NEW YORK (Reuters) - Legalized U.S. sports betting, resisted by professional leagues since they won a federal ban nearly a quarter century ago, could begin spreading around the country if the state of New Jersey prevails in a pending federal court case.
The state may have only one major league franchise bearing its name: the New Jersey Devils NHL hockey team. But with an eroded casino industry and sluggish state economy, New Jersey has been pushing for sports betting for several years and carrying the ball in the legal battle while other states wait and watch.
“A New Jersey win will have immediate, far-reaching implications beyond its borders,” said Daniel Wallach, a Florida sports and gambling attorney who has followed the case closely. “It will prompt swift action by other states.”
A decision is expected any day from the U.S. Court of Appeals for the Third Circuit. Whichever side loses will almost certainly appeal.
The NCAA, NFL, NBA and other leagues sued after New Jersey lawmakers legalized sports betting in 2012. The leagues said that violated a 1992 federal law that banned the activity in all but four states - particularly Nevada - where it was already allowed. Betting also threatens the integrity of sports games by opening the door to price fixing, the leagues argued.
New Jersey lost the case, but it tried again last year with new legislation that attempts an end-run around the federal ban - which prohibits states from authorizing, sponsoring, operating or licensing the practice - by essentially removing state control and deregulating sports wagering at casinos and racetracks.
Those venues would then be free to oversee their own sportsbooks under the latest bill, which the sports leagues also tried to block in court. They won that case as well, and New Jersey appealed.
Other states - especially Pennsylvania and Delaware, which are also in the Third Circuit - might immediately follow New Jersey’s lead if it won and begin pushing for broader sports betting, Wallach said.
If legal sports betting spread, New Jersey could eventually grab about $10 billion of a national market that could be as much as $400 billion, said Dennis Drazin, an advisor to two parties involved in New Jersey’s Monmouth Park Racetrack, where on Aug. 2 American Pharoah won his first race since taking the Triple Crown.
“It would be a huge economic boost to Monmouth Park and New Jersey and Atlantic City casinos,” Drazin said.
The park has already spent $1 million to outfit a sportsbook room through the largest North American sports betting operator, the U.S. subsidiary of Britain’s William Hill PLC.
But New Jersey faces long odds, according to some analysts.
“It’s going to go down in flames,” said Chuck Humphrey, lawyer and author of the website gambling-law-us.com.
Humphrey and others called the leagues “hypocrites” for blocking sports betting while actively investing in fantasy sports companies.
The tide may be turning, however. In a November op-ed in The New York Times, NBA Commissioner Adam Silver urged Congress to adopt a federal framework to allow betting on professional sports, arguing that a state-by-state spread of measures like New Jersey’s would be bad public policy.
“There is an obvious appetite among sports fans for a safe and legal way to wager on professional sporting events,” he wrote.
Globally, the market is at least $1 trillion, 90 percent of it conducted illegally, said Patrick Jay, who oversaw Asia’s largest regulated sportsbook as director of trading at the Hong Kong Jockey Club. It could be as big as $3 trillion, nearly all of it illegal, he estimated.
Americans bet $3.8 billion illegally on this year’s Super Bowl game, compared to approximately $100 million of legal bets on the event annually, according to American Gaming Association estimates.
So far, the NBA is the sole league calling for federal authorization.
“Our long-standing position against the proliferation of gambling on NFL games remains,” NFL spokesman Brian McCarthy said in an email.
The NCAA said in a statement that “the spread of legalized sports wagering is a threat to student-athlete well-being and the integrity of athletic competition.”
Major League Baseball declined to comment. The NHL did not reply to a request for comment.