THE CONSTITUTIONALITY OF FEDERAL SPORTS WAGERING PROHIBITIONS. Gaming Law Policy April 18, 2001 Renée Mancino

Transcription

1 THE CONSTITUTIONALITY OF FEDERAL SPORTS WAGERING PROHIBITIONS Gaming Law Policy April 18, 2001 Renée Mancino

2 TABLE OF CONTENTS I. Federal Sports Wagering Legislation... 1 A. The Professional and Amateur Sports Protection Act of B.... The High School and College Sports Gambling Protection Act and The Student Athlete Protection Act of the 106 th Congress... 1 C. The Student Athlete Protection Act and The Amateur Sports Integrity Act of the 107 th Congress II. Federalism Principles... 4 III. Supreme Court Federalism Case Law... 4 IV. Constitutionality of The High School and College Sports Gambling Protection Act, The Student Athlete Protection Act, and The Amateur Sports Integrity Act V. Conclusion Appendix I... AI-1 Appendix II...AII-1 Endnotes... E-1 i

3 There are four primary problems with sports wagering prohibition legislation. First, Congress does not have the authority under the Commerce Clause to enact a sports wagering prohibition. 1 Second, Congress is attempting to commandeer Nevada s state legislative process. 2 Third, Congress does not have the authority to control the way that states regulate private parties. 3 Fourth, Congress is isolating one state from the political process to handle what it sees as a nationwide problem. 4 All four are unconstitutional exercises of Congress power under Article I Section Eight and the Tenth Amendment of the Constitution. I. Federal Sports Wagering Legislation A. The Professional and Amateur Sports Protection Act of 1992 The state of Nevada has recognized legalized sports wagering within its borders since 1975, the state has strictly regulated them since However, on October 7, 1992 the 102 nd Congress passed the Professional and Amateur Sports Protection Act (PASPA). 6 On October 28, 1992 PASPA was signed into law. 7 PASPA was intended to prevent the spread of sports wagering by prohibiting statesponsored sports wagering. 8 The prohibition extended to states that lacked state legislation for or did not already conduct, a lottery, sweepstakes, or other sports gambling scheme. 9 Nevada, Oregon, Delaware, and Montana were exempted under the applicability provision. 10 This resulted in Nevada continuing to oversee and regulate all forms of sports wagering within its borders as they had since PASPA changed nothing within the state of Nevada and realistically had no application within Nevada. B. The High School and College Sports Gambling Protection Act and The Student Athlete Protection Act of the 106 th Congress In 2000 Congress began an effort to broaden the reach of PASPA to include the states excluded under the 1992 law. 11 Encouraged by the National Collegiate Athletic Association (NCAA), Senator Sam Brownback and Representative Lindsey Graham sponsored this effort in the Senate and the House respectively. 12 The impetus behind the effort was a concern for the impact illegal sports gambling had 1

4 on the integrity of sports, and the affect on college students. 13 In backing this legislation, the NCAA reasoned that allowing legalized college sports betting in Nevada sanctioned the practice, gave access to a valid betting line, and allowed illegal bookmakers to lay off their illegal wagers legitimately. 14 This resulted in more college students comfortable with wagering on college athletics and contributed to the growing national problem of illegal student gambling. 15 Ultimately both Acts died in Congress. 16 C. The Student Athlete Protection Act and The Amateur Sports Integrity Act of the 107 th Congress. In 2001 Congress once again introduced legislation to broaden the reach of the PASPA. On March 20, 2001, a little under two weeks before the NCAA Championship Game was played, Representative Lindsey Graham introduced The Student Athlete Protection Act (SAPA) in the House. 17 The text of the SAPA was identical to what was introduced in the 106 th Congress. 18 On April 5, 2001 two days after Doris Dixon of the NCAA met an aide for Senator John McCain, Senators Enzi, and Brown, Representatives Stupak, and Payne, at the NCAA Championship Game in Minneapolis, Senator John McCain introduced The Amateur Sports Integrity Act. 19 This time upon introduction in the Senate the structure of the bill has changed. Instead of it simply being a sports wagering prohibition, that sports wagering prohibition is added on to a proposal to establish a program that will research and help produce methods to detect performance enhancing drugs in athletes, and for other purposes (emphasis added). 20 The drug program proposal comprises the first part of the bill, Title I, Performance Enhancing Drugs. 21 The other purposes are hidden under Title II, Gambling. 22 That other purpose is a prohibition on amateur, high school, and Olympic wagering. 23 Additionally, instead of amending 28 U.S.C (PASPA) as all three previous proposals have set out, the proposed Title II Gambling section would amend 36 U.S.C by simply adding the proposed verbiage as a subchapter to the end of that chapter and invalidating PASPA by reference. 24 2

