[h=1]History Repeating? How The Next Sports Gambling Lawsuit May Manifest[/h]
John Holden, Jun 11, 2018
John Holden, Jun 11, 2018
The expansion of legalized Delaware sports betting on June 5 marked the first time in that single-game betting was properly licensed in the US under state law outside of Nevada.
Shortly before Gov. John Carney placed the first wager, some chatter began to emerge following an Associated Press report that various options remained on the table for sports leagues to obtain concessions in the New Jersey legislature.
The response from New Jersey legislators to representatives from the sports leagues regarding the suggestion that the sports leagues should benefit from legalized sports betting was less than kind, after the state reportedly spent more than $9 million in legal fees alone in the fight to offer sports betting.
While the horses have likely left the barn on a broad prohibition of sports betting resulting from sports league litigation, the path forward is not going to be free from challenges. In fact, in nearly every instance that a state other than Nevada has attempted to offer a new type of sports betting, the sports leagues were there hauling state officials into federal court.
[h=2]NFL v. Delaware – 1977[/h]Shortly before Gov. John Carney placed the first wager, some chatter began to emerge following an Associated Press report that various options remained on the table for sports leagues to obtain concessions in the New Jersey legislature.
The response from New Jersey legislators to representatives from the sports leagues regarding the suggestion that the sports leagues should benefit from legalized sports betting was less than kind, after the state reportedly spent more than $9 million in legal fees alone in the fight to offer sports betting.
While the horses have likely left the barn on a broad prohibition of sports betting resulting from sports league litigation, the path forward is not going to be free from challenges. In fact, in nearly every instance that a state other than Nevada has attempted to offer a new type of sports betting, the sports leagues were there hauling state officials into federal court.
In 1977, the NFL and all of its member teams sued the governor of Delaware and the director of the state lottery, for the first time. The NFL raised four issues in their efforts to stop Delaware’s efforts to launch a new lottery game based on the results of NFL games.
[*=1]The first theory advanced by the NFL was that the state was misappropriating the NFL’s intellectual property.
[*=1]The second theory advanced was that the Delaware lottery was giving an impression of an association with the NFL by offering the lottery games (note the disclaimer on 2018 materials).
[*=1]Third, the NFL attempted to enforce a Delaware lottery statute against the lottery by arguing that one of the proposed games did not comply with Delaware law requiring lotteries to payout at least 45 percent of revenue in prizes.
[*=1]Finally, the NFL attempted to enforce federal gambling law against the director of the lottery and the governor.
In regards to the NFL’s intellectual property misappropriation claims, the Delaware District Court said:
“The only tangible product of plaintiffs’ labor which defendants utilize in the Delaware Lottery are the schedule of NFL games and the scores. These are obtained from public sources and are utilized only after plaintiffs have disseminated them at large and no longer have any expectation of generating revenue from further dissemination.”
On the issue of whether the lottery was seen to be signaling an association with the NFL, the league was successful in getting Delaware to implement a disclaimer disassociating the lottery from any NFL endorsement. While the NFL successfully raised concerns regarding the payout percentages, the league was not successful in convincing a federal judge to give them the power to enforce federal criminal law.
[h=2]NBA v. Oregon Lottery – 1989[/h]
In 1989, the Oregon Lottery sought to expand its “Sports Action” parlay offerings beyond simply NFL games. Like the NFL before it in Delaware, the NBA sued, arguing that the new Sports Action games violated Federal gambling laws (this is three years before PASPA); the games violated the Oregon constitution; and the state lottery was infringing on various property rights, including the intellectual property rights of the league and the league’s teams.
The Oregon Lottery case would not result in a reported decision of precedential value; instead the lottery and the NBA would settle the lawsuit out of court on December 17, 1990, after a federal judge had tossed out the NBA’s attempts to enforce both federal criminal law and Oregon’s own constitution in March of 1990 (the judge did not rule on claims regarding property rights). In spite of Sports Action offering wagering on both NBA and NFL games, the NFL did not join the lawsuit.
[h=2]MLB v. Delaware – 2009[/h]The Oregon Lottery case would not result in a reported decision of precedential value; instead the lottery and the NBA would settle the lawsuit out of court on December 17, 1990, after a federal judge had tossed out the NBA’s attempts to enforce both federal criminal law and Oregon’s own constitution in March of 1990 (the judge did not rule on claims regarding property rights). In spite of Sports Action offering wagering on both NBA and NFL games, the NFL did not join the lawsuit.
Delaware was again the target of the professional sports leagues’ high-priced lawyers in 2009, just a few years before the same conglomerate would sue the governor of New Jersey.
The sports leagues argued that Delaware’s efforts to offer more than parlay betting on NFL games violated Delaware’s constitution, in addition to the now deceased Professional and Amateur Sports Protection Act (PASPA). The leagues, which initially saw federal judge Gregory Sleet deny their request for a preliminary injunction, would go on to prevail in later stages of the litigation. Sleet cited the words of Judge Stapleton, who ruled against the NFL more than 30 years earlier stating:
The sports leagues argued that Delaware’s efforts to offer more than parlay betting on NFL games violated Delaware’s constitution, in addition to the now deceased Professional and Amateur Sports Protection Act (PASPA). The leagues, which initially saw federal judge Gregory Sleet deny their request for a preliminary injunction, would go on to prevail in later stages of the litigation. Sleet cited the words of Judge Stapleton, who ruled against the NFL more than 30 years earlier stating:
I should add that the plaintiffs have not demonstrated that the existence of gambling on its games, per se, has or will damage its good will or reputation for integrity. By this, I do not suggest that an association of the NFL with a gambling enterprise in the minds of the public would not have a deleterious effect on its business. Such an association presupposes public perception of the NFL sponsorship or approval of a gambling enterprise or at least confusion on this score. . . .
