Supreme Court to hear arguments over sports-betting ban

Sports Dow Jones Newswires

The race and sports book in the Las Vegas Hilton. (Reuters/Steve Marcus)

A U.S. Supreme Court case next week could dramatically reshape the landscape of American sports betting, with major ramifications for casino operators and European betting shops, as well as professional sports leagues and college athletics. 

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A 25-year-old federal law restricts sports betting to Nevada and three other states, but a challenge to that ban by the state of New Jersey has set the stage for the Supreme Court to decide whether the law is constitutional. If the justices decide the federal ban is an unlawful intrusion on states' rights, such a ruling could open up more of the country to sports wagering. 

European sports books such as William Hill plc and Paddy Power Betfair plc, which already have footholds in the U.S., could stand to gain from a potential expansion. 

Analysts estimate an expanded legal marketplace for the sports betting industry could generate between $7 billion and $15 billion annually in the U.S. That is up from a current $270 million in legal betting and an estimated $3 billion generated in unregulated black markets, including through unlicensed offshore operations in the Caribbean and elsewhere that take wagers online. 

"The illegal market has worked well for the customer," said Geoff Freeman, president and chief executive of the American Gaming Association, which argues that more widely regulated sports betting would represent a new revenue stream for states. "They can access these sites just as easy as they can get an Uber." 

In addition to generating new business for casinos in the U.S., where gambling revenue growth has slowed in recent years, supporters say sports betting could provide a boost for professional leagues in the form of licensing fees for game data and enhanced viewership among fans. 

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Sports leagues, however, historically have been the primary opponents of sports gambling in the U.S. Professional leagues, along with the National Collegiate Athletic Association, lobbied for the 1992 ban at the center of the Supreme Court case after a series of scandals involving college athletes who tilted the outcome of games in exchange for money. 

The NCAA, along with Major League Baseball, the National Hockey League, the National Football League and the National Basketball Association, also sued to stop New Jersey from going forward with state-sanctioned sports betting, and they will argue against the state when the high court hears oral arguments on Monday. 

The case is a classic showdown between states and the federal government. In court filings, the leagues say there's nothing unconstitutional about Congress preventing states from sanctioning sports betting. The Trump administration also will argue in defense of the federal law, known as the Professional and Amateur Sports Protection Act. 

New Jersey argues that Congress improperly forced the states to carry out federal policy that prohibits sports wagering. 

By agreeing to hear the case, the Supreme Court signaled it was interested in considering New Jersey's arguments. 

A group of 18 state attorneys general and three governors filed a brief supporting New Jersey. 

The states said they wouldn't all legalize sports betting if permitted, but that they were concerned about federal intrusions on state sovereignty. 

The Supreme Court's decision is expected by June of 2018. 

As the case has moved through the courts over the past three years, leaders of several professional leagues, including the NBA and MLB, have voiced more support for a wider legalization of sports betting. 

NBA Commissioner Adam Silver has been one of the most outspoken, urging Congress to create a federal system that would allow states to offer regulated sports betting. 

The NBA says it is still fighting the New Jersey case because it doesn't believe the matter should be settled by the courts, which is likely to lead to a state-by-state system if the federal ban is struck down. But the league has been preparing for such a scenario. 

"We've been studying this," said Dan Spillane, the NBA's senior vice president and assistant general counsel, at a sports-betting industry conference in New York in November. "We're ready for whatever happens." 

New Jersey, New York, Mississippi, Pennsylvania and Connecticut already have passed legislation to position themselves for sports betting should the Supreme Court rule in favor of states, and about a half-dozen other states have considered similar measures. Under current law, betting on individual sports contests is legal only in Nevada; Oregon, Montana and Delaware offer more-limited wagering.