Legalizing Sports Wagering… A long shot, but don’t bet against it!

1. Legalizing Sports Wagering…A long shot, but don’t bet against it! Presentation by Alan Koslow, Esq.Shareholder and Director of Gaming, Hospitality & Sports LawBecker & Poliakoff, P.A. | Fort Lauderdale, Florida Research by Michelle L. Klymko, Esq.

2. Current Law on Sports Wagering in the U.S. The Professional Amateur Sports Protection Act (PASPA) was enacted by Congress in 1992 PASPA makes it illegal to bet on professional and amateur athletics. Four states, Nevada, Oregon, Montana, and Delaware, were grandfathered in as exceptions under PASPA because they had some form of sports wagering at the State level at the time of enactment. (Nevada is unique in that it is the only State in the United States that has legalized licensed sports books, which comes under PASPA’s exceptions. (28 USC §3704)

3. 28 USCSection 3702, the main provision, provides that: • It shall be unlawful for • a governmental entity to sponsor, operate, advertise, promote, license, or authorize by law or compact, or • (2) a person to sponsor, operate, advertise, or promote,pursuant to the law or compact of a governmental entity, a lottery, sweepstakes, or other betting, gambling, or wagering scheme based, directly or indirectly (through the use of geographical references or otherwise), on one or more competitive games in which amateur or professional athletes participate, or are intended to participate, or on one or more performances of such athletes in such games. • PASPA's only remedial scheme, found in Section 3703, allows a sports organization or the United States Attorney General to seek injunctive relief if Section 3702 is violated: Specific Language of PASPA

4. PASPA Opponents (at time of enactment) • PASPA received opposition from Senator Chuck Grassley of Iowa and the Department of Justice ("DOJ"), as they felt that PASPA would be a "substantial intrusion" into states' rights. • Senator Grassley argued that it would discriminate among the states because the grandfathered states would have a monopoly on sports gambling. • The DOJ went on to say that "determinations of how to raise revenue have typically been left to the states.“ • Senator Grassley contended that “if the professional sports leagues were truly concerned about the risk of 'fixed' games [and] the integrity of professional sports . . . they would have sought to prohibit the $1.8 billion head-to-head sports wagering industry in Nevada."

5. The Professional and Amateur sports leagues have • complained that sports gambling ruins the integrity of their sports. They do not want fans to think that the “fix was in” when a controversial play occurs. • However, since PASPA’s enactment, there have been several episodes of point shaving that would lead one to believe the integrity of sport will always be challenged, regardless of whether sports gambling is legal. • One of the biggest proponents of PASPA was Senator Bill Bradley, former professional basketball player and New Jersey Senator. Senator Bradley was concerned that state-sanctioned sports gambling would send the wrong message to children that sports revolve around gambling rather than achievement and sportsmanship. • Senator Bradley also believed that gambling would injure the integrity of sport by causing fans to question whether a missed shot or fumble was "fixed." He "believed that 'the harm that state-sponsored sports betting causes'—that is, threatening the integrity of sports in the eyes of both fans and young people—far outweighed the financial advantages received. PASPA Supporters (at time of enactment)

6. Do Federal Laws Really Prohibit Sports Wagering Within States? 18 U.S.C. § 1084 - The Federal Wire Act ("Wire Act") prohibits the use of wire communications in wagering on a sporting event. In combination, PASPA and the Wire Act amount to what appears to be a defacto prohibition on Internet sports wagering. 18 U.S.C. §1952 – The Travel Act - forbids the use of the U.S. mail, or interstate or foreign travel, for the purpose of engaging in certain specified criminal acts. 31 U.S.C. §§ 53161-5367 – The Unlawful Internet Gambling Enforcement Act of 2006 - prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law

7. Economic Impact of Sports Wagering In Nevada • In 2011, $2.88 billion was legally wagered in Nevada’s sports books; (Note: While approximately $2.88 billion was wagered in 2011, more than 95 percent of all bets placed were returned to patrons in winnings). As of June 2012, Nevada has 216 legal sports books. • The National Gambling Impact Study Commission (NGISC) estimated that illegal wagers are as much as $380 billion wagered illegally annually. • According to the Nevada Gaming Control Board, approximately $93.9 million was wagered on the 2012 Super Bowl at legalized sports books across the state, but most of that figure was returned to bettors in the form of winnings.

