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Report: The long-term battle between sports leagues and gambling

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Sports and gambling go together like peanut butter and jelly. The NCAA and the professional sports leagues know this, yet for decades, they’ve maintained a puritanical opposition to any legal acknowledgment of sports gambling. Last week, the NCAA, NFL, NBA, NHL and MLB sued New Jersey Gov. Chris Christie and two other state officials in federal court, challenging a recently adopted law that would permit sports gambling in Atlantic City casinos.

This is actually the latest battle in a war that dates back more than two decades. In 1992, the NCAA and the professional leagues successfully lobbied Congress for special interest legislation to prohibit states from adopting any “lottery, sweepstakes, or other betting, gambling, or wagering scheme” based on any reference to a professional or amateur athletic competition. This law, known as PASPA (“Professional and Amateur Sports Protection Act”), permitted the four states where sports wagering was already legal, notably Nevada, to continue their activities. New Jersey was also given a one-year window to consider legalization.

The legislative history of PASPA is largely confined to a single hearing before the Senate Judiciary Committee’s Subcommittee on Patents, Copyrights and Trademarks, which took place on June 26, 1991. The NCAA did not send a representative to the hearing, but then-executive director Richard Schultz submitted a letter in support of the legislation. The key witnesses were the three major sports commissioners: David Stern from the NBA, Paul Tagliabue from the NFL and Fay Vincent from MLB.

All three followed the same talking points. They claimed that any attempt to further legalize sports gambling would irreparably harm the reputation and integrity of their respective leagues. “We do not want our games to be used as bait to sell gambling,” Tagliabue told the subcommittee. “Sports lotteries inevitably foster a climate of suspicion about controversial plays and intensify cynicism with respect to player performances, coaching decisions, officiating calls and game results.”

David Stern claimed it was a matter of defending the leagues’ intellectual property rights from third-party infringement:

Conducting a sports lottery or permitting sports gambling involves the use of professional sports leagues’ games, scores, statistics and team logos, in order to take advantage of a particular league’s popularity; such use violates, misappropriates and infringes upon numerous league property rights. …the NBA – like other sports leagues – owns the rights to its games and the manner of their exploitation.

A year earlier, Stern noted, the NBA settled a lawsuit against the State of Oregon, which attempted to operate a sports-based lottery. The terms of the settlement included a five-year ban on Oregon operating any lottery “based on the outcomes of NBA games or any team or player statistics, or that in any way incorporate the city names, geographic designations, or other words designating NBA teams.”

Stern went so far as to suggest government censorship to prevent the public dissemination of gambling information: “We would actively support any legislation that would prohibit the media from carrying point spreads, if such legislation were permissible under the First Amendment.”

The subcommittee noted a number of conflicts between the commissioners’ testimony and real-world practice. For example, Los Angeles Lakers owner Jerry Buss had recently competed in the World Series of Poker and the 1991 world champion Chicago Bulls sponsored a promotion with the Illinois lottery. More to the point, James Hosker, then-president of the North American Association of State and Provincial Lotteries, noted the leagues “have long been aware of the extensive wagering on their games, have virtually taken no action to prevent it, have frequently acquiesced in it, and in fact have benefited from it.” Hosker noted the presence of gambling experts on NFL-approved television shows.

There was also a significant conflict within the Senate Judiciary Committee itself. Sen. Herb Kohl of Wisconsin was a member of the committee as well as owner of the NBA’s Milwaukee Bucks. Kohl abstained from voting on the bill in committee and on the Senate floor, yet his mere presence demonstrated the leagues had an unfair advantage in obtaining this legislation.

PASPA passed the Senate 88-5 after a short debate on June 2, 1992. (The House passed the bill without formal debate or a recorded vote.) Iowa Sen. Charles Grassley was the only legislator to speak at length against the bill. While he opposed sports gambling, he objected to the fact that four states—including Delaware, which was represented by then-Judiciary Committee Chairman Joe Biden—were grandfathered in. Grassley further railed at the hypocrisy of the leagues demanding taxpayer support for stadium construction while simultaneously depriving states of potential revenues from sports gambling.

Grassley’s most notable objection, however, was to the enforcement provision of PASPA, which allowed the leagues, not just the U.S. attorney general, to seek an injunction against any state that attempted to legalize sports gambling in the future—the very provision the leagues are using in its current lawsuit against New Jersey. “The Federal Government also has never authorized private parties to enforce restrictions against the States,” Grassley told the Senate. “This legislation would do so.”

The Department of Justice was also baffled and opposed PAPSA as “particularly troubling” with respect to “federalism issues.” Nonetheless, President George H.W. Bush signed PAPSA into law in October 1992. (Bush’s son, the future president, was then managing general partner of baseball’s Texas Rangers.)

