IN THE SUPREME COURT OF THE UNITED STATES MARCH TERM, 2011 DOCKET NO

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1 IN THE SUPREME COURT OF THE UNITED STATES MARCH TERM, 2011 DOCKET NO DEUCE McCALLISTER, Governor of the State of Tulania; RONALD HUGHES, Director of the Tulania State Lottery Office, Petitioner, -against- MAJOR LEAGUE BASEBALL; NATIONAL BASKETBALL ASSOCIATION; NATIONAL FOOTBALL LEAGUE; NATIONAL HOCKEY LEAGUE; MAJOR LEAGUE SOCCER; NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, Respondent. On writ of certiorari to the UNITED STATES COURT OF APPEALS FOR THE FOURTEENTH CIRCUIT BRIEF FOR PETITIONER Team #3

2 QUESTIONS PRESENTED I. Did the U.S. Court of Appeals for the Fourteenth Circuit incorrectly decide that the Professional and Amateur Sports Protection Act prohibits Tulania from offering sports lotteries to generate revenues to help alleviate its substantial budget deficits and satisfy its constitutional balanced budget obligations? II. Did the U.S. Court of Appeals for the Fourteenth Circuit incorrectly decide that the proposed Sports Lottery violates the Tulania Constitution? 2

3 TABLE OF CONTENTS QUESTIONS PRESENTED...2 TABLE OF CONTENTS...3 TABLE OF AUTHORITIES...5 STATEMENT OF THE FACTS...7 SUMMARY OF THE ARGUMENT...10 ARGUMENT...12 I. THE FOURTEENTH CIRCUIT S DECISION MUST BE REVERSED BECAUSE THE PROFESSIONAL AND AMATEUR SPORTS PROTECTION ACT ALLOWS TULANIA TO OFFER ANY SPORTS LOTTERY PURSUANT TO THE EXCEPTION IN 28 U.S.C. 3704(a)(1)..12 A. The Tulania Sports Betting Scheme Qualifies For the Exception in 3704(a)(1) Because the Exception is Broad and Tulania Satisfies the Necessary Condition..13 B. The Exception to PASPA is Ambiguous Such That Review of Legislative History is Necessary The legislative history of PASPA makes clear that Congress did not intend to prohibit the expansion of the Tulania sports lottery Congress did not intend to create a distinction between substantive and nonsubstantive changes within the PASPA exception...17 C. This Court Should View PASPA Broadly and Apply Gregory s Federalism Principles Because Doing So Maintains State Sovereignty Without Upsetting the Federal-State Balance Gregory s federalism principle is applicable here because Tulania is exercising the core sovereign function of raising revenues.19 II. THE PROPOSED SPORTS LOTTERY SHOULD BE PERMITTED BY THE TULANIA CONSTITUTION AS THE EXCEPTION ALLOWS FOR LOTTERIES UNDER STATE CONTROL FOR THE PURPOSE OF RAISING FUNDS A. This Court Should Follow The Majority Of Jurisdictions And Apply The American Rule Where Chance Is The Predominating Factor Over Skill

4 1. By adopting the American rule, chance is clearly the dominant factor of the games contemplated by the Sports Lottery and skill is not determinative in the outcome If skill were to be the dominant factor, it would have to satisfy the four requisite aspects as established by Morrow v. State...27 B. Even If This Court Were To Follow The English Rule, The Sports Lottery Still Passes The Tulania Constitution Exception There is a strong public policy argument to recover funds amidst the budget emergency that should compel this court to hold in favor of the Sports Lottery...28 CONCLUSION

5 TABLE OF AUTHORITIES United States Supreme Court Cases Allied Stores of Ohio v. Bowers, 358 U.S. 522 (1959) City of Edmond v. Oxford House, Inc., 514 U.S. 725 (1995) Dillingham v. McLaughlin, 264 U.S. 370 (1924).26 Gregory v. Ashcroft, 501 U.S. 452 (1991).passim H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229 (1989) 13,16,19 Nixon v. Mo. Mun. League, 541 U.S. 125 (2004)....14,15 Pa. Dep t of Corrs v. Yeskey, 524 U.S. 206 (1998).18,20 Ratzlaf v. United States, 510 U.S. 135 (1994)...15 Russello v. United States, 464 U.S. 28 (1983)...18 Salinas v. United States, 522 U.S. 475 (1997)...17 United States v. Bass, 404 U.S. 336 (1971) Will v. Mich. Dep t of State Police, 491 U.S. 58 (1989) United States Court of Appeals Cases Bruesewitz v. Wyeth Inc., 561 F.3d 233 (3rd Cir. 2009)..19 Hayden v. Pataki, 449 F.3d 57 (2nd Cir. 2006). 18 Paradissiotis v. Rubin, 171 F.3d 983 (5th Cir. 1999)...12,14 US v. Marder, 48 F.3d 564 (1st Cir. 1995)...23 United States District Court Cases NFL v. Governor of Delaware, 435 F.Supp (D. Del. 1977).passim 5