5 In Congress, the same principles underlie all three pieces of legislation. 25 Congress main basis for the legislation was the National Gambling Impact Study Commission Final Report (NGISC), which found that regulation of gambling was a challenge, and college students as well as athletes showed an increase in illegal gambling. 26 Further, Congress held that although Nevada strictly regulates sports gambling there has still been a connection from illegal wagering to Nevada Sports Books. 27 However, one article Congress cites in support of its position that illegal wagering is helped by Nevada in spite of regulation starts out quite differently. 28 Gambling is a system so impossible to beat that a former star athlete at the University of Notre Dame said Tuesday night that he couldn't beat it even though he was able to rig games. 29 Additionally, all involved in the gambling schemes cited in the article were caught, arrested, and served time in federal prison. 30 In considering this legislation however there was no emphasis placed on what this type of legislation would do to the state of Nevada. The only reference in the House s main report was that the benefit of Nevada Sports Books was far outweighed by the burden to society. 31 Also, that sports wagering did not contribute to local economies or produce many jobs, and unlike casinos or destination resorts, sports wagering did not create other economic sectors. 32 In reality Nevada would be the only state affected directly. The Congressional Budget Office s implementation analysis for the costs underlying the 2000 Legislation cited them as only significant within the State of Nevada. 33 Specifically, CBO estimates that implementing H.R would have no significant effect on the federal budget. 34 Further, because Nevada is the only state that allows betting on amateur sports, the report stated that Nevada would lose $2 million in revenue per year, or about $40 million annually in net income. 35 In conclusion Congress stated their authority for the legislation under Article I 8 of the Constitution. 36 3

6 II. Federalism Principles The Constitution sets out a system of dual sovereignty. 37 In Article I 8 the Constitution places limits on the federal government, specifically Congress, by bestowing specific powers to them. 38 Under the Tenth Amendment, "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." 39 This system allocates power among the sovereigns, precisely so that we may resist the temptation to concentrate power in one location as an expedient solution to the crisis of the day. 40 The ability to provide a check on federal power is one of the principal benefits of a system of dual sovereignty. 41 Additionally, the Constitution holds that Congress shall be bound by Oath of Affirmation to support the Constitution. 42 To be bound by this provision in the Constitution, Congress must make a determination of the constitutionality of a bill. That is a plain language interpretation of the Constitution. However, the Supreme Court has the ultimate authority in determining the constitutionality of a statute. 43 In Cooper the Court held that, This decision declared the basic principle that the federal judiciary is supreme in the exposition of the law of the Constitution, and that principle has ever since been respected by this Court and the Country as a permanent and indispensable feature of our constitutional system." 44 Because the Supreme Court is "supreme in the exposition of the law," its interpretations of the Constitution become, according to Cooper, "the supreme law of the land." 45 This principle is furthered by the Court s view in Boerne v. Flores that congressional interpretations made by Congress that are opposite from the Supreme Court s holdings are not controlling. 46 III. Supreme Court Federalism Case Law The Supreme Court has strengthened and supported plain meaning federalism principles throughout the last thirteen years in various different decisions. 47 Some of the cases were strictly Tenth Amendment cases and have been handled as such. 48 Other cases were handled under the 4

7 commerce clause, as a preemption case, or under the supremacy clause to circumvent the state s rights issues. 49 Therefore, the Court s constitutional analysis of Congressional legislation will focus on whether Congress has been expressly granted the power to legislate under the Article I enumerated powers, or whether the state retains that power under the Tenth Amendment. 50 If the Court s analysis finds support for the legislation under the enumerated powers they will avoid the state s rights issue. 51 Under the current disposition of the Court, if they reach the Tenth Amendment analysis, the latest case holdings support three main propositions. Congress does not have the authority to control the way that states regulate private parties, they cannot undermine a states power as a sovereign, 52 and non-generally applicable legislation cannot isolate one state denying them protection from the political process. 53 Therefore, legislation that falls into any of these categories will upset the balance of power between the sovereigns and will be declared unconstitutional. Traditionally, the Court did not give much credence to the Tenth Amendment and federalism principles. 54 Modernly National League of Cities v. Usery laid the foundation for decisions that have expanded upon and supported these federalism principles. 55 In National League of Cities, by a five-to-four decision, the Court reaffirmed federalism as a check on Congress commerce power. 56 At issue in National League were 1974 amendments to the Fair Labor Standards Act (FLSA). 57 Initially when the FLSA was enacted in 1938 employers were required to pay minimum wages and time and a half over 40 hours of work per week. 58 States were excluded from the minimum wage and maximum hour provisions. 59 Shortly after being enacted the FLSA survived a constitutional challenge by a lumber manufacturer under the Tenth Amendment in United States v. Darby. 60 In 1966 additional FLSA amendments removed the exemption for state hospitals, schools, and institutions, which again led to a challenge, this time by the state of Maryland. 61 In response to Maryland s 5