I do find, however, that the existence of gambling on NFL games, unaccompanied by any confusion with respect to sponsorship, has not injured the NFL and there is no reason to believe it will do so in the future. The record shows that extensive gambling on the NFL has existed for many years and that this fact of common public knowledge has not injured plaintiffs, or their reputation.
[h=2]NCAA v. Christie[/h]I do find, however, that the existence of gambling on NFL games, unaccompanied by any confusion with respect to sponsorship, has not injured the NFL and there is no reason to believe it will do so in the future. The record shows that extensive gambling on the NFL has existed for many years and that this fact of common public knowledge has not injured plaintiffs, or their reputation.
On August 7, 2012, the major American sports leagues sued the governor of New Jersey for the first time, alleging in a one-count complaint that New Jersey’s new law allowing sports betting was a violation of the Professional and Amateur Sports Protection Act. The defunct statute also served as the primary focus of the leagues’ initiation of the second dance with the governor of the Garden State.
The 2014 version of the Christie case would see the complaint double in length. While Count 1 remained the same, the leagues sought a more indiscriminate approach in their efforts to stop New Jersey’s second kick at the can by alleging that in addition to violating PASPA, New Jersey was violating its own constitution. As we learned on May 14, 2018, PASPA was unconstitutional, but the issue of New Jersey violating its own constitution had been dropped before the case reached the Supreme Court.
While PASPA has been eliminated by the stroke of Justice Samuel Alito’s pen, the likelihood that this is the last time the sports leagues attempt to influence sports betting is about the same as the Miami Marlins having the best record in baseball this season.
[h=2]What tricks might be left up the leagues’ sleeves?[/h]The 2014 version of the Christie case would see the complaint double in length. While Count 1 remained the same, the leagues sought a more indiscriminate approach in their efforts to stop New Jersey’s second kick at the can by alleging that in addition to violating PASPA, New Jersey was violating its own constitution. As we learned on May 14, 2018, PASPA was unconstitutional, but the issue of New Jersey violating its own constitution had been dropped before the case reached the Supreme Court.
While PASPA has been eliminated by the stroke of Justice Samuel Alito’s pen, the likelihood that this is the last time the sports leagues attempt to influence sports betting is about the same as the Miami Marlins having the best record in baseball this season.
While the sports leagues have built empires on consistently delivering an entertaining product, they have also resorted to the legal system frequently in efforts to stop sports betting, especially when they do not receive what they want.
If you have not heard, the sports leagues have not been having as much success with lobbying as they likely had hoped. This raises the possibility that the leagues may seek to obtain some clarity as to their entitlement through the legal system. While it is possible that the leagues may try to argue that new gambling laws violate state constitutions or go back to the well, again, and try to enforce federal criminal laws, given the recent chatter one possible lawsuit may involve the leagues’ claims to intellectual property.
The argument that the leagues own the scores of the games does not appear strong given existing precedent, but the sports leagues do own extensive intellectual property. In particular, the leagues own team names and logos. Given the history of some leagues targeting things like podcasts, which use team names, it would not appear out of the question for the leagues to demand either that sportsbooks not use team names, or that the books pay a licensing fee for the right to use team names and/or logos.
[h=2]But, what about Nevada?[/h]If you have not heard, the sports leagues have not been having as much success with lobbying as they likely had hoped. This raises the possibility that the leagues may seek to obtain some clarity as to their entitlement through the legal system. While it is possible that the leagues may try to argue that new gambling laws violate state constitutions or go back to the well, again, and try to enforce federal criminal laws, given the recent chatter one possible lawsuit may involve the leagues’ claims to intellectual property.
The argument that the leagues own the scores of the games does not appear strong given existing precedent, but the sports leagues do own extensive intellectual property. In particular, the leagues own team names and logos. Given the history of some leagues targeting things like podcasts, which use team names, it would not appear out of the question for the leagues to demand either that sportsbooks not use team names, or that the books pay a licensing fee for the right to use team names and/or logos.
Before PASPA became PASPA, the original Congressional plan was to amend an intellectual property statute to prohibit state lotteries from using league and team service marks. The issue of team names being used in Nevada came up during a Senate hearing. In response to a question from Sen. Dennis DeConcini asking:
Unlike state lotteries, many Las Vegas casinos use team names and logos for placing bets. Why has the NFL taken no legal action against the licensed sports books in Las Vegas?
Former NFL commissioner Paul Tagliabue may have telegraphed the leagues’ legal research on the likelihood of success on such a claim when he stated:
We do not approve of the licensed sports books in Las Vegas. If it were within our power to eliminate them, we would do so. Lanham Act protection has not proven to be sufficient to address our concerns.
No one outside of league offices knows what their plan is with regards to potential litigation. While there does not appear to be an obvious or clear path to victory for the leagues, the leagues do own extensive rights that newly minted legal sportsbooks would likely be wise to avoid.
Litigation or even the threat of litigation can sometimes act as a catalyst for an agreement between parties. The leagues may also seek an alternative path, one that is perhaps even more uncertain, going to Congress.
<strike></strike>Litigation or even the threat of litigation can sometimes act as a catalyst for an agreement between parties. The leagues may also seek an alternative path, one that is perhaps even more uncertain, going to Congress.
