lottery in 1976. It discontinued the games due to a lack of ticket sales. It relaunched these games in 2009.

Why can’t Delaware spread full sports betting?

While Delaware is exempted from PASPA, the Third Circuit Court of Appeals ruled in 2009 that the state could only offer sports betting based on laws on the books in 1992. That only includes NFL parlay cards involving three or more outcomes.

Why can’t New Jersey spread sports betting?

New Jersey did not pass sports betting in 1993 through a loophole provided to the state under PASPA. This allowed New Jersey one year to legalize sports betting. The Third Circuit Court of Appeals ruled that PASPA was constitutional, even though it gives more rights to four states than the others.

Why can Nevada offer full-service sports books when others cannot?

Nevada was exempted under PASPA. Nevada has offered full sports betting since 1949. This includes straight betting on professional sports and most amateur events, as well as parlays and teasers.

Why is Montana exempted from PASPA?

Montana had a sports pool law on the books in 1992. It allows taverns to offer pool betting contests based on squares purchased by patrons. The house must return all funds to gamblers.

Why is Oregon exempted from PASPA?

Oregon offered NFL and NBA parlay cards through its state lottery from 1989 to 2006.

Why are offshore companies permitted to offer sports betting over the Internet?

Offshore sports betting companies like Bovada and BetOnline operate outside the United States. These companies are not legal under PASPA. They are outside the reach of U.S. law enforcement.

Are daily fantasy sports sites exempted from PASPA?

DraftKings, FanDuel and competitors assert that they operate through an exemption under the Unlawful Internet Gambling Enforcement Act. The daily fantasy sports industry is not mentioned in PASPA. Some legal analysts believe that regulating daily fantasy sports is not permitted under PASPA.

Recommended reading on PASPA