8 challenge, the Court found that the Act fell under the commerce clause and the amendments were constitutional. 62 In 1974 FLSA amendments extended yet again the minimum wage and maximum hour provisions, this time to almost all state employees. 63 In response to these amendments, in National League of Cities, the Court departed from the Darby and Wirtz decisions, invalidating the provisions because the Constitution prohibited direct regulation by the federal government. 64 As the dissent in Wirtz had previously argued for, the case was finally handled as a Tenth Amendment case. 65 The National League of Cities Court viewed the Tenth Amendment as a reflection of federalism under the structure of the Constitution, as such the states are an integral part of the structure of the Constitution and they were immune from direct regulation by the federal government. 66 The victory for states rights in National League of Cities was short lived thanks to Garcia v. Metropolitan Transit Authority, and once again the vehicle for dissolution was the FLSA and the commerce clause. 67 Nevertheless, the basis for the Garcia lawsuit arose out of the decision in National League of Cities. 68 The test set out in National League of Cities held that the commerce clause did not grant Congress the power to regulate "in areas of traditional governmental functions." 69 As a result of this test, the San Antonio Mass Transit authority decided that as a municipal mass transit system they were exempt from the FLSA minimum wage and maximum hourly provisions because operation of mass transit was a traditional government function and immune from federal regulation. 70 The Court decided that the San Antonio Metropolitan Transit Authority was not immune from the minimum wage and maximum hour provisions in the FLSA under the Tenth Amendment. 71 In making their decision, the Garcia Court overruled the test set out by the National League of Cities Court for two main reasons. First, because this Court itself has made little headway in defining the 6

9 scope of the governmental functions deemed protected under National League of Cities. 72 Second, because the test violated traditional notions of federalism. 73 Ultimately, the Court said to protect federalism that the states had to protect the concept of federalism through the political process, not the judicial process. 74 Because Congress was made up of state representatives they could exert influence over Congress and protect themselves directly through their representatives. Soon after Garcia was decided another Tenth Amendment case came before the Court South Carolina v. Baker, which challenged the Court s holding in Garcia. 75 Congress was concerned with tax evasion and enacted 310 (b)(1) of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) removed the federal income tax exemption from interest earned on publicly traded, long-term bonds issued by state, local, and private issuers unless the bonds were issued as registered instead of as bearer bonds. 77 The main basis for the provision was because unregistered bonds left no paper trail and that encouraged tax evasion. 78 Therefore, Congress enacted 310 (b)(1) to encourage compliance with the tax laws, which would reduce the federal deficit. 79 In analyzing the case the Court treated 310 (b)(1) as though TEFRA was generally applicable, because it applied both to the states and private entities. 80 Additionally, although there was no prohibition on selling non-exempt bearer bonds, the Court treated the provision as though it did. 81 In light of the Garcia decision, South Carolina initially argued that the political process was flawed because Congress did not rely on concrete evidence that purchasers of bearer bonds were evading taxes. 82 Instead, they relied on anecdotal evidence that the income was being concealed. 83 As a result, Congress was uniformed and the resulting Congressional vote was flawed. 84 South Carolina also argued that 310 (b)(1) was flawed because it forced the states to enact state legislation authorizing and regulating the bond registration process. 85 7

10 In response to South Carolina s initial argument the Court held that extraordinary defects in the process could render congressional regulations invalid under the Tenth Amendment. 86 However, they had never identified the defects and were not going to do so in this case. 87 Further, the Court refused to second guess the substantive basis for congressional legislation. 88 Ultimately, they dismissed the argument. However, upon dismissing the argument they did note that South Carolina was not deprived of the right to participate in the political process because they never argued that it [South Carolina] was singled out in a way that left it politically isolated and powerless. 89 Therefore, it seemed as though these would be valid arguments for the political process having extraordinary defects adequate enough to defeat the legislation. The Court also denied South Carolina s second argument, that enacting new legislation and implementation of the new bond system would be commandeering the state administrative and legislative processes. 90 In refusing the second argument the Court held that this case was not like FERC v. Mississippi, which South Carolina relied on. 91 To decide otherwise, [W]ould not only render Garcia a nullity, but would also restrict congressional regulation of state activities even more tightly than it was restricted under the now overruled National League of Cities line of cases. 92 The Court set forth two reasons for refusing South Carolina s second argument. First, 310 (b)(1) was not the same as the statute in FERC. 93 In FERC, the legislation did not just compel the states to enact a federal regulatory scheme. 94 Instead the FERC legislation required states to adjudicate federal issues, and in a preemptible field choose between regulating under federal standards or following federal procedures. 95 Second, the Court dismissed without a Tenth Amendment analysis, because the Court held that this process was an inevitable consequence with any federal legislation. 96 Therefore, the Court found 310(b)(1) did not commandeer these state processes because it did not 8