6 State Court Cases Bell Gardens Bicycle Club v. Dept. of Justice, 2 Cal.Rptr.2d 730 (Cal. Dist. Ct. 1995).23 Citation Bingo, Ltd. v. Otten, 910 P.2d Commonwealth v. Laniewski, 98 A.2d 215 (Pa. 1953)..passim County Fair Board v. Smylie, 386 P.2d 374 (Idaho 1963)...28 Harris v. Missouri Gaming Commission, 869 S.W.2d 58 (Mo. 1994).27 In re Allen, 377 P.2d 280 (Cal. 1962)...24 Morrow v. State, 511 P.2d 127 (Alaska 1973)...passim People ex rel. Ellison v. Lavin, 71 N.E. 753 (Ct. App. N.Y. 1904).23,25 Seattle Times Co., v. Tielsch, 495 P.2d 1366 (Wash. 1972) 25,26 State v. Eckerd s Suburban, Inc., 164 A.2d 873 (Del. 1960).29 State v. Stroupe, 76 S.E.2d 313 (N.C. 1953)...24,25 Statutory Provisions 28 U.S.C. 3704(a)(1) passim 28 U.S.C Miscellaneous BLACK S LAW DICTIONARY (8 th ed. 2004) 14 S. REP. NO , at 9-10 (1991)..12,15, N.Y. Op. Atty. Gen. 11, 1984 WL (N.Y.A.G. 1984)..22,28 6

7 STATEMENT OF THE FACTS Deuce McCallister, Governor of the State of Tulania and Ronald Hughes, Director of the Tulania State Lottery Office have proposed to implement a Sports Lottery that will permit the public to bet on the outcome of numerous sporting events. The lottery comes in the wake of a budget emergency, which projects the budget deficit for the 2010 fiscal year to reach approximately $800 million. The intention was to commence its sports betting scheme on September 1, Tulania amended into its Constitution in 1973 to authorize Lotteries under State control for the purpose of raising funds. R., at In 1974, the State enacted legislation authorizing lottery games that affiliate the determination of the winners of a game with any racing or sporting event held within or without the State. Id., at 20. In 1976, Tulania instituted a Sports Lottery, much like the modern version, but restricted as to NFL games. The lottery was then discontinued following the 1976 NFL season. The 1976 version conducted three types of games, collectively known as Scoreboard. The first game, Football Bonus, required bettors to pick the winners of seven games and would win a prize only if that person correctly picked all seven games. The second game, Touchdown, required bettors to pick the winners of NFL games with the point spread in each of three, four, or five contests. The third game, Touchdown II, replaced Touchdown for the second-half of the season and required bettors to pick the winner with the spread in twelve games. Prizes were awarded to bettors who correctly picked at least four games. The State of Delaware instituted an identical lottery system in 1976 based on an identical exception granted by the Delaware Constitution. The Delaware Sports Lottery was cut short due 7

8 to a mistake in their Lottery Office in December of Amidst concerns regarding the losses sustained in Delaware, Tulania decided to discontinue its lottery. The 2009 version, based on the 1976 version allowed for single game bets and was structured slightly differently. The first game, Single Game Lottery, bettors were to select the winner of any contest against the spread. The second game, Total Lottery, bettors were to select whether the total points would be over or under a specified number. The third game, Parlay Lottery, bettors were to select the winners of two or more games, choosing either the winners against the spread, the over/under or a combination of both. Additionally, there are two different types of betting lines allowed in the Sports Lottery, the point-spread and the money-line. The point-spread is the betting line that favors one team over another and the winner team must win by more than the given spread. The standard payout is a player must wager 11 to win 10. The money-line is the linemaker s estimate of the probability of a team winning or some series of events occurring. Id. at 22. The team selected to win does not have to cover a spread and the payout is based on the linemaker s judgment as to the probability that the favorite will win the contest. Id. Judge John Lannin of the United States District Court for the Southern District of Tulania held that this Sports Lottery is a legal lottery under the terms of the Tulania Constitution. Id. at 41. However, the United States Court of Appeals for the Fourteenth Circuit reversed the lower court decision and Judge Donald Ricketts applied a different standard to find that the Sports Lottery violates the Tulania Constitution as a matter of law. Id. at 17. The Sports Lottery Act also proscribed to take advantage of an exemption granted to the State of Tulania under federal law, namely the Professional and Amateur Sports Protection Act. Id. at 24. PASPA was instituted into law on January 1, 1993 and prohibits any person or 8

9 government entity from sponsoring, operating, advertising or promoting: a lottery on one or more competitive games See 28 U.S.C However, PASPA has four exceptions, mainly 3704(a)(1) which allows for a lottery that was previously conducted by the State during the period of January 1, 1976 and ending August 31, Tulania instituted its original Sports Lottery within this time frame and therefore should be permitted to reinstitute a Sports Lottery, as permitted by the exception. The U.S. District Court concluded that the PASPA exception applicable to Tulania does not prevent them from conducting the Sports Lottery currently proposed. Id. at 35. The U.S. Court of Appeals then reversed the lower decision and held that PASPA s grandfather clause covers a lottery to the extent that the scheme was conducted by that State Therefore, to the extent that the Sports Lottery contemplated betting on single games and on sports other than the NFL, it violates PASPA. Id. at 13. 9

