Millions of people flock to Las Vegas each year to gamble on sports. Las Vegas sees on average $5 billion annually in sports bets. But what if the average Minnesotan didn’t have to travel to Las Vegas to gamble on the next football game? What if it were possible to place a bet within driving distance?
This is the scenario that could face the Legislature as early as next year. Indeed, at least one Minnesota lawmaker, Pat Garofalo, said he intends to introduce a bill in the next legislative session.
“It is time for Minnesota’s sports gambling laws to move out of the cave man era and into the 21st century,” he said.
Worldwide, it is estimated more than $500 billion is exchanged on an annual basis on sports wagers. A substantial amount of this money is spent in unregulated black market exchanges. The primary reason that the black market exists is because sports gambling is illegal in most jurisdictions.
In 1992, Congress mandated that state and local governments ban and control sports gambling through the Professional and Amateur Sports Protection Act (PASPA). PASPA prohibits legislatures from sponsoring, operating, advertising, promoting, licensing, or authorizing sports gambling, and it prohibits individual sports wagers pursuant to state law. Outside of a few grandfathered jurisdictions, namely Nevada, legal sports betting doesn’t exist in the U.S. As a result, many sports bettors are driven to the black market to participate in an unregulated marketplace ripe for corruption and crime.
In 2010, New Jersey was the first to recognize this opportunity and attempted to create a regulatory environment that would allow for sports betting only at horse tracks and casinos. In addition, N.J. regulations would prohibit minors from gambling and would halt anyone from placing a wager on any collegiate program in the state. New Jersey also banned anyone from placing a bet on a sporting event occurring inside the state. New Jersey, however, has faced steep legal opposition from professional sports leagues, including the NFL, NHL, NCAA, MLB and the NCAA.
The sports betting marketplace may soon change. On Dec. 4, the U.S. Supreme Court heard oral arguments in Christie v. National Collegiate Athletic Ass’n. In this case, New Jersey argued that PASPA violates the anti-commandeering principles of the 10th Amendment. Under the anti-commandeering principle, Congress lacks the power to compel states to require or prohibit certain acts which Congress itself may require or prohibit. In response, the sports leagues argue that PASPA is a valid exercise of Congress’ broad powers under the commerce clause.
The implications cannot be overstated. During the hearing, the Supreme Court seemed concerned that Congress was directly controlling state and local legislatures. Instead, the court asked, why couldn’t Congress just outright ban sports betting? The Supreme Court asked the sports leagues whether there was any other federal statute that was similar. The leagues said they were not aware of such a statute.
If the Supreme Court rules in favor of New Jersey, it is likely that PASPA will be ruled unconstitutional. At least 15 states, including Michigan, New York and South Carolina, have introduced or plan to introduce legislation intended to regulate and legalize sports betting.
Minnesota businesses, such as SportsRadar, a sports focused data analytics company, and Canterbury Park Holding Corp., will stand to benefit if the Legislature acts quickly. By regulating sports gambling, the Minnesota Department of Public Safety could ferret out bad actors in the marketplace. It is estimated that potential tax revenue in Minnesota could exceed $100 million. If the Supreme Court rules in favor of New Jersey, the opportunity to expand Minnesota businesses and to create meaningful tax revenue should not be taken lightly.
Aalok Sharma is an attorney in the sports and entertainment business group at Stinson Leonard Street in Minneapolis.