“Always read the footnotes.”
As a college professor, that is my oft-repeated advice to students when reading legal decisions.
Last month, Judge Andrew P. Gordon — a federal district court judge residing in Nevada — issued a 27-page ruling in favor of the state in its litigation against Crypto.com involving the permissibility of sports event contracts. Footnote 13 included a direct citation to the Supreme Court’s Gov. Murphy v. NCAA, NFL, NBA, NHL & MLB decision. In the relevant part, here are Judge Gordon’s sentences immediately before and after the footnote:
“[C]asinos have openly operated sports books and accepted sports wagers on the outcomes of sporting events in this state and others both before and after the 2010 amendments to the CEA [Commodity Exchange Act]. And no one, including Congress and the CFTC [Commodity Futures Trading Commission], has suggested those bets are ‘swaps’ that had to be conducted on a DCM [designated contract market].”
As a close observer during the entire pendency of the SCOTUS sports betting case involving New Jersey, I did not recall the Supreme Court — or anyone else involved in any portion of the litigation spanning seven years from 2012-18 — ever mentioning how federal laws pertaining to commodities permitted sports wagering.
So I decided to re-visit Gov. Murphy v. NCAA, et al. and see what, if anything, was discussed during the case about prediction markets, event contracts, derivatives, or swaps involving sports.
I found nothing.
What the Supreme Court concluded
The majority ruling in the 2018 Supreme Court case that ushered in the expansion of legalized sports betting nationwide was written by Justice Samuel Alito. The most important sentence in the lengthy ruling was decidedly simple: “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.”
The Supreme Court majority opinion also delved into the history of sports betting vis-à-vis federal regulatory efforts, but never alluded to federal laws such as the Commodity Exchange Act (CEA) and Dodd-Frank Act, which is now at the center of litigation involving companies such as Crypto.com, Robinhood, and Kalshi.
When discussing the “general federal approach” tethered to sports gambling, the Supreme Court referenced several federal laws, including the Illegal Gambling Business Act and the Wire Act. Justice Alito wrote that “[t]hese provisions implement a coherent federal policy: They respect the policy choices of the people of each State on the controversial issue of gambling.”
Concurrences and dissents
Justice Alito’s majority ruling wasn’t the only opinion that emanated from the Supreme Court on May 14, 2018. Justice Clarence Thomas joined the majority opinion “in its entirety,” but wrote a concurrence separately to emphasize his concerns about “severability,” a legal principle pertaining to whether unconstitutional laws should be overruled entirely or only partially. Justice Thomas made no mention of the federal laws about commodities extending to sports betting.
Justice Stephen Breyer filed a short statement described as a partial concurrence and partial dissent. In discussing the “federal policy” involving sports wagering, Justice Breyer focused on the Professional and Amateur Sports Protection Act (PASPA) and never cited any federal statute relied on in the current prediction market litigation across a half-a-dozen states.
Justice Ruth Bader Ginsburg wrote a dissent that was joined by Justice Sonia Sotomayor. Justice Ginsburg dissented from the majority of the Supreme Court because she disagreed about how PASPA was deemed unconstitutional in toto, as opposed to only having a portion of the statute declared impermissible.
Justice Ginsburg — in the main text and in a footnote — also weighed in on the same “direct” regulation issue flagged by Justice Alito in the Supreme Court majority opinion:
“Nor is there any doubt that Congress has power to regulate gambling on a nationwide basis … direct federal regulation of sports-gambling schemes nationwide, including private-party schemes, falls within Congress’ power to regulate activities having a substantial effect on interstate commerce. See Gonzales v. Raich, 545 U. S. 1, 17 (2005). Indeed, according to the Court, direct regulation is precisely what the anticommandeering doctrine requires.”
Justice Ginsburg made no mention of any federal commodity-focused laws as overlapping with sports gambling.
Others who never discussed the issue
The nine U.S. Supreme Court justices were not alone. Here is a partial list of others who never mentioned the role of the CEA, Dodd-Frank Act, or CFTC regulations in the context of sports betting from 2012-18:
- Judge Michael Shipp, the New Jersey-based federal judge who oversaw the district court proceedings in the cases that were filed between 2012-14 by the five sports leagues against New Jersey;
- Three judges at the U.S. Court of Appeals’ Third Circuit when the first iteration of the case was decided in 2013;
- The entire en banc panel of the Third Circuit when the second iteration of the case was decided in 2016;
- Four then current or former U.S. solicitor generals — the high-ranking Department of Justice (DOJ) officials responsible for all Supreme Court litigation — who were intricately involved in the litigation during the seven-year span: Ted Olson, Paul Clement, Donald Verrilli, and Noel Francisco;
- Over a dozen DOJ attorneys who filed briefs as intervenors during the first phase of the litigation (2012-14) or as an interested party during the second phase of the case (2014-18);
- Dozens of amici — including me — who filed briefs at various stages from the perspective of industry stakeholders, state law enforcement, or academia; and
- Adam Silver, who penned a New York Times op-ed in 2014 extolling the virtues of a “federal framework” for sports betting regulation.
The path to SCOTUS (again)
In lawsuits across the country — Nevada, New Jersey, Maryland, Ohio, Massachusetts, and New York as of last week — prediction market operators are taking the legal position that Congress passed legislation in 2010 authorizing the CFTC to exclusively regulate sports-based markets offered by entities pre-approved by the CFTC.
To date, there have been a mixed bag of results across the different courtrooms, creating the possibility of a “circuit split” that could nudge the Supreme Court to resolve all the pending litigation with a definitive ruling. If so, it seems likely that the earliest the high court could hear that case would be 2027 or 2028.
A majority of the SCOTUS justices who decided Gov. Murphy v. NCAA, et al. will likely still be on the Supreme Court bench in two to three years. They would have to ponder whether they overlooked the novel argument that Congress authorized sports betting in all 50 states to flow through companies registered with the CFTC instead of regulators in states that have legalized sports wagering. Likewise, the justices would be tasked with deciding whether the prediction market companies’ legal position effectively preempts existing statutory sports betting bans in states like Utah, Texas, and California.
Indeed, SCOTUS may look to quote from Judge Gordon’s ruling in the Crypto.com case last month to address such a novel argument:
“Had Congress intended such a sea change in the regulatory landscape, it surely would have said so. See Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001) (“Congress, we have held, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.”). The CEA’s language and legislative history show that Congress did not intend such a change and, to the contrary, did not want gambling to take place on CFTC-designated exchanges.”
But the Supreme Court will not find anything on-point in its own Gov. Murphy v. NCAA, et al. ruling seven years ago.
Perhaps the absence of evidence will itself be revealing.