10 SUMMARY OF THE ARGUMENT This Court must reverse the decision of the Court of Appeals for the Fourteenth Circuit and find that the Tulania Sports Lottery does not violate PASPA. Tulania is permitted to conduct its Sports Lottery under the exemption Congress created in 28 U.S.C. 3704(a)(1). Tulania comes within the exception pronounced in 3704(a)(1) because a lottery was in operation in Tulania, to the extent that the scheme was conducted by Tulania, during the period beginning January 1, Defining the terms scheme and to the extent that most reasonably, demonstrates that any Tulania Sports Lottery from 1976 is included within the exception contained in 3704(a)(1). However, the definitions of the terms in 3704(a)(1) are subject to other interpretations which results in a statute which lacks clarity. When a statute is ambiguous, an examination of its legislative history is essential. The Senate Report discussing the PASPA exception clearly expresses the intent of Congress to include within 3704(a)(1) any state lottery that was authorized or permitted under Tulania law. Although the PASPA exception contains ambiguous terms, examination of its legislative history demonstrates that Congress intended to include within it any state lottery authorized or permitted during the relevant time period. Furthermore, PASPA alters the usual constitutional balance between the States and federal government, and as such must be subject to the plain statement rule contained in Gregory. Lastly, Congress did not make its intent to include Tulania within PASPA unmistakably clear. For this reason, this Court must hold that Congress intended to maintain the constitutional balance and allow Tulania to raise revenues through any Sports Lottery from Congress made the determination to exclude Tulania and other States from PASPA s flat ban on state sports lotteries through the exception in 3704(a)(1). This Court must hold that Tulania 10

11 does not violate PASPA and it is permitted to conduct any sports lottery pursuant to the exception contained in 28 U.S.C. 3704(a)(1). This Court must also reverse the decision of the Court of Appeals for the Fourteenth Circuit and find that the Tulania Sports Lottery does not violate the Tulania Constitution. Tulania is permitted to conduct the Sports Lottery as the exception allows per the 1973 amendment authorizing Lotteries under State control for the purpose of raising funds. R. at There are three elements required to constitute a lottery, which are prize, consideration, and chance. The element at issue is regarding chance. This court may apply the English pure chance rule or the American dominant factor rule. The U.S. District Court correctly applied the American rule, which is the more accepted approach among jurisdictions. The American rule states that: a particular scheme may be a lottery even though skill, judgment or research enter into it in some degree, if chance in a larger degree determines the result. Commonwealth v. Laniewski, 98 A.2d 215, 217 (Pa. 1953). Although skill is a factor, the bettor has no affect on the result of the game and therefore chance is largely the predominant factor. Additionally, there are many uncontrollable elements that play into the ultimate result, such as weather, mental and physical condition of the players. There is also a strong public policy argument that this court must consider as well. The Tulania Legislation reinstituted the Sports Lottery in order to help recover from the projected large budget deficit. Since the exception is broad and was not defined by the legislature, this court should give deference to the State. Therefore, this court must reverse the U.S. Court of Appeals decision and permit the Sports Lottery as the exception allows in the Tulania Constitution. 11

12 ARGUMENT I. THE FOURTEENTH CIRCUIT S DECISION MUST BE REVERSED BECAUSE THE PROFESSIONAL AND AMATEUR SPORTS PROTECTION ACT ALLOWS TULANIA TO OFFER ANY SPORTS LOTTERIES PURSUANT TO THE EXCEPTION IN 28 U.S.C. 3704(a)(1). The Court of Appeals for the Fourteenth Circuit erred in finding that the Tulania Sports Lottery violates the Professional and Amateur Sports Protection Act, 28 U.S.C. 3702, (hereinafter PASPA ). The Tulania Sports Lottery is permitted under 28 U.S.C (a)(1), an exception to PASPA. This exception makes clear that PASPA s general prohibition against sports betting shall not apply to: A lottery in operation in a State or other governmental entity, to the extent that the scheme was conducted by that State or governmental entity at any time during the period beginning January 1, 1976, and ending August 31, U.S.C. 3704(a)(1). Pursuant to this broad exception, Tulania may presently conduct any sports lottery under state control because it conducted a state lottery in The Tulania Sports Lottery is permitted under the exception to PASPA as demonstrated by 3704(a)(1) and its legislative history. A State may operate a lottery to the extent that the scheme was conducted by that State at any time during the period beginning January 1, 1976, and ending August 31, The phrase to the extent that is reasonably read as introducing a condition that a State either does or does not satisfy. See Paradissiotis v. Rubin, 171 F.3d 983, 987 (5th Cir. 1999). Tulania satisfies this condition because of the Sports Lottery it conducted in A review of the legislative history of PASPA provides further clarification of Congress s intent in creating 3704(a)(1). The committee has no wish to apply this new prohibition retroactively to Tulania which instituted sports lotteries prior to the introduction of our legislation. S. REP. NO , at 9-10 (1991). Tulania s Sports Lottery is permitted under PASPA as evidenced by Congress s intent in creating 3704(a)(1). 12

13 To prevent Tulania from conducting a sports lottery under the exception pronounced by Congress would interfere with state sovereignty and upset the federal-state balance. The people of each State compose a State, having its own government, and endowed with all the functions essential to separate and independent existence. Gregory v. Ashcroft, 501 U.S. 452, 457 (1991). The Tulania Sports Lottery is an exercise of sovereign State power that may not be usurped by Congress. A sports lottery to reduce a substantial budget deficit is a core State function, and as such Gregory s plain statement rule must apply to the PASPA exception. If Congress intends to alter the usual constitutional balance between the States and the Federal Government, it must make its intention to do so unmistakably clear in the language of the statute. Id. at U.S.C. 3704(a)(1) exempts Tulania from PASPA s prohibition, therefore Tulania may implement any sports lottery. A. The Tulania Sports Betting Scheme Qualifies For The Exception In 3704(a)(1) Because The Exception Is Broad And Tulania Satisfies The Necessary Condition. Tulania comes within the exception enunciated in 28 U.S.C. 3704(a)(1) because a lottery was in operation in Tulania, to the extent that the scheme was conducted by Tulania at any time during the period beginning January 1, 1976, and ending August 31, The PASPA exemption is broad in scope in that it does not restrict a State from operating a particular lottery game for a particular sport. The provision merely states a lottery, sweepstakes, or other betting, gambling, or wagering scheme in operation in a State or other governmental entity without stating any further particulars to be satisfied. The United States Supreme Court has noted that scheme is hardly a self-defining term. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 241 n.3 (1989). The term scheme most logically refers to a sports lottery under State control in which the winners of lottery games were affiliated with the outcome of sporting events. Black s Law Dictionary provides further support for this definition of scheme as it defines scheme as, 13