11 control how the states regulate private parties. 97 Instead, it directly regulated a state activity within a preemptible field and as a result was constitutional. Of note in South Carolina, Chief Justice Rehnquist concurred in the judgment but disagreed with the doubt that the court has placed on the protective scope of the Tenth Amendment. 98 Additionally, Justice O Connor in the dissent was deeply disturbed by the Court s dependence on the rise and fall of legal doctrine, as well as failing to look into the substantial effects the legislation would have on the state and local bonds. 99 Contrary to the Court s refusal of both arguments advanced by South Carolina, in the next case concerning the Tenth Amendment, New York v. United States, the Court held that Congress did not have the authority to control the way that states regulate private parties. 100 This would be treating the states as administrative agents of the federal government or commandeering them into federal service. 101 Which in turn would be a threat to state sovereignty and unconstitutional. Congress passed the Low-level Radioactive Waste Policy Amendments Act of The Act was intended to help alleviate the radioactive waste disposal problem. 103 In response to the Act, New York filed for a declaratory judgment arguing that the Act s three provisions violated the Tenth Amendment. Initially the Court pointed out that the Tenth Amendment cases, Usery, Garcia, and Baker were all distinguishable from New York because they concerned laws of general applicability. 104 Contrary, [t]his litigation instead concerns the circumstances under which Congress may use the States as implements of regulation; that is, whether Congress may direct or otherwise motivate the States to regulate in a particular field or a particular way. 105 The Court concluded that the first two parts of the Act, the monetary and the access provisions were constitutional. 106 The take title provision was unconstitutional under the Tenth Amendment

12 The Court held that with the take title provision, Congress has crossed the line distinguishing encouragement from coercion. 108 Also, mandating possession and acceptance of liability for any damages from the waste generators was unconstitutional. 109 Further, [a] choice between two unconstitutionally coercive regulatory techniques is no choice at all. 110 Finally, [t]he take title provision appears to be unique. No other federal statute has been cited which offers a state government no option other than that of implementing legislation enacted by Congress. 111 As a result of New York v. United States, what Congress can do is handled two ways. First, under the spending power attach conditions on receipt of federal funds. Second, engage in cooperative federalism, only where Congress has the power under the commerce clause, to allow the states to choose between regulating that activity according to federal regulations or having the state law preempted by federal regulation. 112 Therefore, New York did not overrule Garcia. Under Garcia Congress can directly regulate the states, and mandate wages and hours of state employees. Under New York Congress cannot use the states as an administrative arm for implementing federal regulatory policy. Therefore, Congress can require states to pay their employees a certain minimum wage but they cannot order the states to have their employees forced to perform federally mandated functions. Congress may entice states to voluntarily join a federal regulatory program but they cannot force them to do so. The distinction between these two cases being enticement or direct coercion. With New York and Garcia the Court has shaped the limits of power Congress has over the states. Three years later Congressional power was further defined in United States v. Lopez to include a prohibition on federal regulations of a private activity that displaces state and local regulations. 113 Although the majority did not view this as a Tenth Amendment case, the concurrence by Justices Kennedy and O Connor saw things differently

13 Lopez was convicted of carrying a concealed handgun and bullets within a school zone in violation of the Gun Free School Zones Act. 115 The Court struck down the statute, which said it was a federal crime to possess a firearm within 1000 feet of a school. 116 The Court used two tests which both must be present to strike down legislation under the commerce clause: If the economic activity substantially affects interstate commerce, legislation regulating that activity would be sustained. 117 Economic activity means; an activity that can be characterized as economic, or regulating the activity must be properly characterized as economic in nature. 118 If the economic activity can be fairly regulated as economic, then in order to fall within the commerce power it must also have a substantial relation to interstate commerce, or it must substantially affect interstate commerce. 119 Using these arguments the court concluded that gun possession is not economic and could not be thought of as part of a larger regulatory scheme. 120 Also schools were not commercial in contributing to the economic well being of the nation. 121 Therefore, the Court invalidated the federal legislation because it regulated private parties displacing state and local regulations without a substantial relation to interstate commerce. Following Lopez, the Court held that Congress does not have the authority to control the way states regulate private parties because it is a threat to state sovereignty. In Printz v. United States the Court struck down an interim provision of the Brady Handgun Violence Prevention Act. 122 This provision required state law enforcement officers (mostly local sheriffs) to do background checks for potential handgun purchasers for the federally enacted regulatory scheme. 123 In distinguishing this case from New York v. United States, the Court did not find any of the arguments advanced by the United States to be persuasive. 124 First, the law enforcement officers did not have to make policy. 125 Second, requiring the local officers to perform federal tasks did not 11

14 reduce their accountability. 126 Third, the interim provisions were addressed to law enforcement officers, while the take title provision in New York was directed to the state itself. 127 The Printz Court expanded the New York holding to prohibit state executive commandeering. 128 Given that the Court held in New York that Congress could not compel the states to enact or administer a federal regulatory program. 129 This was a way for the Court to maintain continuity between Printz and New York v. United States. As a result, the Printz decision was a powerful force behind further strengthening the federalism principles embodied in the Tenth Amendment. As the Court has reached Tenth Amendment decisions they have repeatedly reinforced the Tenth Amendment and sovereignty principles. Under New York v. United States the Court held that Congress could not compel the states to enact or administer a federal regulatory program. 130 In United States v. Lopez the Court required that the activity be economic and have a substantial relation to interstate commerce for legislation to be able to reach private parties and displace state and local regulations. 131 In Printz v. United States the Court reinforced the principle from New York v. United States prohibiting the federal government from forcing the states to enact or administer a federal regulatory program. 132 In addition, Printz further refined the Tenth Amendment boundaries by holding that Congress cannot commandeer the states executive power in the absence of a particular constitutional provision granting them the power to do so. 133 Therefore, the Court defined the restrictions on Congress over people in Lopez, and restrictions on Congress over the states are reflected in New York and Printz. Modernly, Reno v. Condon outlines the limits of the Tenth Amendment. 134 On the one hand Congress can regulate states in their own activities, as was seen in the South Carolina decision. On the other hand, Congress does not have the authority to control states when they are acting within their sovereign capacities, regulating private parties, their own citizens, as was seen in Printz, Lopez, and 12

