WASHINGTON – A United States Supreme Court ruling that struck down a 1992 federal law prohibiting state-sanctioned gambling on competitive sports in most parts of the country may be a revenue jackpot for New Jersey and other states.

The high court’s 6-3 ruling on Monday could have broad implications nationwide because it invalidated the 26-year-old Professional and Amateur Sports Protection Act (PASPA), which prohibited state-sanctioned gambling on competitive sports in all states except in Nevada, Oregon, Montana and Delaware.

The decision arose from a lawsuit over a 2014 New Jersey law authorizing sports wagers at horse racing tracks and Atlantic City casinos, where local leaders had said they expected big benefits from a ruling in their favor.

“This is a decisive and extremely gratifying victory for New Jersey,” said New Jersey Senate President Steve Sweeney, a Democrat. “We are on the right side of history with this case with a decision that will allow us to follow through with legally sanctioned sports betting. We can now seize the opportunity with a new sector of gaming that will help create jobs, generate economic growth and be an important boost to the casino industry and horse racing. Sports betting is already a common practice and making it legal is the most responsible and most beneficial thing to do.”

The U.S. Supreme Court's decision in Murphy v. National Collegiate Athletics Association opens the door for gaming that could impact state and locality bottom lines nationwide.
The U.S. Supreme Court's decision in Murphy v. National Collegiate Athletics Association opens the door for gaming that could impact state and locality bottom lines nationwide. Brian Tumulty, The Bond Buyer

The nation’s high court found that PASPA was unconstitutional because instead of regulating sports gambling directly, it regulated state governments’ regulations: a power the court said Congress does not have under the U. S. Constitution.

“Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” wrote Justice Samuel Alito.

Five professional sports leagues and the National Collegiate Athletic Association had sued to prevent the law allowing gaming in New Jersey from moving ahead. Both a federal district court and the U.S. Court of Appeals for the Third Circuit had ruled against New Jersey before the Supreme Court stepped in.

New Jersey has faced fiscal pressures in recent years stemming mainly from a large unfunded pension liability and has suffered numerous downgrades in the past few years. It now has bond ratings of A3 from Moody’s Investors Service, A-minus from S&P Global Ratings, and A from both Fitch Ratings and Kroll Bond Rating Agency. The Garden State was estimated to generate more than $173 million in additional annual tax revenue and 3,633 jobs if allowed to proceed with the gaming, according to a study from Oxford Economics.

Atlantic City in particular was hoping to get a boost from a victory, as the casinos there that once enjoyed a virtual monopoly on East Coast gaming but lost out in recent years from competition in other states.

While some analysts have said the impact in New Jersey could be stifled by gambling in other states, New Jersey is among those well-positioned to benefit immediately because it already had the ball rolling.

"Operators in states that have already approved sports betting (in anticipation of repeal), including New Jersey, Pennsylvania, among others, will benefit first," said Moody's gaming analyst Peggy Holloway.

Fitch ratings pointed out last month that Connecticut, Mississippi, New York and West Virginia have also recently enacted laws to offer legal sports betting. Also, such legislation has been introduced recently in 14 other states. But Fitch says the impact might end up being modest.

“Regardless of a potential expansion in legal gaming offerings, Fitch believes competitive tax rates will be required to draw participants from existing illegal or informal wagering pools,” the agency said. “This constraint is likely to result in only modest tax revenue to states although sports wagering would add an amenity to regional casino operators that could drive incremental visitation.”

The decision does not bar Congress from passing new gambling legislation.

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Kyle Glazier

Kyle Glazier

Kyle Glazier is a reporter covering market trends, infrastructure, and the Far West region for The Bond Buyer.