U.S. Supreme Court Decision Clears Way for Sports Wagering and Possibly Esports Wagering in Pennsylvania

by McNees Wallace & Nurick LLC

The U.S. Supreme Court has struck down the Professional and Amateur Sports Protection Act of 1992 (PASPA). PASPA specifically prohibited any government or individual from operating, sponsoring or licensing a gambling or wagering scheme. In Murphy v. National Collegiate Athletic Association, the Court considered argument by the NCAA and the four major professional sports leagues that New Jersey’s attempt to deregulate sports betting, resulting in a de facto authorization, violated PASPA. New Jersey asserted that PASPA itself was unconstitutional. In a 6-3 decision, the court agreed with New Jersey, finding PASPA violates the anticommandeering doctrine found in the U.S. Constitution. The anticommandeering doctrine prohibits Congress from issuing direct orders to state legislatures. In this case, the failure of Congress to enact its own sports betting ban, and instead using PASPA to force states to prohibit sports betting, was a constitutional error that could not be fixed.

This decision effectively permits states to regulate legalized sports gambling, unless and until Congress steps in to regulate sports gambling.

What’s next?
In Pennsylvania, Act 42 of 2017 authorized sports wagering in the Commonwealth if PASPA was ever overturned by a federal court decision or repealed by the federal government. Based on this recent decision, there are no legal impediments to sports wagering in Pennsylvania, although the state legislature and the Pennsylvania Gaming Control Board will be faced with several outstanding issues prior to a true roll-out.

Some of those issues include whether the professional leagues will continue their efforts to require states to issue an “integrity fee” – which could be as high as 1% of “handle” or all wagers placed, or equal to 20% of all revenue; whether those leagues will convince states to require sportsbooks to use data officially provided by the league, with a fee or tax associated with providing that data; and whether tax rates and licensing fees are acceptable to the industry. Currently, Pennsylvania imposes a $10 million license fee, and a 34% tax rate.

Additionally, the Board must consider the role of the esports industry in the context of sports betting. While esports, or competitive video gaming, is still a relatively unknown industry, it boasts immense popularity among its followers. It has recently passed the $1 billion revenue threshold. Esports wagering is currently offered on the sportsbooks in Nevada, albeit in limited scope, and has proven surprisingly lucrative. In Pennsylvania, the Pennsylvania esports Coalition is an advocacy group on the forefront of important issues related to esports. The Coalition’s position is that Pennsylvania would reap enormous benefit by adding esports to its sportsbooks. The group stands to serve as a valuable resource for any private or governmental entity to learn about the industry and what it means for esports to be part of the sports wagering conversation. For more information on the Coalition, click here.

Final thoughts:
The Pennsylvania Gaming Control Board has enormous control over this process and will be instrumental in determining where and how sports betting will be conducted in the state, including whether esports wagering will be permitted. Act 42 permits sports wagering at casinos, off track betting sites, and online – as a game provided under the state’s iGaming regulations. The Act does not provide a timeframe. It will ultimately be up to the Board to interpret the sports betting provision of the statute and implement a regulatory scheme. New Jersey will offer sports betting within a few weeks of the Murphy decision. To continue to be a leader in the gaming industry, Pennsylvania would do well to follow within the year.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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