15 New York. Further, if the political process is flawed then the legislation is overreaching. 135 However, instead of painting a clear picture of the federalism principles already embodied in New York, Printz, Lopez, and Garcia, the Court instead muddied the waters and found ways around their prior holdings. 136 Therefore, although the Court did not solidify their federalism holdings in stone, they also did not overrule any of them either. They merely distinguished and clarified their position. In Reno v. Condon the statute in dispute was the Driver's Privacy Protection Act of 1994 (DPPA). 137 The DPPA restricted States Department of Motor Vehicles (DMV) from selling or disclosing an individual s personal information obtained in the driver licensing and vehicle registration process. 138 Because the DPPA conflicted with South Carolina law they challenged the constitutionality of the DPPA, alleging Tenth and Eleventh Amendment violations. To remove the case from the New York and Printz federalism holdings the Court found that the DPPA was generally applicable. 139 Their reasoning was that the DMV sold the information and once purchased, that information was used by and relied upon throughout interstate commerce. 140 Therefore, to bring the case within the South Carolina v. Baker holding they found that the information sold is an article of commerce and as such the DPPA applies equally to the states and private parties. 141 Once they found the DPPA to be within Congressional commerce power they addressed the federalism principles. 142 The Court outlined their New York and Printz decisions and distinguished the case before them from those holdings. 143 In New York, the Court held that Congress commandeered the state legislative process by requiring a state legislature to enact a particular kind of law. 144 This prohibited Congress from forcing a federal regulatory program on the states. 145 Printz prohibited Congress from forcing state and local enforcement officers to conduct background checks on prospective handgun purchasers

16 Therefore, this case was different because Printz and New York were cases where the federal statute was seeking to control or influence the manner in which States regulate private parties. 147 Therefore, as in South Carolina, to comply with federal standards, it is often necessary for States to take administrative and legislative action to further the activity. 148 As the Court held in South Carolina, that is constitutional. Based on this analysis the Court concludes that the DPPA provisions are constitutional under the Commerce Clause, and not a violation of the Tenth Amendment. IV. Constitutionality of The High School and College Sports Gambling Protection Act, The Student Athlete Protection Act, and The Amateur Sports Integrity Act In light of the Supreme Court s case holdings it is difficult to see how Congress could use the Commerce Clause or the Tenth Amendment to justify their authority for the sports wagering prohibition legislation. 149 From the Supreme Court federalism cases two distinct lines from within the jurisprudence arise. The National League of Cities, New York, Printz, and Lopez rules, which prohibit Congress from directly forcing states to enact legislation by commandeering their executive powers and prohibits usurping a states powers as a sovereign. The South Carolina, Garcia, and Reno rule, which, prohibits non-generally applicable legislation or an extraordinary defect in the political process. No matter which line of cases the Court follows, both lines result in holdings that nullify Congress authority for sports wagering prohibitions both under the Commerce Clause and the Tenth Amendment. Congress is prohibited from forcing regulations on states that commandeer its executive power or its power as a sovereign. In National League of Cities the Court prohibited direct state regulation by the federal government in areas of traditional government function under the Tenth Amendment. 150 New York v. United States held that Congress did not have the authority to control the way states regulate private parties by enacting a federal regulatory program. 151 This would be commandeering the states into federal service, which crosses the line into coercion, and is a threat to state sovereignty. 14

17 152 After New York, what Congress can do is entice the states to regulate using federal funds Congress can not use the states as a regulatory arm to implement federal regulatory policy. United States v. Lopez expanded the New York decision by prohibiting federal regulation of private activities that displace state and local regulations under the commerce clause unless the activity itself was an economic activity or substantially affected interstate commerce. 153 In Printz v. United States the Court further narrowed Congress power over the states. 154 The Printz Court refused to allow Congress to pass legislation that commandeered the state s executive activity by striking down a provision that required local sheriffs to do background checks for the Gun Control Act of Congress is prohibited from enacting legislation that is not generally applicable and will not enable a state to protect itself through the political process. Garcia v. Metropolitan Transit Authority overruled the traditional government function test and instead held that the states could protect federalism through the political process, not the judicial process. 156 South Carolina v. Baker challenged Garcia by holding that only extraordinary defects in the process could lead to Congress overstepping its authority under the Tenth Amendment with generally applicable legislation. 157 An extraordinary defect could be political isolation, leaving one state completely powerless to use the political process, which in turn would only leave the judicial process as a remedy. 158 In Reno v. Condon the Court aligned the case with South Carolina v. Baker, and Lopez, as opposed to New York, and Printz. 159 The Court found that the legislation was generally applicable and the information sold by the DMV s was an economic article of commerce. 160 Further, unlike New York they were not commandeering the state legislative processes requiring the states to enact a particular kind of law, and unlike Printz they were not trying to influence the way states regulate private parties. 161 As a result the legislation in Reno v. Condon was constitutional under the commerce clause