14 [a] systematic plan, a connected or orderly arrangement, esp[ecially] of related concepts. BLACK S LAW DICTIONARY (8 th ed. 2004). In 1976, Tulania debuted a multi-game (parlay) lottery as to NFL games with plans to extend it to other sports, and conducted three games collectively known as Scoreboard. R. at 20. Certainly, the multi-game (parlay) lottery and the Scoreboard games are related concepts and connected arrangements as they all have to do with betting based on sports. Further, the Black s Law Dictionary defines scheme as a systematic plan which accurately describes the multi-game (parlay) lottery Tulania debuted in Defining scheme in this way demonstrates that 3704(a)(1) permits Tulania to implement a sports lottery that allows the public to bet on single NFL games and sporting events involving other sports. The phrase to the extent that contained in 3704(a)(1) is reasonably read as introducing a condition that a State either does or does not satisfy. See Paradissiotis, at 987. Tulania satisfies this condition because it conducted several lottery games in The 1976 Tulania state law authorized the multi-game (parlay) lottery as well as the Scoreboard lottery, thus Tulania may now institute a broad lottery with those features. The respondent urges that in order to implement a sports lottery under the PASPA exception, the particular lottery must have been actually conducted. However, this reading of 3704(a)(1) is contrary to the plain reading of the provision. Nowhere within the exception does it state that the Sports Lottery had to be actually conducted, 3704(a)(1) merely states to the extent that the scheme was conducted. Furthermore, the strange and indeterminate results of using conducted to mean actually conducted is the key to understanding that Congress used conducted with a broad reference to any state lottery previously authorized or permitted under State law. Nixon v. Mo. Mun. League, 541 U.S. 125, 133 (2004). The exemption in 3704(a)(1) sets out a condition which is satisfied 14

15 by Tulania, and thus permits Tulania to presently implement a broad lottery. The current Tulania Sports Lottery may include any sports lotteries because the exception to PASPA is broad and Tulania satisfies the pertinent condition. B. The Exception To PASPA Is Ambiguous Such That Review Of Legislative History Is Necessary. An examination of the legislative history of PASPA expresses Congress s intent to allow Tulania to implement a broad state lottery. The Court of Appeals for the Fourteenth Circuit did not find PASPA ambiguous and thus rejected an interpretation of its legislative history. The Court of Appeals stated that we do not resort to legislative history to cloud a statutory text that is clear. See Ratzlaf v. United States, 510 U.S. 135, (1994). However, the complex dispute that has arisen over the meaning of 3704(a)(1) clearly demonstrates otherwise, its ambiguity is a central argument and its text is anything but clear. While the definitions of the terms in 3704(a)(1) provide guidance, they are still subject to multiple interpretations and as such present an ambiguity. Similar to the statute in Bass, PASPA is not a model of logic or clarity and after seizing everything from which aid can be derived, we are left with an ambiguous statute. United States v. Bass, 404 U.S. 336, 347 (1971). When a Congressional statute is ambiguous, legislative history is appropriately considered to establish whether the unmistakably clear standard is satisfied. Nixon, at 133. Looking to PASPA s legislative history it is evident that Congress intended to exclude Tulania from PASPA. 1. The legislative history of PASPA makes clear that Congress did not intend to prohibit the expansion of the Tulania Sports Lottery. The PASPA Report of the Senate Judiciary Committee explicitly declares that PASPA was not intended to prevent Tulania from modifying the particular lottery games offered in 1976: Tulania may conduct sports lotteries on any sport, because sports lotteries were conducted by Tulania prior to August 31, S. REP. NO , at 9-10 (1991) (emphasis added). This 15

16 portion of the Senate Report resolves the argument as to which lottery 3704(a)(1) applies to because it states that Tulania may conduct sports lotteries on any sport. This portion of the Report is also in direct contradiction to the Leagues argument that the current Sports Lottery may only apply to the NFL, providing further support that Congress intended to allow Tulania to implement any sports lottery. The Senate Report also states that Paragraph 1 is not intended to prevent Oregon or Delaware [or Tulania] from expanding their sports betting schemes into other sports as long as it was authorized by State law prior to enactment of this Act. S. REP. NO , at 9-10 (1991) (emphasis added). This portion of the Report provides clarity as to what was meant by to the extent that the scheme was conducted because Congress clearly sought to include any lotteries authorized within the meaning of conducted. The legislative history here shows that Congress indeed had a fairly flexible concept of conducted in mind. See H.J. Inc., at 208. Thus, Congress intended for Tulania s multi-game (parlay) lottery to be implemented because it was authorized by Tulania state law in Throughout the Senate Report terms such as permitted and authorized are used frequently. The utilization of these terms in the Report is indicative of the intent of Congress to include within the meaning of conduct in 3704(a)(1) lotteries that were also permitted or authorized by State law during the relevant time period. The legislative history shows that Congress knew what it was doing when it adopted commodious language capable of extending beyond conducted. See H.J. Inc., at 246. Further support for the contention that Congress meant to include lotteries that were permitted or authorized within the meaning of conducted comes from the language of the Report itself: Therefore, it provides an exemption for those sports gambling operations which already are permitted under State law. S. REP. NO , at 9-16

