Two New Jersey lawmakers are proposing a fee on sports betting that would go to the professional sports leagues. Atlantic County State Sen. Jim Whelan and Assemblyman Vincent Mazzeo released a letter addressed to NBA commissioner Adam Silver thanking him for his comments that sports betting is inevitable.
In the letter, the two state lawmakers proposed a solution to the issue that legalized sports betting may jeopardize the “integrity of the game,” one of the main sports betting concerns expressed by the NCAA and professional leagues. “While we strongly support the legalization of sports betting in New Jersey and the economic benefits it will bring to Atlantic City, we are cognizant that sports leagues like the NBA need the necessary resources to protect the integrity and fairness of games,” the letter dated September 15 states.
The proposal includes a 0.25% fee on the amount wagered, known as the handle, at New Jersey sportsbooks. These funds would go towards creating a “Game Integrity Department” at league offices, according to the letter. Said department will be tasked with investigating suspicious betting patterns and opponents involved in those contests.
The problem may come with enforcing the regulation. How exactly would the State of New Jersey be able to enforce these proposed fees? Sportsbook operators would have to work on the honor system with sports leagues due to the unusual situation of the repeal of the law prohibiting sports gambling without the concurrent implementation of any broad-based state regulations or licensing. It may be a game of catch-up for some time.
It also may not be the only fee paid on New Jersey sports handles. The Internal Revenue Service has a sports betting excise tax of 0.25% on “any wager authorized under the law of the state in which accepted.” The tax may actually be 2% of all sports wagers in New Jersey as state law does not expressly permit the activity.
A New Jersey sports betting court battle created this scenario.
New Jersey Gov. Chris Christie issued a directive that allows New Jersey racetracks and Atlantic City casinos to offer sports betting. Monmouth Park was the first to announce its launch date. The ambitious racetrack hoped to have sports betting live by September 14. Track officials announced that the goal is now to open by the last weekend in October.
This change of direction is due to a review of Gov. Christie’s order. The legality of this opinion, supported by New Jersey Attorney General John Hoffman, is being considered by a federal judge. A ruling on the case is expected on or around October 17. No other racetracks have announced plans to offer sports betting and Atlantic City casinos have also largely remained silent as to their intentions.
New Jersey lost a federal court battle with five sports leagues and the U.S. Department of Justice when lower courts ruled in favor of the NCAA and professional sports leagues that fought vigorously to uphold federal law that placed a restriction on states allowing sports gambling within their borders (with the exception of a few states grandfathered in for specific types of sports betting in place when the original ban was implemented). The U.S. Supreme Court declined to hear the case.
New Jersey hopes to have found a loophole to begin offering sports betting despite the state losing in court. “This is not the first time Gov. Christie has expanded gambling in New Jersey to help the struggling industry,” said James Peterson at Legal NJ Online Casino.”In 2013 he also signed a bill into law that regulated online poker and casino games in the state.”
The NCAA and professional sports league plaintiffs asserted, in prior litigation, that the Professional and Amateur Sports Protection Act prohibits New Jersey from legalizing sports betting. New Jersey argued that the law is unconstitutional on its face.
One point made by the sports leagues was that nothing was stopping New Jersey from repealing its sports betting laws. According to New Jersey Attorney General Hoffman, the Third Circuit Court of Appeals agreed. That is the path New Jersey is attempting to take with its most recent push to implement a sport wagering scheme within the state.
This move was contrary to Gov. Christie’s actions in August. He vetoed a bill that was essentially the same as his most recent order on the subject. The bill was sponsored by State Senator Ray Lesniak and passed the Senate 38-1. The Assembly approved it 63-6 with two abstentions. The votes made the bill appear to be veto-proof, but not with Gov. Christie making the final decision on whether the bill became law.
Gov. Christie did not like taking this backdoor approach. “Ignoring federal law, rather than working to reform federal standards, is counter to our democratic traditions and inconsistent with the Constitutional values I have sworn to defend and protect,” he wrote in a veto message at the time.
However, it could be easily argued that Gov. Christie’s new action allowing sports betting at racetracks and Atlantic City casinos does just that.
Monmouth Park appears to be the only venue at the moment that is preparing to roll out sports betting. The Meadowlands Racetrack is on the record as not being interested at this stage. The Meadowlands Racetrack’s neighbor is MetLife MET +0.18% Stadium, home to the NFL’s New York Giants and New York Jets.
New Jersey casinos have more on the line than the sanctity and health of the state’s racetracks. If sports betting is spread to resorts within the state and the sports betting scheme is later found to be contrary to federal law it could create problems with gaming commissions in other jurisdictions where they are licensed or hope to be in the future.
There may not be any reason for Atlantic City casinos to take the risk of implementing sports betting systems until the legal status of Gov. Christie’s order is offered additional clarity. Nevada sportsbooks brought in $202.8 million in 2013. That was just 1.8% of Nevada’s entire gaming revenue in 2013. If New Jersey were to match that win total, it would count for about 7% of Atlantic City’s gaming revenue.
The biggest takeaway is that the New Jersey sports betting battle is far from over. The state is determined to have its way, even if that means not taxing sportsbook earnings. However, the implementation of such a fee appears to be gaining significance in the legal and political battle that never seems to end.