18 In light of the case law the first question is whether legalized sports wagering can be considered an item of interstate commerce. According to the holding in Lopez for Congress to have the power to regulate under the commerce clause the activity must be economic or economic in nature and that economic activity must have a substantial connection to interstate commerce. There can be no dispute that sports wagering is an economic endeavor within the state of Nevada. There can also be no dispute that sports wagering is not a legal economic endeavor in any other state. 163 Sports wagering is an industry whereby money is wagered against a proposition for a chance to make more money. A patron in Nevada can walk into any of the heavily regulated and policed sports wagering locations and place a wager on sporting events. Therefore, like Lopez sports wagering is economic but unlike Lopez the economic activity cannot be thought of as part of a larger regulatory scheme because the sole participant in this system is the state of Nevada and the private operators of Nevada s sports books. The second test from Lopez is whether that economic activity has a substantial connection to interstate commerce. While it is true that sports wagering is legal within the state of Nevada, sports wagering is not legal in most other states within the United States. As a result how is it possible that legal sports wagering that occurs entirely within the borders of the state of Nevada can have a substantial connection to interstate commerce? The supporters of the sports wagering prohibition would like to make that substantial connection with a few different arguments. First, the betting line is made public, both in print media like major newspapers and on the Internet. 164 This results in the information moving in interstate commerce. Second, legal wagering facilitates illegal wagering by giving the illegal bookmakers a legitimate place to balance their books. 165 This results in money flowing through interstate commerce from states where sports wagering is illegal to Nevada. Further, having one state with legalized sports 16

19 wagering sends a message to residents in states where sports wagering is illegal that sports wagering is a legitimate endeavor and that is not the image college sports industry executives want portrayed throughout the nation. 166 The college betting prohibition backers instead want wagering made illegal to dispel that view so college sports can retain its wholesome and all-american image. 167 None of these arguments are sufficient to make the necessary substantial connection to interstate commerce. If the legislation passed, the Newspaper Association of America s CEO has said that major news publications like USA Today that publish the line, would not stop publication of the betting line. 168 The reasoning being that point spreads are useful, to newspaper readers who have no intention of betting on games. 169 Also significant is the fact that the wagering lines are available on the Internet for free. 170 Further, it would be difficult for Congress to prohibit Internet sites inside the United States from posting betting lines, let alone reach locations outside its jurisdiction. Therefore, unlike the public information that was sold throughout interstate commerce in South Carolina, this information is freely available on mediums that are protected under the First Amendment. Therefore, how can they be classified as items of commerce with a substantial connection to interstate commerce? There is nothing commercial about free news being circulated through a free medium like the Internet. There is really no realistic possibility that illegal bookmakers are laying off in Nevada legally to balance their operations thereby precluding another possible substantial connection to interstate commerce. The theory underlying laying off is to balance your risk. For example, if a bookmaker has taken $4,000 in wagers on the Cleveland Browns at 7 points, and only $500 on the Pittsburgh Steelers at + 7 points, theoretically a bookmaker could balance their book in two ways. One way is to move their in-house point spread to entice individuals to bet on the Pittsburgh Steelers, in this case the line could be moved to If moving the betting line fails to encourage in-house betting on the Steelers they could lay-off their excess Browns wagers with other bookmakers. This means they 17

20 would take a portion or all of the $3,500 difference and bet that on the Browns with other bookmakers that might have more betting action on the Steelers. This would result in revenue being moved from one location to another to balance their risk of loss on the Browns. In 1999 the combined total for all sports wagering in Nevada was $2.3 billion. 171 In contrast illegal wagering was responsible for $80 to $380 billion for that same year. 172 Consequently, based on the theory underlying laying-off, how much could the illegal operations possibly be laying-off in Nevada? At the low-end illegal wagers constituted thirty-four times the total amount wagered in the whole state of Nevada, at the high end it resulted in one hundred and sixty five times as much. If the ratio can go from 34:1 all the way to 165:1 there is absolutely no way the illegal books could be laying off their wagers in Nevada. The figures do not justify the proposition, especially when wagers by patrons at casinos within Nevada must be accounted for within the $2.3 billion total. Contrary, it is more likely that the opposite is true. That is that the illegal bookmakers are laying-off amongst themselves, which is why the unregulated totals wagered could be as high as $380 billion. That would make more sense because the higher end is roughly four times and the low end which would realistically put the actual figure somewhere between. Using this reasoning it is more likely than not that illegal wagers are not crossing state lines into Nevada. Which would also reinforce the proposition that illegal wagering is the problem to be remedied by any legislation, not the legal sports wagering conducted within Nevada. The final argument for the substantial commerce clause connection is the weakest. That abolition of legalized sports wagering will legitimize college sports, help to curtail illegal wagering, and resurrect a clean-cut, wholesome image to sports. This is simply not the way that prohibitions affect individuals. As with the prohibition of alcohol, which the nation thought would curtail drinking, the sports wagering prohibition is a flawed solution. 173 Initially prohibition was handled with laws against the sale and production of alcohol. 174 However, these laws did not work as expected and as a 18

