SCOTUS decision creates a ‘Wild West’ for sports gambling

On Monday, the Supreme Court issued its decision in Murphy v. NCAA, a case brought by the State of New Jersey to overturn the 1992 Professional and Amateur Sports Protection Act (PASPA), which was sponsored, ironically enough, by former Sen. Bill Bradley (D-N.J.), a professional basketball legend, to protect the integrity of U.S. sports.

Trying to legalize sports gambling, New Jersey lost twice in U.S. district court and twice in the Third Circuit U.S. Court of Appeals between 2012-2014.

{mosads}In a perplexing move, however, the Supreme Court accepted New Jersey’s appeal and heard the case on Dec. 4, despite the recommendation of the Office of the Solicitor General advising the court to reject New Jersey’s appeal.

Generally ignoring the practical economic and social effects of enabling unregulated “real time” sports gambling, for example by kids on cell phones, a divided court decided “to destroy PASPA rather than salvage the statute” complained Justice Ruth Bader Ginsburg in her dissent.

The majority decision focused almost exclusively on New Jersey’s myopic arguments invoking the “anti-commandeering” principle of a 1992 case New York v. United States, while ignoring the obvious interstate impacts and the well-established Commerce Clause empowering congressional action on interstate sports.

While appearing innocuous to the uninitiated, the Murphy case will quickly generate ubiquitous and unregulated “Wild West” sports gambling. It is academically well-documented that this type of gambling is poised to explode with local and strategic economic impacts negatively affecting the U.S. economy.

While unlikely, immediate congressional actions regulating the practical impacts of the Murphy case are necessary.

Unlike the Supreme Court in Murphy, in a 1995 congressional hearing, the U.S. House Judiciary Committee rejected anti-commandeering arguments by Frank Fahrenkopf, the CEO and president of the American Gaming Association lobbying group.

Fahrenkopf was arguing against the establishment of the bipartisan U.S. National Gambling Impact Study Commission, sponsored by former Sen. Paul Simon (D-Ill.).

While the Supreme Court cited the U.S. Gambling Commission’s 1999 Final Report, the court missed the Final Report’s numerous recommendations against gambling in cyberspace — particularly sports gambling.

Sports gambling in real time on cell phones and computers was highlighted as an example of the “crack cocaine” for hooking college students, teens and kids into addicted gambling.

The Supreme Court also missed a wide spectrum of negative economic and financial issues associated with widespread sports gambling.

Speculators are already encouraging the Wall Street promulgation of strange financial instruments that have no collateral — paralleling the infamous credit default swaps of the 2008 Great Recession and the historically illegal “bucket shops” for gambling on stocks.

In anticipation of a decision overturning PASPA, lobbyists have been flooding individual state legislatures for several months and encouraging legislatures to legalize sports gambling and “daily fantasy sports” (DFS).

For example, the Illinois Senate Committee on Gaming held a hearing on the Murphy case on April 3 of this year. Virginia, Ohio and other states have already passed legislation authorizing types of DFS. The lobbyists push a fast-shuffle strategy stating that if one state does not conform to the gambling lobbyists’ wishes, the neighbor state will do so.

While ignoring the recommendations of the U.S. Gambling Commission, the Murphy court was careful to cite to Greater New Orleans Broadcasting Assn., Inc. v. United States, authorizing radio and television stations to advertise gambling in lottery states.

In the New Orleans Broadcasting case the purported socioeconomic “benefits” of gambling were touted to the Supreme Court in a 1998 amicus brief listing as co-counsels, John Roberts as well as AGA lobbyist Frank Fahrenkopf (both with offices at the same Washington D.C. building address).

In a July 7, 2017 article in Legal Sports Report, the query was raised whether Chief Justice Roberts needed to recuse himself from deciding the Murphy case, as well as the initial decision to hear the case against the advice of the solicitor general’s office.

By ignoring the practical socioeconomic impacts and deciding the Murphy case by misapplying the anti-commandeering principle in a myopic decision, the Supreme Court has dictated that Congress take immediate remedial and regulatory actions.

John W. Kindt is a professor of business and legal policy in the Department of Business Administration at the University of Illinois’ Gies College of Business. For 20 years, his specialty research has been focused on the societal, business and economic impacts of decriminalizing gambling activities.