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WHERE’S THE IRREPARABLE HARM? IN THE SPORTS BETTING CASE, NEW JERSEY’S COLOSSAL BLUNDER

Kallas Remarks by Steve Kallas – While much can and will be written on New Jersey’s recent attempt to allow sports betting at Monmouth Park, there are two fascinating things to look at in the specifics of the present case (a federal judge granted a temporary restraining order (“TRO”) last Friday barring Monmouth from taking any sports bets) and the history of the federal law at issue in the present case.

WHERE’S THE IRREPARABLE HARM?

While there are four things a movant must show to get a TRO, we will focus on the main two:  irreparable harm (in this case, to the NFL and the other leagues) and likelihood of success on the merits of the case.  A federal judge, in this case Judge Michael Shipp, read his decision from the bench last Friday, stopping Monmouth Park from accepting bets on sports this past Sunday.

In discussing his decision that the NFL and other movants would be irreparably harmed if you bet $50 to win on the Patriots this past Sunday, Judge Shipp said: “More legal gambling leads to more total gambling, which in turn leads to an increased incentive to fix plaintiffs’ matches.”

To say this cheapens the meaning of “irreparable harm” would be an understatement.  According to papers filed in New Jersey federal courts over the last few years, sports betting is a $500 billion (yes, with a b) per year industry, most of it bet illegally.  In New Jersey, let’s assume the annual illegal betting is in the neighborhood of one billion per year (you can put in any number you want here from hundreds of millions of dollars to a few billion).

The point here is that, even if 10 or 20 billion dollars a year would be bet legally in New Jersey (and remember, the New Jersey gambling at Monmouth did not allow any wagers on games played in New Jersey and limited wagers to $100), that would be a drop in the bucket compared to what is already wagered.

We’ve already had the Tim Donaghy affair in the NBA and a number of betting scandals in the NCAA.  Did this have anything to do with legal (as opposed to illegal) gambling?  Of course not.  The leagues police this stuff and warn their players about it every year.  If anything, the concept is backwards.  The legislatures and the courts should be more worried about illegal gambling rather than the spread of legal gambling.

Maybe the judge doesn’t understand how involved the NFL is with gambling (maybe with a wink and a nod, but involved nonetheless).  Sometimes, judges just don’t quite understand the industry before them.  For example, why is the NFL injury report so important, so regulated, so needs-to-be-true,, according to the NFL?  Well, if you understand the business, you understand that the weekly injury report is gold to gamblers, legal and illegal.

There is certainly no evidence to show that, if there were more (legal) gambling on top of illegal gambling, it would cause more “incentive” to fix games.

Maybe the judge also doesn’t understand that legal gambling won’t attract the big bettors anyway.  You see, the state of New Jersey isn’t going to give you credit when you go to bet at Monmouth.  Your local bookie, if you know one, will absolutely (in most instances) give you credit.  Of course, you’d better pay if you lose.

There are an awful lot of under-the-radar things when it comes to sports gambling.

Frankly, the notion that legal gambling would lead to more fixes is preposterous.  It’s just a made-up reason to stop legal gambling in New Jersey. Again, can anyone really say, with any certainty, that, if sports gambling increases from $500 billion to $600 billion (or any number you want to fill in here), more games will be fixed?

Of course not.  And we won’t even discuss the behemoth that is fantasy football, that is played “for fun” and, yes, for money (and plenty of it).  But we will discuss one more irreparable harm aspect below under New Jersey’s colossal blunder.

WHAT ABOUT LIKELIHOOD OF SUCCESS ON THE MERITS?

While it didn’t seem to be addressed, at least by news reports of Judge Shipp’s oral decision, this judge also had to find that the NFL and the other leagues are going to prevail at trial on these issues (in order to grant the TRO).  That’s a very bad sign for New Jersey (although the loser of this case will appeal to the Third Circuit, where, it says here, New Jersey has a better chance to win).

As you may know, Judge Shipp had ruled against New Jersey a few years ago and his ruling was affirmed by the Third Circuit Court of Appeals.  But there was language in the higher court’s opinion that gave New Jersey hope that it could have legal sports betting in New Jersey.

It is unclear as to why Judge Shipp believes that the NFL and the other leagues will win this case on the merits.  Presumably, it is that sports betting in New Jersey still runs afoul of The Professional and Amateur Sports Protection Act of 1992 (“PAPSA”).  This act, essentially, bars state-involved gambling.

So you have a federal judge who has ruled against the state of New Jersey in the past, who has come up with, to be kind, weak irreparable harm, who doesn’t quite understand the realities of the gambling business and who has, either explicitly or implicitly, decided that the NFL and the other leagues will win this case on the merits.

NEW JERSEY’S COLOSSAL BLUNDER?

Lost in the shuffle, while discussing this case, is that the State of New Jersey had the right to institute legal gambling in New Jersey and chose not to do it.

How could that be?

Well, when PAPSA was passed, there were three exceptions to the anti-gambling statute.  One, of course, was for Nevada, apparently so as not to destroy their economy.  Another was for other states (like Delaware and Oregon) which are allowed to take lottery-type bets (only Nevada can take single-game bets).

But the third, which is section 3704(a)(3) of PAPSA, specifically allowed the state of New Jersey to license sports wagering in Atlantic City within one year of PAPSA’s enactment.

Obviously, New Jersey decided not to do it then.  But, equally obviously, they want to do it now.

Did New Jersey “drop the ball?”

Draw your own conclusions.

To add one more factor to the erroneous (it says here) irreparable harm finding, how is it that something (sports wagering in New Jersey) which was specifically going to be allowed as legal in 1992, somehow become a basis for irreparable harm in 2014?

Again, it simply makes no sense.

CONCLUSION

The conclusion is legal sports betting is coming to places other than Nevada.  The only question is when, not if.

Indeed, the bigger question is whether Congress will repeal PAPSA and allow any and all states to participate in legal sports gambling.

While New Jersey is not “sponsoring” the legal gambling they want in New Jersey, the benefits to the state are obvious: more tax revenue, the saving and/or revival of thousands of jobs (many already lost) in Atlantic City, the revival of racetracks and the horse industry, which also has thousands of jobs in New Jersey.

It says here that, eventually, the leagues will come on board (presumably if they get a piece of the action).  NBA Commissioner Adam Silver has already essentially said that the NBA would consider it (he knows it’s coming).

Maybe the court(s) should look at the legalization of marijuana in places like Colorado, even though it seems, to some degree, to run afoul of federal law.  New Jersey is trying to do a similar thing (in fact, New Jersey is trying to comply with the law as enunciated by the Third Circuit Court of Appeals in the prior decision on sports gambling in New Jersey).

The legal gambling snowball is rolling.  Eventually, like with the legalization of marijuana, each state will make its own decision as to whether they want to have legal sports gambling or not.

There is no evidence that legal sports gambling, no matter what a federal judge thinks, will lead to more potential fixes.  The heavy hitters would never bet in a state-sponsored gambling casino, because, among other reasons, 1) they wouldn’t want their gambling habits to be made public; and 2) they won’t be able to get credit for large amounts of money that they already get credit for from their bookmakers.

Time to face the realities of the situation.

The future is now.

© Copyright 2014 by Steve Kallas. All rights reserved.

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