21 result the laws were toughened and police enforcement was increased. 175 As a result of tougher laws there was an increase in violence, corruption, crime, and there was a general disregard for the government and the law without a significant decrease in alcohol consumption. 176 In addition, under a prohibition it is commonplace for people to want, even to a greater degree, what is prohibited. Prohibitions increase the allure. If anything this will only worsen the illegal wagering problem throughout the country and if the legislation is successful, all of the previously legal wagers from Nevada can be added to the illegal total nationwide. Therefore, although sports wagering can be classified as economic, without a substantial connection to interstate commerce Congressional authority is improper under the Commerce Clause and United States v. Lopez. Once the activity does not have a substantial connection to interstate commerce, the Court s analysis cannot proceed to the Tenth Amendment issue because Congress has asserted the Commerce Clause as their basis for the legislation. 177 However, for completeness, the Tenth Amendment principles in light of the Supreme Court case holdings already outlined will be examined. There are three basic theories in the Tenth Amendment case holdings. The Court will reject direct commandeering of a state s executive powers or their powers as a sovereign. 178 The Court will also protect states that cannot protect themselves with the political process and from generally applicable laws. 179 The sports wagering prohibition is an attempt by Congress to treat the state of Nevada as an administrative agent of the federal government and that is unconstitutional. 180 The sports wagering prohibition is akin to the take title provision that was declared unconstitutional in New York. In New York Congress attempted to force the states to take title to nuclear waste and accept liability for failing to do so. In this case Congress is forcing the state of Nevada to erase legislation that has been 19

22 in effect for more than fifteen years with no alternate choice. Congress is not enticing the state to comply, or giving them the choice of regulating the industry within acceptable guidelines. Nevada does not operate sports betting operations directly, the state regulates private entities that operate sports wagering operations. Congress is forcing the states to directly prohibit sports wagering operators from taking bets. There is no choice, which is an even greater burden than Congress attempted in New York. In New York the states had a choice between two coercive regulatory actions, in this case the state of Nevada has no choice. Congress legislates that Nevada directly prohibit private parties operating legally within its borders with no other alternate choice at all and that is unconstitutional. Along those same lines, Congress cannot force Nevada to federally regulate the privately operated sports books, specifically if that prohibition displaces state and local regulations. 181 Under Lopez, as already outlined, unless the activity in question is economic, and unless there is a substantial connection to interstate commerce there can be no authority under the Commerce Clause to enact the legislation. Unlike Lopez, sports wagering is an economic endeavor. However, like Lopez, there is no substantial connection to interstate commerce. Like Lopez and Printz the sports wagering prohibition would apply to private parties, which are currently regulated by the state of Nevada. Also, like Printz, the proposed sports wagering prohibition would force Nevada to enact or administer a federal regulatory program displacing a complex state system already in place. Congress has determined that there is a large illegal gambling problem throughout the United States. To solve nationwide problems Congress legislates with federal regulations. In order to eliminate the illegal sports wagering problem throughout the United States, Congress is trying to federally regulate by prohibiting that conduct within the state of Nevada. This proposition is unconstitutional because that is forcing Nevada to enact and enforce a federal regulatory program at great state expense and for the benefit of the entire country. 20

23 Under the second line of Supreme Court cases the sports wagering prohibition must still fail under the Tenth Amendment. Congress cannot enact legislation that is the result of a flawed political process and that legislation must be generally applicable. 182 This reasoning comes from the Garcia, South Carolina, and Reno Court holdings. The Garcia Court held that the states must protect themselves through the political process. South Carolina aligned with Garcia but restricted the test to extraordinary defects in the process. They further noted that South Carolina was not isolated or singled out politically. The Reno Court aligned itself with the South Carolina case but did not reach an analysis from the political defect standpoint because they found that the state owned DMV databases and selling that information were economic items in interstate commerce. However, the sports wagering prohibition is unlike Garcia, South Carolina, and Reno for two main reasons. First, in Garcia, The San Antonio Metropolitan Transit Authority was a publicly owned mass transit system that regularly received federal funding, in South Carolina the issue was over state issued bonds that were being used to circumvent federal tax laws, which encouraged federal tax evasion and contributed to the national debt, and Reno concerned state DMV database information which although it was private information, it was gathered by the state and used for various state and federal processes and sold in interstate commerce. Sports wagering in Nevada is regulated by the state and operated by private individuals within those guidelines. The sports wagering industry does not receive federal funds like the San Antonio Metropolitan Transit authority does and the industry does not affect a federally mandated, nationwide regulatory scheme like the federal taxation system. The industry is a private industry with private operators within the state of Nevada being regulated by the state of Nevada. Therefore, when Congress legislates for a prohibition against this activity it is not generally applicable legislation. It does not apply equally to the states as states and to private 21