8. States that currently allow legalized sports gambling have an advantage over the rest of the states The Numbers Don’t Lie • Legal sports wagering helps bring more than 30 million visitors to Nevada each year and provides employment for thousands of people. • The FBI estimates that more than $2.5 billion is illegally wagered annually on March Madness. • The Las Vegas Convention and Visitors Authority estimated that the 2007 Super Bowl weekend generated $109.5 million in non-gaming economic impact and attracted approximately 287,000 visitors. • Club CalNeva, a Las Vegas based company that operates over thirty sports books forecasts that sports gambling will bring in $1.3 billion in gross revenues and $220 million in tax revenues for New Jersey on an annual basis. Source: American Gaming Association Fact Sheet

9. Most states use lotteries to fund public education, economic development, state parks and gambling problem treatment, so what is wrong with legalized sports wagering? Questions States Should Be Asking: Is PASPA an excuse for the Federal Government to thwart a State’s ability to raise its own revenues? Does PASPA violate the Constitution’s 10th Amendment and the Commerce Clause? Should PASPA be repealed for economic reasons? Is it outdated? Archaic? (Analogy to legalization of marijuana at state level) Why shouldn’t States be free to set up their own taxing schemes from sports wagering? Sports Wagering as a Revenue Source

10. Why New Jersey? Why Now? In 2011, NJ State. Sen. Raymond Lesniak (D) envisioned a change that would bring up to $100 million to state coffers in taxes, generate billions in betting, spark economic activity, and throw lifelines to casinos and the horse-racing industry. "Our casinos are suffering, our racetracks are dying, and our state budget needs revenues," "How can Congress say to the people of the state of New Jersey, 'You do not have this right that the people in Nevada do?” Lesniak said. He contends, among other things, that the federal law does not uniformly regulate commerce and is overly broad and vague.

11. New Jersey Taking on the Feds? New Jersey lawmakers have long insisted PASPA is unconstitutional Nov. 9, 2011 - After a two-year long effort, in the courts and in the state legislature, New Jersey voters overwhelmingly supported the beginning of legal sports wagering in New Jersey. Voters approved the constitutional question by a final margin of 65% in favor, 35% opposed. The bets could be placed at horse tracks throughout New Jersey and casinos in Atlantic City. Jan. 17, 2012 - New Jersey Governor Chris Christie signed into law a constitutional amendment that will permit sports wagering at the State’s casinos and race tracks. Governor Christie signed the bill which can take effect once PASPA has been overturned or repealed. Governor Christie decided that rather than challenging PASPA in court and trying to overturn the law, New Jersey will implement sports gaming as of January 2013. August 2012 - August the NCAA along with the NFL, NBA, NHL, and MLB, filed a lawsuit in federal court seeking to prohibit New Jersey from implementing sports gambling. Case Number: 12-cv-4947

12. in New Jersey December 21, 2012 - According to a Wall Street Journal report, US District Judge Michael Shipp agreed with the National Football League, Major League Baseball, National Basketball Association, National Hockey League, and National Collegiate Athletic Association that they might suffer injury if such gambling were legalized in the state. Following, Governor Christie said - “We intend to move forward and to issue sports gaming licenses where appropriate, and to have this happen in our state.”

13. Judge Shipp’s Order • For the reasons stated in the Opinion filed on this date, and for other good cause shown,IT IS on this 21st day of December, 2012, ORDERED that: • Plaintiffs have demonstrated standing and this case will proceed to the merits;” • 2) Defendants’ Motion to Dismiss (ECF No. 29) is DENIED; • 3) Defendants’ Cross Motion for Summary Judgment (ECF No. 76) is DENIED in so far as it challenges Plaintiffs’ standing; • 4) Plaintiffs’ Motion to Preclude the Expert Testimony of Robert D. Willig (ECF No. 98) is administratively terminated as moot; and • 5) A date for oral argument regarding the constitutional issues will be issued after January 20, 2013.

14. Faced with a mounting budget crisis, Delaware decided to offer a broader range of sports betting games on non-Delaware athletic events, including individual games at the professional and college level. The state-run betting operation was set to begin in September 2009. The four major professional sports leagues – baseball, basketball, football, and hockey – and the National Collegiate Athletic Association filed suit to block the Delaware sports betting operation. The Issue: whether the federal law’s grandfather clause should be read broadly to permit states to operate a wide range of gambling options, or whether the clause should be read narrowly to authorize only the same wagering games offered in the state between 1976 and 1990. The Third Circuit ruled that the Delaware plan exceeded the narrow scope of the federal law’s grandfather clause. The state could run the same games it ran in 1976 but may not expand those games or include new games, the appeals court ruled. The US Supreme Court let stand an appeals court ruling that the Delaware’s plan to run an expanded sports betting operation is barred by a federal antigambling law. - Markell v. Office of the Commissioner of Baseball, et al. Other Challenges Involving Sports Wagering

