Yesterday was Constitution Day. It’s oddly fitting, then, that the U.S. Third Circuit Court of Appeals issued its opinion in a case that reflects the massive changes in constitutional priorities over the past 220-plus years. The NCAA and the four major North American professional sports leagues sued the State of New Jersey to prevent implementation of a voter-approved state constitutional amendment enabling sports wagering at existing state gaming facilities. The leagues, relying on a federal law adopted at their insistence in 1992, managed to invalidate the New Jersey action–all under the pretext of “federalism” and regulating “interstate commerce.”
Sports betting remains legal in Nevada, which was grandfathered in under the 1992 law. As the law currently stands, no other state may currently license or permit sports wagering of any kind. Congress, over the Justice Department’s objections at the time, gave the leagues themselves the right to seek an injunction against any state that attempted to defy the federal ban.
New Jersey challenged this congressional grant of standing in the present lawsuit. But neither the district judge that initially heard the case–and ruled in favor of the leagues–nor the three judges sitting for the Third Circuit agreed with New Jersey’s argument. The standing issue is critical because it establishes how the entire federal ban is predicated on utter bullshit.
As the Third Circuit notes in its opinion, wagering “is simply a contingent contract involving ‘two or more . . . parties, having mutual rights in respect to the money or other thing wagered.’” More to the point, it is a contract between private parties and not the leagues. The league may produce the “object” of the wager, but that does not make it a party to the contract.
So why, then, should the leagues have standing to prevent the private contractual arrangements of thousands of third parties who seek to wager on games? According to the Third Circuit, the mere existence of legal sports betting “threatens to cause [the leagues] reputational harm amongst their fans and the public.” Yes, you read that correctly. The NFL, NBA, et al., may violate your right to enter into contracts with others because it may harm their reputation.
The Third Circuit cited two examples of how “reputational harm” creates a legal injury. The first involved a Supreme Court decision from 1987 where “a senator who wished to screen films produced by a foreign company had standing to challenge a law requiring the identification of such films as foreign ‘political propaganda’ because the label could harm his reputation with the public and hurt his chances at reelection.” The second case, a Third Circuit decision from 2007, said a medical student could challenge “a rule requiring that he be identified as disabled because such label could sour the perception of him by ‘people who can affect his future and his livelihood.’”
The Third Circuit said like those two cases, here the leagues are harmed by the mere “unwanted association” with an activity they disapprove of–gambling. The court said such an association was “stigmatizing”:
Before the District Court were studies showing that: (1) some fans from each League viewed gambling as a problem area for the Leagues, and some fans expressed their belief that game fixing most threatened the Leagues’ integrity; (2) some fans did not want a professional sports franchise to open in Las Vegas, and some fans would be less likely to spend money on the Leagues if that occurred; and (3) a large number of fans oppose the expansion of legalized sports betting.
The operative word in this paragraph is “some.” The Third Circuit didn’t require proof that many or most fans had a negative association with legal sports betting–just “some” of them. That’s all the leagues had to show to prove a legal injury exists. The overwhelming empirical data demonstrating the leagues are economic juggernauts despite the widespread existence of illegal wagering–not to mention Nevada’s legal wagering–is dismissed by the court as irrelevant.
The entire notion of “reputation injury” is itself ridiculous. If Congress can ban the states from allowing legal sports betting to protect the leagues’ reputation, why can’t it simply ban all discussion of gambling in the course of interstate commerce? NBA Commissioner David Stern raised this issue in 1991: “[The NBA] would actively support any legislation that would prohibit the media from carrying point spreads, if such legislation were permissible under the First Amendment.” But there are plenty of First Amendment loopholes. The FCC, for example, could ban network broadcasters–say, Al Michaels–from mentioning point spreads on the air. After all, such words would tend to associate the NFL with illegal gambling.
“Reputation injury” is fundamentally incompatible with constitutional government or a free society. The whole point of the 1992 law was to short-circuit both federalism and separation of powers by (1) granting executive power indirectly to the sports leagues, (2) subverting the interstate commerce clause by deliberately favoring one state–Nevada–over the others, and (3) enabling private businesses to overrule the sovereign voters of the State of New Jersey to determine local laws. And all this in order to protect said private businesses from the mere possibility that some customers might form a negative association between the leagues’ games and the private contractual wagers of third parties.
S.M. Oliva (@skipoliva) is a writer living in Charlottesville, Virginia. Please feel free to email the author at skip -at- skipoliva -dot- com.