20 Sep 2013

New Jersey Sports betting law held unconstitutional by Third Circuit Court, decision to have impact on model of gambling regulation in India


The United States Third Circuit Court passed a split decision holding that the recently enacted New Jersey Sports Betting Regulation law conflicts with the federal Professional and Amateur Sports Protection Act, 1992 (PASPA) and thus is unconstitutional; puncturing the states’ plan to earn millions of dollars of tax revenue from sports betting. While Judge Vanaskie partly dissented and said that PASPA directed states how to regulate activities traditionally within its domain and hence fell foul of the anti-commandeering prinicple, the majority ruling held that sports betting events would fall within the Commerce Clause (Article 1, Section 8, Clause 3) of the US Constitution and hence Congress was entitled to regulate it.

While the Court agreed that whatever has not been expressly provided to be within the domain of the Congress falls within the ambit of state legislatures, it held that the inter-state commerce clause in the constitution is of wide import and may be used to regulate incidental intra-state commerce, and further that PASPA does not seek to regulate unlimited sports betting having no relation with inter-state commerce as it does not regulate purely local activities. Further, the majority rejected the argument that the Act regulates purely local activities adding that the Act is consistent with the federal policy of protecting the integrity of sporting leagues.

The majority also rejected the argument that the PASPA violates the anti-commandeering principle as it neither gives any directive to the state governments nor compels them to enforce any federal policy, but merely ensures that there is no licensing or regulation policy by the states.

Though the decision comes as a major blow to the New Jersey government and the investors who were keen to start operations (New Jersey Governor Chris Christie has vowed to challenge the decision in the US Supreme Court or before a full bench of the Third Circuit Court first and has already started the political blame game on the subject), the decision is equally relevant in the Indian context where the Central government has washed its hands off all forms of betting regulation (including online sports betting) and there is a growing debate on the need to regulate betting at the federal level. It may be noted that the anti-commandeering principle may not be relevant in India as India is not a purely ‘federal’ nation as opposed to USA, but the commerce clause of the US Constitution is similar to Section 92 of the Australian Constitution and Articles 301-304 of the Indian Constitution (allowing free trade and commerce and authorising Parliament to regulate trade and commerce in public interest), read with Entry 42 of List I (inter-state trade and commerce) of the Seventh Schedule of the Indian constitution. These provisions would authorise the Parliament and Central government as well to regulate various forms of gambling and betting, specially online gambling and betting which has substantial implications on inter-state as well as International trade and commerce.

Indeed, I had argued in another post earlier that the Union Parliament would have the right to regulate various forms of internet gaming and this decision is only going to bolster the demand for federal regulation of online gaming and betting in India.

Note: A copy of the Third Circuit court decision can be accessed here.

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