17 10 (1991) (emphasis added). The 1976 Tulania multi-game (parlay) Sports Lottery was permitted under State law, it must follow then that Tulania may presently conduct a multi-game Sports Lottery for any sport. The PASPA Senate Report makes it clear that Congress intended to allow Tulania to implement any sports lottery that were authorized or permitted in Congress did not intend to create a distinction between substantive and non-substantive changes within the PASPA exception. The Report of the Senate Judiciary Committee states that 3704(a)(1) exempts sports gambling operations permitted by State law and allows Tulania to expand its lottery to other sports. The Leagues main contention is that by implementing a multi-game (parlay) lottery, Tulania is making a substantive change outside the scope of the exception in 3704(a)(1). Contrary to what the Leagues contend, neither the Senate Report nor the text of 3704(a)(1) refer to any prohibited substantive changes or permissible non-substantive changes to the Tulania lottery scheme. The substantive change standard that the League relies on is nowhere to be found within the statutory text, in fact PASPA does not identify any requisite attributes of the types of lottery to be excluded. Similarly, 3704(a)(1) does not state which sports are involved or which types of wagers in the lottery are permitted. The Leagues go beyond changing the plain reading of 3704(a)(1) to how they see fit, and completely ignore the provision s drafting history that shows Congress s intent to broaden the exception s scope. A statute may not be strained and distorted in order to exclude conduct clearly intended to be within its scope. Salinas v. United States, 522 U.S. 475 (1997). Here, despite the Leagues best efforts at distorting the text, Congress clearly intended for any 1976 Tulania Sports Lottery to come within the scope of 3704(a)(1). The Leagues also argue that any lottery that was not actually conducted during the relevant time period qualifies as a substantive change and does not fall under the exception in 17

18 3704(a)(1). However, Congress in creating the PASPA exception purposefully declined to include actually before conducted. From this, the decision to exclude actually from 3704(a)(1) seems obvious that Congress intended to include activity not actually conducted within its meaning. Russello v. United States, 464 U.S. 28 (1983) (holding that the term interest was a broad term that included the profits and proceeds of defendant s crime). The fact that Congress omitted the term actually from 3704(a)(1) is indicative of the intent to allow other terms such as authorized and permitted to come within the meaning of conducted. A review of the legislative history of PASPA is crucial to resolve ambiguities and to demonstrate Congress s intent to exclude Tulania from PASPA and to allow Tulania to implement a broad Sports Lottery for any sport. C. This Court Should View PASPA Broadly And Apply Gregory s Federalism Principles Because Doing So Maintains State Sovereignty Without Upsetting The Federal-State Balance. A broad view of PASPA allows Tulania to conduct any sports lottery and preserves state sovereignty. Without the States in union, there could be no such political body as the United States. Therefore, there can be no loss of separate and independent autonomy to the States. Gregory, at 422. The States power to retain sovereignty from the federal government is a fundamental principle protected under the Tenth Amendment. Maintaining State sovereignty is so vital that this Court has stated, [A]bsent an unmistakably clear expression of intent to alter the usual constitutional balance between the States and the Federal Government, we will interpret a statute to preserve rather than destroy the States substantial sovereign powers. Pa. Dep t of Corrs v. Yeskey, 524 U.S. 206, 209 (1998). With the creation of PASPA, Congress has altered the usual constitutional balance with respect to sports lotteries. There is no question that raising revenue is an important State interest and that interfering with a State s power to govern this area would disrupt the federal balance. Hayden v. Pataki, 449 F.3d 57 (2nd Cir. 2006). 18

19 Taking a broad view of PASPA maintains State sovereignty because it allows Tulania to implement its 1976 lottery without being usurped by the Congressional statute. In 1974 and 1976, Tulania enacted legislation authorizing lottery games that affiliate the determination of the winners of a game with any racing or sporting event held within or without the State. R. at 20. When Congress created PASPA, Tulania s previous State laws concerning sports wagers were subject to federal preemption. Congress acknowledged the delicate federal-state balance and thus created an exception to PASPA in 3704(a)(1). The PASPA exception allows Tulania to implement any sports lottery that it previously had under State law without being preempted by the federal law. When faced with two equally plausible readings of statutory text, we have a duty to accept the reading that disfavors preemption. Bruesewitz v. Wyeth Inc., 561 F.3d 233, 240 (3rd Cir. 2009). Viewing the exception broadly reflects the intent of Congress to allow Tulania to implement any sports lottery under previous State law in order to maintain Tulania s State sovereignty. Furthermore, as this Court has stated, it would be counterproductive and a mismeasure of Congressional intent to adopt a narrow construction of the statute s conduct element that would require proof of a state lottery that was actually conducted. See H.J. Inc., at Gregory s federalism principle is applicable here because Tulania is exercising the core sovereign function of raising revenues. The plain-statement rule set forth in Gregory, that if Congress intends to alter the usual constitutional balance it must make its intention to do so unmistakably clear, must be applied here to protect Tulania s right to raise revenues in the manner it deems fit. Similar to that statute in Gregory, although PASPA plainly covers state lotteries, it contains an exception for a lottery conducted at any time during the period beginning January 1, 1976, and ending August 31, 1990, which makes it impossible for us to conclude that the statute plainly covered 19