24 individuals instead it forces the states to regulate their private individuals in a certain way and that is unconstitutional. The second proposition introduced in Garcia and reinforced by the other two Courts is political isolation. Unlike both Garcia and South Carolina, Nevada is politically isolated. It is true that four states were ignored with PASPA, however, only Oregon with its Sports Action lottery for pro football actively allows any sports wagering at all. Additionally, because their lottery is based on a professional sport it would not even be affected by the proposed legislation. Therefore, Nevada is alone, isolated in the fight against saving their legal sports wagering industry to defeat the illegal effects seen throughout the country. No other state has a stake in fighting the legislation. The problem is not the legalized sports wagering within Nevada. The problem is the illegal sports wagering outside the state. So Nevada stands alone and isolated in the fight against the rest of the country to protect an industry that provides a significant revenue source to the state in terms of jobs, subsidiary industries, and wagering monies. Nevada v. the rest of the country in the political process, those odds are even insurmountable for Las Vegas gamblers. V. Conclusion The United States Constitution sets out a system of dual sovereignty under Article I 8 and the Tenth Amendment. If the power is specifically enumerated within Article I 8 then Congress has the authority to legislate. If the power is not found in Article I 8 then the legislation must fail because it is outside the scope of Congress power. If that power is outside of Article I 8 then that power is reserved for the states under the Tenth Amendment. Article I 8 does not grant Congress the power to regulate a legal, state policed, and regulated sports wagering industry conducted entirely within the borders of the state of Nevada. This power is reserved to the states under the Tenth Amendment. 22

25 Power for sports wagering prohibitions cannot be derived from the commerce clause even though sports wagering can be characterized as economic. In order for the commerce clause to enable Congress to legislate the activity must be economic and there must be a substantial connection to interstate commerce. Without the substantial connection to interstate commerce something that is merely economic is not governed by the commerce clause. Further support against sports wagering prohibitions are found in the plain meaning federalism principles embodied throughout the last decade by the Supreme Court. The Supreme Court case holdings set out two main lines of reasoning, both of which forbid sports prohibition legislation under the Tenth Amendment. First, the National League of Cities, New York, Printz, and Lopez rules, which prohibit Congress from directly forcing states to enact legislation by commandeering their executive powers or intruding upon their powers as a sovereign. Second, the South Carolina, Garcia, and Reno rules, which prohibit Congress from enacting non-generally applicable legislation or an extraordinary defect in the political process. Under both lines of reasoning, as has been outlined the sports wagering prohibition will fail. Therefore, the unconstitutionality of congressional sports wagering legislation is clear. It does not literally fall within the specifically enumerated powers granted to Congress under the Constitution, therefore it is a power that belongs rightly to the states under the Tenth Amendment. Consequently, if this issue were brought before the United States Supreme Court the current tenor of their Tenth Amendment case holdings would support a decision in favor of the state of Nevada. 23

26 Appendix I Underlined text are additions, strikeout text are deletions in existing (a) CHAPTER 178. PROFESSIONAL AND AMATEUR SPORTS PROTECTION 28 USCS Applicability Section Except as provided in subsection (c), section; 3702 shall not apply to (1) a lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or other governmental entity at any time during the period beginning January 1, 1976, and ending August 31, 1990; (2) a lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity where both (A) such scheme was authorized by a statute as in effect on October 2, 1991; and (B) a scheme described in section 3702 (other than one based on parimutuel animal racing or jai-alai games) actually was conducted in that State or other governmental entity at any time during the period beginning September 1, 1989, and ending October 2, 1991, pursuant to the law of that State or other governmental entity; (3) a betting, gambling, or wagering scheme, other than a lottery described in paragraph (1), conducted exclusively in casinos located in a municipality, but only to the extent that (A) such scheme or a similar scheme was authorized, not later than one year after the effective date of this chapter [effective Jan. 1, 1993], to be operated in that municipality; and (B) any commercial casino gaming scheme was in operation in such municipality throughout the 10-year period ending on such effective date pursuant to a comprehensive system of State regulation authorized by that State's constitution and applicable solely to such municipality; or (4) parimutuel animal racing or jai-alai games. (b) Except as provided in subsection (a), section 3702 shall apply on lands described in section 4(4) of the Indian Gaming Regulatory Act (25 U.S.C. 2703(4)). (c)(1) Section 3702 shall apply to a lottery, sweepstakes, or other betting, gambling, or wagering scheme based directly, or indirectly, on- (A) or or (B) (i) one or more competitive games in which high school or college athletes participate; (ii) one or more performances of high school or college athletes in competitive games; one or more competitive games at the Summer or Winter Olympics. (3) In this section- AI-1