15. In Flager v. United States Attorney for the District of New Jersey, a private citizen of New Jersey challenged PASPA on the grounds that it violated the Tenth Amendment because "the power to outlaw sports wagering was not expressly granted to the federal government" by the Constitution. The court did not address the Tenth Amendment claim and dismissed the case holding that the plaintiff lacked standing. Case Number: 2:2006cv03699, filed:August 7, 2006, New Jersey District Court . In Interactive Media Entertainment and Gaming Association, Inc. v. Holder, Interactive Media Entertainment and Gaming Association, Inc. ("iMEGA"), New Jersey state senator Raymond Lesniak, and the New Jersey horse-racing industry filed suit against the United States Attorney General, Eric Holder, claiming that PASPA was unconstitutional and violated the First, Fifth, Tenth, Eleventh, and Fourteenth Amendments in addition to the Equal Protection & Commerce Clause. The government sought to dismiss the case for lack of standing and failure to state a claim. The Court ruled that the Plaintiff lacked standing and that under the 10th Amendment (the State’s express and implied reserved powers to regulate matters affecting its citizens including the raising of revenue) was reserved for the states only and since New Jersey was not a party to this suit, Plaintiff has no standing. (2011 WL 802106) . Other Challenges to PASPA

16. April 26, 2012 - Rep. Frank LoBiondo (R-NJ 2nd) and Rep. Frank Pallone, Jr. (D-NJ 6th) have asked members of the US House of Representatives to support two bills introduced to roll back the Federal ban on expanded state-licensed sports betting. • In a letter to colleagues, Reps. LoBiondo and Pallone asked members to: • Support H.R.3809, “the New Jersey Betting and Equal Treatment Act of 2012″, which seeks ”to exclude the State of New Jersey from the prohibition on professional and amateur sports gambling”; • Support and H.R.3797 - “the Sports Gaming Opportunity Act of 2012″ , which would amend Chapters 178 of Title 28 USC to “permit a 4-year period [for] States to enact statutes…[for] wagering schemes involving professional and amateur sports. No action was taken on either bill other than referral to Committee. • Congress was asked to consider the economic benefits of rolling • back the Professional & Amateur Sports Protection Act of 1992 Most Recent Legislative Efforts

17. If State’s Can Legalize Marijuana to Raise Revenue, Why Can’t States Legalize Sports Books for Same Reason? Colorado's legalization of marijuana campaign touted money for school construction. Ads promoted the measure with the tag line, "Strict Regulation. Fund Education." State analysts project somewhere between $5 million and $22 million a year in additional revenue for Colorado. An economist whose study was funded by a pro-pot group projects a $60 million boost by 2017, said Christopher Stiffler, an economist for the nonpartisan Colorado Center on Law & Policy. Washington State’s campaign promised to devote more than half of marijuana taxes to substance-abuse prevention, research, education and health care. Washington State analysts have produced the most generous estimate of how much tax revenue legal pot could produce, at nearly $2 billion over five years. Oregon's measure, known as the Cannabis Tax Act, would devote 90% of recreational marijuana proceeds to the state's general fund. Oregon's fiscal analysts haven't even guessed at the total revenue, citing the many uncertainties inherent in a new marijuana market. They have projected prison savings between $1.4 million and $2.4 million a year if marijuana use was legal without a doctor's recommendation.

18. On balance, the better legal and policy arguments militate in favor of recognizing the States’ inherent rights reserved to them under the Constitution to enact laws to raise revenues, and specifically, laws authorizing sports wagering. • Why is sports wagering sacrosanct to the Federal PASPA laws pre-empting the field when all other casino gaming laws and licensing are consistently dealt with at the respective State level. If marijuana sales can now be legalized State by State in their respective discretion, isn’t legalized sports wagering a fortiori argument. • Does Federal Policy creating a “back door” monopoly on sports wagering to Nevada casinos and sports books make any sense? • The policy clearly impedes on a State’s rights and encourages illegal sports wagering activity through “bookies” and sports wagering on the internet. • Given recent trends for states to exercise their rights to legislate their own State Policies on all other forms of casino gaming, PASPA’s prohibitions on sports wagering seem arbitrary, capricious and archaic and no longer justified. Conclusion

19. Questions Welcomed Thank you