20 all state lotteries. See Pa. Dep t of Corrs, at 219 (citing Gregory, 501 U.S. at 467). Because 3704(a)(1) is ambiguous, as evidenced by the ongoing dispute over what it does or does not include, and because it alters the usual constitutional balance the application of a plain-statement rule is necessary. The Gregory plain-statement rule applies here because Tulania s ability to raise revenue is a decision of the most fundamental sort for a sovereign entity. City of Edmonds v. Oxford House, Inc., 514 U.S. 725, 732 n.5 (1995). If raising revenues to remedy a State budget emergency is not considered an essential State interest then the question must be asked what is. The Supreme Court instructs us to conduct a case-by-case assessment of whether an asserted state interest is sufficiently weighty to invoke the plain-statement rule. Will v. Mich. Dep t of State Police, 491 U.S. 58, 65 (1989). Currently, Tulania is experiencing a record budget deficit of approximately $800 million. This deficit has become a State budget emergency and thus is sufficiently weighty to invoke the plain-statement rule. With PASPA, Congress has not made its intention to override Tulania s prior state laws concerning the Sports Lottery unmistakably clear. As such, Tulania retains substantial sovereign powers under our constitutional scheme, powers with which Congress does not readily interfere; and these powers include Tulania s right to raise revenue through a sports lottery. See Gregory, 501 U.S Because the Sports Lottery will raise revenue for Tulania, it is a core sovereign function to which Gregory s federalism principles apply. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State. Gregory, at 458. The implementation of the Tulania Sports Lottery comes within the powers reserved to the States because eliminating Tulania s record budget deficit concerns the lives of the people of Tulania and will improve the internal order and prosperity of the State. The 20

21 Leagues contend that regulating gambling on a nationwide basis has long been a federal function. However, this Court has stated the States have the attribute of sovereign powers in devising their fiscal systems to ensure revenue and foster their local interests. Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526 (1959). Congress purposefully carved out an exception for Tulania and other States to continue to raise revenue through previous lottery schemes implemented under State law. By exempting Tulania from PASPA, Congress chose to preserve Tulania s right to continue to raise revenues through sports lotteries. A broad view of PASPA and application of Gregory s federalism principles maintains State sovereignty and permits Tulania to conduct any State lottery. II. THE PROPOSED SPORTS LOTTERY SHOULD BE PERMITTED BY THE TULANIA CONSTITUTION AS THE EXCEPTION ALLOWS FOR LOTTERIES UNDER STATE CONTROL FOR THE PURPOSE OF RAISING FUNDS. The Court of Appeals for the Fourteenth Circuit erred in finding that the Sports Lottery violates the Tulania Constitution and this court must be reverse the decision. In 1974, Tulania amended its Constitution to allow for lotteries under State control for the purpose of raising funds as the exception to the prohibition against all forms of gambling. It is well established that to constitute a lottery there must be (1) a prize to be won, (2) the determination of the winner by chance, and (3) a consideration. Commonwealth v. Laniewski, 98 A.2d 215, 217 (Pa. 1953). There is no discussion as to the elements of prize and consideration. With regards to the element of chance, the issue is whether to apply the English rule, consisting of pure chance or the American rule, where skill can be present as long as chance is the predominating factor. See e.g., Id., Morrow v. State, 511 P.2d 127 (Alaska 1973); NFL v. Gov. of Del., 435 F.Supp (D. Del. 1977). This court should follow the U.S. District Court holding as well as the majority of jurisdictions and apply the American rule to define the element of chance. 21

22 Additionally, the legislature did not define lottery or its elements as it pertains to the Tulania Constitution. This would appear to be a broad exception to the Constitution s ban on gambling of sports, R. at 14, contrary to the Court of Appeals holding. The court suggested using a more general phrase such as wagering upon the outcome of future contingent events. See Id., 1984 N.Y. Op. Atty. Gen. 11, 1984 WL (N.Y.A.G. 1984) at 7. This additional phrase would be a limitation rather than an extension of the legislative purpose. Even more so, the lack of defining lottery does not restrict the court as a way to define its term and should take into consideration the strong public policy argument. This court should recognize that statutes are not frozen in time and generally should be construed with a view toward accommodating societal and technological evolution. Citation Bingo, Ltd. V. Otten, 910 P.2d 281, 286 (N.M. 1995). Regardless, the purpose is not determinative. All three elements must be present for the scheme to constitute a lottery. If one element is absent, the scheme is not a lottery, regardless of its purpose. If all of the elements are present, the scheme is a lottery, regardless of the purpose Morrow, at 128. Therefore, since chance is an existing element, this court should find that a lottery does exist and the Sports Lottery is allowed as the Tulania Constitution permits. A. This Court Should Follow The Majority Of Jurisdictions And Apply The American Rule Where Chance Is The Predominating Factor Over Skill. In order to determine whether the Sports Lottery is to be considered a lottery, this court must determine whether to define the element of chance using the English pure chance rule or the American dominant factor rule. See, NFL, at ; Morrow, at 129. The English rule is extremely narrow and does not allow for any skill to be involved. On the contrary, the American rule allows for skill as long as chance is still the predominating factor. People ex rel. 22

