By Anthony Malky
Pennsylvania is betting on a Supreme Court decision that would allow it to offer legal sports gambling. On October 30, 2017 an extensive sports gambling package was signed into law by Pennsylvania Governor Tom Wolf. The bill, H 271, legalizes and regulates daily fantasy sports (DFS) and provides a framework for sports betting in the state.[1] The legislation positions Pennsylvania to offer legal sports betting as soon as federal law permits. In the meantime, DFS players and operators are now free to take advantage of the newly opened market.
Pennsylvania has become the seventeenth state to formally legalize paid-entry, daily fantasy sports with the passage of its new bill.[2] The bill provides a regulatory structure for daily fantasy sports, with operators overseen by the Pennsylvania Gaming Control Board.[3] DFS operators in Pennsylvania must pay $10,000 per year for a license to operate, a $50,000 licensing fee for five years, complete a testing phase to ensure their operations comply with state law, maintain an office or place of business in the state, and are subject to a gross revenue tax of 15%.[4] The tax rate Pennsylvania seeks to impose on DFS operators is higher than most states, but matches the 15% rates of New York and Delaware.[5] Lobbyists for DFS giants DraftKings and FanDuel were influential in drafting the legislation and ultimately getting it passed into law.[6] Thus, expect DraftKings and FanDuel to be the first to market in Pennsylvania as they have been in other states, but the liberal operating regulations and fairly low cost of entry should also entice smaller operators to open up shop in the state.
While DFS has overcome all of the necessary legal hurdles, the sports gambling portion of the legislation, will require the assistance of the Supreme Court. The law must change at the federal level to allow Pennsylvania’s sports betting legislation to take effect. Currently, the Professional and Amateur Sports Protection Act (PASPA) bars single-game sports betting outside of the state of Nevada.[7] Thus, a change to or a repeal of PASPA will need to come first before Pennsylvania is able to offer sports betting. Assuming a favorable decision by the Supreme Court or Congressional action, Pennsylvania legislators believe the state is positioned to offer sports betting as early as mid-2018.[8]
The change that Pennsylvania needs could come in the next several months. In early December, the Supreme Court will hear a sports betting case brought by the state of New Jersey called Christie v. NCAA.[9] New Jersey believes PASPA is unconstitutional and hopes the court will find the same, a decision that would allow states like Pennsylvania to move forward towards offering legal sports betting.[10] If the Supreme Court upholds PASPA or rules in any way so as to maintain the current structure in which sports betting is only permitted in Nevada, states will have to make their cases to Congress to change the law instead. Congress could repeal or amend PASPA on its own, which would be another route that would permit states to offer sports betting. It is unclear as to how the Supreme Court will rule but its decision to hear the case is a monumental step towards eventual legalization, highlighting the traction sports gambling has gained in the mainstream.
Not only has the societal perception of sports gambling shifted, but now professional sports leagues are beginning to get on board as well. With an NHL franchise currently in Las Vegas and the NFL following right behind, the leagues can no longer ignore the possibility of legalized sports betting. The NBA has worked with Las Vegas based gaming consultants for years, while the NFL has long monitored betting trends to ensure the integrity of its product.[11]
Furthermore, the NBA now openly supports the expansion of sports gambling under a federal framework.[12] Undoubtedly, league officials are educating themselves on the current framework and regulation of the industry and working with Vegas insiders to develop strategies that will allow them to capitalize in the event of broad-scale legalization.
While the landscape for legal sports gambling in states like Pennsylvania seems promising, I think it is still too soon to bet on its legalization. It is impossible to determine how the Supreme Court will decide the case, and its decision could lead to an expansion of sports gambling, a reinforcement of the existing framework, or even a buttoning-up of the industry as a whole.
Further, Congress has not committed to amending PASPA, which means the opportunity for legalization likely hinges on the Supreme Court case. After oral arguments are heard early next month there should be a clearer picture as to the trajectory of the case and the ultimate fate of sports gambling.
[1] Dustin Gouker, Add Another Win for DraftKings, FanDuel: PA Becomes 17th State to Enact Daily Fantasy Sports Law, Legal Sports Report (Oct. 30, 2017), https://www.legalsportsreport.com/16329/pennsylvania-17th-state-to-legalize-daily-fantasy-sports/.
[2] Id.
[3] Id.
[4] Id.
[5] Dustin Gouker, PA Senate Passes Gaming Bill With Online Poker, Casino and Daily Fantasy Sports, Online Poker Report (Oct. 25, 2017), https://www.onlinepokerreport.com/27081/pa-online-gambling-bill-passes-senate/.
[6] Dustin Gouker, Add Another Win for DraftKings, FanDuel: PA Becomes 17th State to Enact Daily Fantasy Sports Law, Legal Sports Report (Oct. 30, 2017), https://www.legalsportsreport.com/16329/pennsylvania-17th-state-to-legalize-daily-fantasy-sports/.
[7] Dustin Gouker, PA Governor Signs Sports Gambling Law, But What’s Next?, Legal Sports Report (Oct. 30, 2017), https://www.legalsportsreport.com/16339/pa-sports-betting-law/.
[8] Id.
[9] David Purdum, Supreme Court Agrees to Rule on Sports Betting, ESPN (June 28, 2017), http://www.espn.com/chalk/story/_/id/19749356/us-supreme-court-hear-new-jersey-sports-betting-case.
[10] Id.
[11] David Purdum, Sports Betting Legalization: Where Do We Stand Right Now?, ESPN (Sept. 14, 2017), http://www.espn.com/chalk/story/_/id/20704273/gambling-where-does-sports-betting-legalization-us-stand-right-now.
[12] Id.