On 9 August 2016, a New Jersey Federal Appeals Court ruled that the state of New Jersey was not permitted to enforce a 2014 law that allowed sports betting. Following the ruling, sports betting is once again prohibited in the Garden State.

The ruling of the Federal Appeals Court follows years of legal wrangles regarding sports betting in New Jersey.  This legal battle can be summarised as follows:

  • In 1992, various professional sports leagues successfully lobbied Congress to pass the Professional and Amateur Sports Protection Act (“PASPA”). PASPA barred states that did not already allow sports betting from legally regulating it.  The introduction of this Act meant that regulated sports betting was effectively allowed in Nevada alone.  The many casinos in New Jersey were now missing out on a potentially lucrative market.
  • In 2012, a collection of New Jersey lawmakers launched proceedings seeking a legalisation of sports betting in the state, despite the existence of PASPA. The sports leagues sued in a Federal Court in an attempt to stop them.
  • The Federal Court ruled in favour of the sports leagues but said that, while PASPA was constitutional, there was nothing to stop the state of New Jersey from repealing its state laws against sports betting.
  • In 2014, Governor Chris Christie partially repealed New Jersey’s laws against sports betting. As a result, sports betting was only allowed in casinos and racetracks.  This represented a success for those with vested interests in the industry.
  • Yet this decision was not popular with everyone. It was opposed by associations such as Major League Baseball, the National Basketball Association and the National Football League. The sports leagues therefore sued again, leading to the present decision of the Federal Appeals Court.

In her decision, Circuit Judge Marjorie Rendell stated that the 2014 law violated federal law.  PASPA was therefore reinstated and sports betting was once again outlawed in New Jersey.

Given that sports betting is permitted in many other countries, including the United Kingdom, why is it prohibited in most states in the US?  Put simply, there exist concerns that, if sports betting were permitted, there would be an increased risk of corruption and integrity offences in US sports.

Yet there is also an appreciation that sports betting represents a potentially lucrative market.  By way of example, the UK Gambling Commission has recently released figures demonstrating the extent of regulated gambling in the United Kingdom in the year ended 30 September 2015.  These figures show that the gross gambling yield (i.e. the amount retained by gambling operators after the payment of winnings but before the deduction of operation costs) was £12.6 billion.  Of this amount, £9.518 billion related to sports bets.

In view of the potential sums which could be generated were sports betting to be permitted in New Jersey (and other US states), it will be interesting to see whether the decision of the Federal Court will be appealed.  Clearly, the stakes have never been higher…