23 Ellison v. Lavin, 71 N.E. 753 (Ct. App. N.Y. 1904). This rule is broader, widely followed and the trend toward acceptance of the dominant factor rule has continued and expanded [among jurisdictions.] NFL, at One example is Pennsylvania, holding that the controlling essential need not be pure chance, but may be accompanied by an element of calculation or skill Hence, a particular scheme may be a lottery even though skill, judgment or research enter into it in some degree, if chance in a larger degree determines the result. Laniewski, at 217. In the United States, however, by what appears to be the weight of authority it is not necessary that this element of chance be pure chance, but it may be accompanied by an element of calculation or even of certainty; it is sufficient if chance is the dominant or controlling factor. NFL, at Several other states have followed this holding, making this matter of first impression more clear for the state of Tulania to find a holding under the American rule. One such state is Alaska, where the court dealt with a very similar situation to this case. In Morrow v. State, it involved a football card where bettors picked a number of games with a point spread, and the court held that the sounder approach [to define a lottery] is to determine the character of the scheme under the dominant factor rule, Id., at 129. Massachusetts also defined the terms of a lottery in a case dealing with video poker games. The court held that for there to be a lottery, chance must predominate over skill in the results of the game, or the element of chance must be present in such a manner as to thwart the exercise of skill or judgment in a game, US v. Marder, 48 F.3d 564, 569 (1st Cir. 1995). Two cases in California yielding similar results held that [i]n determining whether a particular game or scheme is a lottery, the test in California is whether the game is dominated by chance, not whether the winner of the game is determined solely by chance Bell Gardens Bicycle Club v. Dept of Justice, 42 Cal.Rptr.2d 730, 747 (Cal. Dist. Ct. 23

24 1995) and [t]he test is not whether the game contains an element of chance or an element of skill but which of them is the dominating factor in determining the result of the game. In re Allen, 377 P.2d 280, 281 (Cal. 1962). Like the Delaware Constitution in NFL, the Tulania Constitution does not define nor limit the meaning of a lottery, more particularly the element of chance. In the absence of statutes and other indicia to the contrary, most courts have reasoned that there are few games, if any, which consist purely of chance or skill, and that therefore a game of chance is one in which the element of chance predominates over the element of skill State v. Stroupe, 76 S.E.2d 313, 316 (N.C. 1953). Likewise, when the term is not defined but rather construed broadly, the court must consider the legislative interpretation. See NFL. Th[e] broad legislative definition is significant because the [Delaware] courts subscribe to the rule of construction that when terms of the Constitution are ambiguous, the interpretation of the legislature is entitled to deference. Id., at In March 2009, Tulania Governor Deuce McCallister suggested reinstituting a Sports Lottery to help make up for the projected record budget deficit of approximately $800 million in fiscal year See R. at Lotteries were first allowed in Tulania as an exception to the prohibition against gambling in 1973, but only for the purpose of raising funds. Similarly here, the current Sports Lottery is also for the point of raising funds. The difference between the 1976 and 2009 version is that the new Sports Lottery Tulania allows for single game bets and non- NFL sports as well. See Id. at 22. These changes are a learned advancement from the original version, but the purpose is identical. According to estimates, illegal sports betting in the United States range from $80 to $380 billion annually. Id. at 24. If Tulania can legalize this lottery, gamblers will still make their bets while the State also benefits. Given the fact that legislation is 24

25 using a pre-existing model and has made beneficial adjustments, this court should allow for the proposed lottery to help make up for the expected deficit. 1. By adopting the American rule, chance is clearly the dominant factor of the games contemplated by the Sports Lottery and skill is not determinative in the outcome. When it comes to picking the winner of football games (and other sports), a bettor must take into consideration many elements. However, once the bet is made, the results are then taken out of the players hands and no one knows what may happen once the game has begun. Laniewski, at 217. This differs from games like shuffleboard or tenpins, which involve superior knowledge and attention, or superior strength, agility and practice gain the victory, and little or nothing is left to chance. Stroupe, at 316. What it ultimately comes down to is that [t]he test of the character of the game is not whether it contains an element of chance or an element of skill, but which is the dominating element that determines the result of the game? Lavin, at 755. There is no argument that with sports, a more knowledgeable fan is more likely to pick a winner than one with little interest. This is the element of skill that is involved that may give an advantage to one who follows the team, players or sport compared to a disinterested bettor. However, it is common knowledge that the predictions even among these so-called experts are far from infallible. See Laniewski, at 217; Seattle Times Co. v. Tielsch, 495 P.2d 1366, 1367 (Wash. 1972). After the contestants are identified by their expertise and knowledge, everything else is chance. No one will ever win the contest without skill but neither will anyone win without chance. Tielsch, at 1367 As discussed in Stroupe, a game of cards and throwing dice are games of chance decided not by judgment, practice, skill or adroitness, but a turn of a card or the cast of the dice. Stroupe, at Similar to betting on a game of cards, once a bet is made on the game through the Sports Lottery, the player cannot affect the outcome and the outcome is determined 25

