MICHAEL HARDER—In May 2018, the Supreme Court released the highly anticipated decision of Murphy v. NCAA, better known as “the sports gambling case.” Although the Court struck down the Professional and Amateur Sports Protection Act (PASPA), the 1992 federal statute prohibiting the states from authorizing sports gambling, most states have yet to capitalize on the new opportunity of authorizing, regulating, and taxing sports gambling.
Last Spring (2018), UMLR Editor Nick Dilts provided an inclusive pre-decision overview of the parties, procedural history, and relevant arguments of the case. In May, Justice Alito delivered the Court’s opinion, in which the Court held that PASPA’s challenged provisions violated the Constitution’s anticommandeering principle. Therefore, because the unchallenged PASPA provisions were inseverable from the challenged provisions, PASPA was deemed unconstitutional. The Court reasoned that because most states prohibited sports gambling when PASPA was enacted, Congress prohibiting the states from authorizing or licensing sports gambling prevented the states from repealing, partially or entirely, their own state laws; PASPA effectively commanded what the states must do.
As mentioned, most states have yet to take the steps to authorize and regulate a comprehensive sports betting system. Notable among such states is New York. Because Murphy v. NCAA was decided about six weeks before the end of New York’s legislative session, the legislature was pressed for time. If New York wanted to legalize sports gambling, it had two options: authorize sports gambling pursuant to a previously passed statute or draft and pass a new, comprehensive sports gambling law. In 2013, New York passed a statute that outlined a sports gambling framework for the state’s four privately run casinos should PASPA be struck down. However, the New York State Gaming Commission would need to draft and adopt regulations to give the 2013 statute effect. Critics argue that five years after its adoption, the 2013 statute is significantly outdated. For one, the 2013 law requires gamblers to place wagers in person, not allowing mobile or online sports betting. Some estimates cut the state’s revenue in half should the state’s regulations not include a mobile or online betting option. And this is makes sense: if the sports gamblers would have to physically go to one of the four licensed casinos to place their bets, the gamblers could continue to bet in the nearly $150 billion illegal sports betting market that is accessible online (they would also avoid a state tax by continuing to bet illegally). Furthermore, the 2013 law prohibits wagers on college sports, which is a tremendous opportunity for revenue. The FBI estimates that each year over $2.5 billion is wagered solely on the NCAA March Madness Tournament, which lasts only three weeks. State Senate Racing, Gaming and Wagering Committee Chair John Bonacic believes that not allowing mobile or online gambling and limiting betting to professional sports are fatal to the 2013 law’s success.
New York’s second route to sports gambling involves drafting and passing a modern, comprehensive law. Senator Bonacic’s proposed bill authorizes the use of online platforms for sports betting, charges an 8.5% state tax on gross revenue, charges integrity fees, and allows wagers on college sports. While imposing a state tax and authorizing online platforms have not drawn much criticism, and betting on college sports seems virtually necessary from a revenue perspective, the integrity fee provision may prove to be more controversial. Integrity fees are a set percentage of the handle (the total pot of bets) that gets paid to the league upon which the bets were made. The professional sports leagues are currently lobbying for 1% integrity fees. But, because some estimates put any given state’s revenue at 5% of the handle, the integrity fee can turn out to be approximately 20% of the state’s revenue. The leagues’ push for integrity fees has been met with much opposition, asking why exactly do the leagues need a possible 20% of the state’s revenue? The leagues insist that they need to collect the integrity fees to address the increased costs stemming from the legalization of sports gambling, mainly ensuring compliance with laws and managing data. Critics counter that policing the “integrity” of a league is necessary whether the betting is through legal or illegal means. And, as the integrity fee operates like a tax, the customers (gamblers) will incur the increased costs. After all, what better way to keep the illegal sports gambling industry thriving than decreasing the take-home percentage of legal winnings?
New York’s 2018 legislative session ended without Senator Bonacic’s bill making it to the floor for a vote. The Commission could possibly release regulations to effectuate the 2013 law, should Governor Cuomo give the go-ahead. However, with midterm elections around the corner, nothing is likely to happen until at least 2019. Until then, across the bridge and to the internet New Yorkers will go.