The NCAA vs. The Constitution

The leagues insisted on enforcing PAPSA themselves because of a prior lawsuit against the State of Delaware. The NFL sued Delaware in 1976 to prevent implementation of a planned football lottery. In the absence of PAPSA, the NFL claimed the lottery amounted to “forced association” with gambling and violated, among other things, the NFL’s trademark rights and common law prohibitions against “misappropriation.”

The NFL tried to broadly assert—as David Stern did at the 1991 hearing—that virtually every piece of information and public support generated by the existence of pro football was somehow the league’s intellectual property. Federal Judge Walter Stapleton rejected that premise in his 1977 decision, which granted only limited relief to the NFL:

We live in an age of economic and social interdependence. The NFL undoubtedly would not be in the position it is today if college football and the fan interest that it generated had not preceded the NFL’s organization. To that degree it has benefited from the labor of others. The same, of course, can be said for the mass media networks which the labor of others have developed.

What the Delaware Lottery has done is to offer a service to that portion of plaintiffs’ following who wish to bet on NFL games. It is true that Delaware is thus making profits it would not make but for the existence of the NFL, but I find this difficult to distinguish from the multitude of charter bus companies who generate profit from servicing those of plaintiffs’ fans who want to go to the stadium or, indeed, the sidewalk popcorn salesman who services the crowd as it surges towards the gate.

While courts have recognized that one has a right to one’s own harvest, this proposition has not been construed to preclude others from profiting from demands for collateral services generated by the success of one’s business venture. General Motors’ cars, for example, enjoy significant popularity and seat cover manufacturers profit from that popularity by making covers to fit General Motors’ seats. The same relationship exists between hot dog producers and the bakers of hot dog rolls. But in neither instance, I believe, could it be successfully contended that an actionable misappropriation occurs.

PAPSA eliminates the need for the leagues to prove any “misappropriation” or harm, since it effectively grants them the authority to act as the federal government, asserting its will against a disobedient state.

This is particularly disturbing in the present case against New Jersey. In November 2011, New Jersey voters approved a state constitutional amendment to authorize sports betting by a 2-to-1 margin. Thus, the NCAA and the professional leagues are now directly seeking to overturn the results of a democratic election. They are not doing so to vindicate any public interest—as the public overwhelmingly supports and participates in sports gambling—but to protect their own monopolistic privileges. In the case of the NCAA, which is composed largely of taxpayer-funded universities, this is a completely unacceptable inversion of the constitutional order.

Unfortunately, this is not the only instance of the NCAA purporting to act above the state. The recently announced Penn State sanctions included an unprecedented $60 million fine, which amounts to an illegal tax imposed upon the State of Pennsylvania without the consent of its elected representatives. Not surprisingly, both the Penn State and New Jersey cases use the pretext of protecting children—the commissioners cried during the 1991 PAPSA hearing that legalized sports betting would cause untold misery for the nation’s children, who would inevitably be led into a lifetime of gambling addiction—to justify clearly unconstitutional actions.

Conclusion

Unless New Jersey manages to mount a constitutional challenge to PAPSA, the NCAA and its brethren leagues will succeed in striking down the state’s sports gambling law. It will be a hollow victory, of course, not only because Nevada’s legal sports books remain alive and well, but because, as Steve Czaban of Yahoo Sports Radio told me, no amount of NCAA-sponsored thuggery will dissolve the eternal link between sports and gambling:

Gambling has been going on in regard to sports—professional and otherwise—for decades. ILLEGALLY. That does not mean the money gambled is inconsequential. It is, in fact, huge. To legalize gambling on sports would do nothing to impugn the integrity of the games, since numerous scandals have already been well documented regarding point shaving and game fixing, despite the existing ban on gambling.

In fact, legal public wagering has often had the opposite effect of being the “disinfecting sunshine” that exposes attempts to fix games. The Arizona State [basketball] point shaving scandal of the 1990s was only discovered because someone had bet an abnormally high amount of money on an obscure single college game LEGALLY, in a Las Vegas sports book. Bells and alarms went off with bookmakers, and the scandal unravelled quickly after that.

Gambling encourages transparency. And that, more than anything, is what the NCAA and the pro commissioners want to avoid. It’s no coincidence that the loudest advocate of PASPA was David Stern, a commissioner whose tenure at the NBA has been rife with corruption and serious questions about the league’s integrity, none of which have anything to do with the legality of sports betting.

It’s always been easier for sports leagues to pretend there’s nothing wrong with their product—and fine anyone who says otherwise—than to take a hard look at real problems with officiating, security and player integrity. This is an even bigger problem for the NCAA than the professional leagues due to amateurism restrictions. Gambling may be a convenient scapegoat for the NCAA, but it is not the cause of college football’s ongoing problems.





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