26 by the performance of the players. There are additional factors to consider, none of which are controllable by the bettor. The result of a football game may depend on weather, the physical condition of the players and the psychological attitude of the players. It may also be affected by sociological problems between and among the members of a football team. The element of chance is an integral part of the game of football as well as the skill of the players. See Tielsch, at 1367; NFL, at The 1976 Tulania Sports Lottery that the current version is modeled from is very similar to the 1976 Delaware Sports Lottery discussed in NFL. Although the focus in NFL was multigame betting (parlay games), the common denominator is the designated point spread or line. This is designed to equalize the odds on the two teams involved. This injects a further factor of chance. Id. at The spread is the ultimate equalizer among the educated and uneducated bettor. This added element makes it even more difficult for a bettor to win and thus chance plays a greater role in determining who the victor is. When considering the odds of betting on a single game, [a]ny attempt to forecast the result of a single athletic contest, be it football, baseball, or whatever, is fraught with chance. Laniewski, at 217. By adding multiple games to the bet, the odds are multiplied and the degree of chance increases. In general, what a man does not know and cannot find out is chance as to him, as is recognized as chance by the law. Dillingham v. McLaughlin, 264 U.S. 370, 373 (1924). There are simply too many unknowns and too many variables to conclude that skill is the predominating factor over skill. Most importantly, the outcome is not determinative by the bettor. The only controllable element the gambler has is the bet itself. No player s choice or will has any part in the lottery s result, nor can human reason, foresight, sagacity, or design enable a player to affect the game. 26

27 Harris v. Missouri Gaming Commission, 869 S.W.2d 58, 62 (Mo. 1994). Therefore, this court should conclude that when applying the American rule, chance is the predominating factor and the Sports Lottery is permitted by the Tulania Constitution. 2. If skill were to be the dominant factor, it would have to satisfy the four requisite aspects as established by Morrow v. State. The court in Morrow determined that the best approach is to follow the dominant factor rule and found issues and foreseeable problems that would result should the court follow the pure chance doctrine. Therefore, the court came up with four requisite aspects that would determine whether skill predominates over chance in a scheme; (1) The test is that without skill it would be absolutely impossible to win the game (2) Participants must have the opportunity to exercise the skill, and the general class of participants must possess the skill (3) Skill or the competitor s efforts must sufficiently govern the result. Skill must control the final result, not just one part of the larger scheme (4) The standard of skill must be known to the participants, and this standard must govern the result. Id. at 129. The determination here is based on the fact that skill must control the final result and chance cannot influence it, otherwise the scheme is a lottery. Comparing these aspects to the Sports Lottery at hand, every one of them is dismissed. Regarding the first aspect, a bettor of a sporting event can still win the game without skill. A bettor with little knowledge of the teams could bet on the favorite and hope the team covers the spread. This involves no skill and would rely solely on chance. For the second aspect, it is a similar situation since possessing the skill is not required to win a bet in the Sports Lottery. The third aspect is the most important, since a bettor has zero impact on the outcome. The bettor cannot determine how each of the players perform for their team or the opponents, nor can the bettor control the weather, playing field, and many other intangibles. Once the bet is made, the rest of it is out of the bettor s hands and left 27

28 up to chance. Lastly, the standard of skill is an unknown and does not govern the result, since the result is left up to the players of the game. Therefore, it would appear that skill is not the predominating factor and the Sports Lottery would constitute a lottery permitted by the Tulania Constitution. B. Even If This Court Were To Follow The English Rule, The Sports Lottery Still Passes The Tulania Constitution Exception. This court must decide whether to apply the English rule or the American rule to determine the definition of chance. As the Court of Appeals held, the English rule is most consistent with a narrow and specific interpretation of the term lottery. R. at 14. Additionally, [i]f the Legislature had wanted to carve out a specific exception it knew how to accomplish this N.Y. Op. Atty. Gen. 11, at 7. Likewise, if Legislature wanted to prohibit a Lottery, an amendment would not have been added to allow for the exception. To support the argument to apply the English rule, the lower court relies on Oneida County Fair Board v. Smylie, holding that a contest is not a lottery unless resolution of the issue depends entirely on chance and if merit or skill plays any part in determining the distribution, there has been no lottery. 386 P.2d 374, 390 (Idaho 1963). Additionally, the case states that result of chance alone, and that no skill, adroitness, or management on the part of the operator can affect the result. Id. at 377. Among all of these holdings, it is commonly accepted that the result of the contests are not affected by skill, which is an accepted proposition. The result of the games is strictly based on chance and the bettor has no hand in affecting the ultimate outcome. 1. There is a strong public policy argument to recover funds amidst the budget emergency that should compel this court to hold in favor of the Sports Lottery. Even if this court is unsure of the element of chance, there is a strong public policy argument for this court to permit the Sports Lottery as the exception provides. In cases where 28

29 there is indecision, courts rely on sound and compelling reason of public policy State v. Eckerd s Suburban, Inc., 164 A.2d 873, 876 (Del. 1960), to disregard a prior decision. Here, legislation enacted the provisions to the Tulania Constitution without providing for a distinct interpretation of the word lottery. In 1973, the Tulania Legislature amended the Constitution to authorize lotteries under State control for the purpose of raising funds. R. at This open amendment provides legislation with the opportunity to create a lottery at its discretion and with full control. In 2009, Governor Deuce McCallister provided an improved proposition to the 1976 Sports Lottery that keeps full control with the State. Most importantly, the proposed Sports Lottery comes amidst a budget emergency and the Tulania legislation believes the most efficient resolution is via this route. This court must take this into consideration. However, it is important to look at the big picture and recognize that all three elements of a lottery are nonetheless present in this instance. See Morrow. Chance is an existing element, whether you apply the English or American rule, and therefore the end result is the same. The Sports Lottery should satisfy the exception as provided by the Tulania Constitution and therefore should be allowed. 29