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NJ Lawmakers Hope to Cash in Fast as Supreme Court Rules in Favor of Sports Gambling

New Jersey’s dogged quest to enable legalized sports betting pays off with major court win. Now there’s a bipartisan effort in Trenton to push through legislation and top up state coffers as a result

NCAA basketball

State lawmakers from both parties were jubilant yesterday after the U.S. Supreme Court issued a major ruling in favor of New Jersey’s longstanding push to allow legalized sports gambling. The question now is whether New Jersey will be able to cash in, or instead find that it’s too late for a significant windfall given neighboring states have casino businesses up and running.

It shouldn’t take long to find out, as just hours after the high court’s 6-3 opinion was released, new legislation was introduced in the State House to set the parameters for how New Jersey will regulate betting on most sporting events — and how sports gambling could be taxed to bring in much-needed new revenue.

The majority ruling written by Justice Samuel Alito, a New Jersey native, comes just weeks before Gov. Phil Murphy and lawmakers have to reach a final agreement on the next state budget, and potential tax revenue from sports betting adds a new element to the negotiations as Murphy has called for a host of tax increases that legislative leaders have thus far not been thrilled about.

The sooner lawmakers set up tax rates for legalized sports betting in New Jersey, the sooner the state will be able to begin collecting the new revenue from those bets and the tourism expected to come with it, although it’s not yet certain exactly how much should be expected. In Nevada, where the tax rate on casino revenues is up to 6.75 percent, the state collected roughly $250 million from sports betting last year, a small percentage of the overall $26 billion in casino revenue generated statewide, according to the Nevada Gaming Control Board.

$100 million, more or less?

While some talk in the New Jersey State House yesterday suggested the haul from sports betting here could be over $100 million, a Murphy administration official was much less sanguine while discussing the prospects for a sports-betting windfall.

Yesterday’s sports-gambling decision, meanwhile, is also being viewed as a much-needed stroke of good luck for Atlantic City, which is still struggling to recover from the Great Recession and the increased competition from casinos that have opened in nearby states in recent years. And it’s a major victory for two outsized political personalities — former Republican Gov. Chris Christie and former Democratic state Sen. Ray Lesniak — who were unlikely allies in the fight to strike down the federal ban on sports betting outside of Nevada and three other states.

The effort to legalize sports gambling in New Jersey dates back to at least 2011, when voters approved by a 2-1 margin a referendum seeking to allow betting on all professional sports, and also collegiate games played outside of New Jersey. The following year, Christie signed Lesniak’s legislation that established sports gambling at Atlantic City casinos and at horseracing tracks, a direct challenge to a 1992 federal law that only allowed sports betting in Delaware, Montana, Nevada and Oregon.

The New Jersey law brought on a lawsuit filed by professional sports leagues and the National Collegiate Athletic Association, which blocked it from being enacted. The state then tried again by passing a different sports-betting law in 2014, which brought on another lawsuit, leading to yesterday’s ruling in a case known officially as Murphy, et al. v. National Collegiate Athletic Association, et al.

Congressional authority

The case hinged on whether the 1992 Professional and Amateur Sports Protection Act overstepped congressional authority when it prohibited sports betting in most, but not all, states.

“Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not,” Alito wrote in the majority. He was joined by Chief Justice John Roberts, and Justices Neil Gorsuch, Elena Kagan, Anthony Kennedy and Clarence Thomas.

The dissent was written by Justice Ruth Bader Ginsburg, joined by Justice Sonia Sotomayor and, in part, by Justice Stephen Breyer.

The high court’s ruling generated an immediate reaction from Murphy, a Democrat who took over for the term-limited Christie in January and continued with the legal effort to upend the federal ban.

“Today’s victory would not have been possible without the incredible bipartisan effort from so many in our state, particularly former Governor Christie and former State Senator Lesniak,” Murphy said. “I look forward to working with the Legislature to enact a law authorizing and regulating sports betting in the very near future.”

Christie also weighed in on social media, saying he is “proud to have fought for the rights of the people of NJ.”

Coughlin: ‘economic benefits’

Still, legislative leaders from both parties welcomed the ruling, with Assembly Speaker Craig Coughlin (D-Middlesex) saying he was anxious to implement regulated sports betting in New Jersey.

“I especially look forward to all the economic benefits that will follow,” Coughlin said.

Senate President Steve Sweeney (D-Gloucester) went a step further yesterday by introducing legislation that would establish an 8 percent tax rate on sports gambling — the same rate already levied on other gambling at casinos in Atlantic City — and a 12.5 percent rate on sports betting that will be permitted online through gambling websites operating with a state-issued permit. The new revenue would be dedicated to programs that benefit senior citizens and the disabled. There would also be a 1.25 percent tax levied on revenue generated from sports betting at racetracks, with those funds provided to host municipalities and counties.

With an Assembly bill having already been filed before the ruling was issued, Sweeney said lawmakers are eager to “act quickly” to get a new law passed in time to fully take advantage of the state’s existing gambling infrastructure.

“We have a competitive advantage with a long history of casino gaming including a regulatory infrastructure that has been operating for decades,” Sweeney said. “It will be a natural transition to incorporate sports gaming by the casino and the racetracks.”

Taxing questions

The issue of tax collections in general has become a key bone of contention as Murphy and the legislative leaders head into the final weeks of budget negotiations before the state’s June 30 deadline for a new spending plan. In his $37.4 billion budget plan for the 2019 fiscal year, Murphy has called for increasing the income-tax rate on earnings over $1 million and restoring a 7 percent sales-tax rate as part of a broader effort to increase investment in key areas like the public-employee pension system, K-12 education, and mass transit. But so far, Sweeney and Coughlin have not been quick to embrace Murphy’s call for higher taxes, so the Legislature’s projection for sports-betting revenue could ease, at least in part, some of the concern about tax hikes.

Jennifer Sciortino, spokeswoman for the Department of Treasury, said her agency is “carefully monitoring the situation.”

“Once pending regulatory legislation is finalized, we will be able to more accurately forecast potential revenue estimates,” she said.

Emily Raimes, vice president and senior credit officer at Moody's Investors Service, said state and local governments in general would see “minor benefits from the incremental tax revenues” from sports betting, but she added “it will take time to implement.”

“States like New Jersey and Pennsylvania that planned ahead will see benefits first,” she said. And while the casino industry in Atlantic City has been tumbling since its heyday, the casinos are still a more than $2.5 billion industry, generating more than $200 million annually for the state budget. Atlantic City Mayor Frank Gilliam Jr. said yesterday that he is “very excited” about the opportunity the court ruling has provided his city with.

“Sports betting could generate millions in revenue for Atlantic City and diversify our gaming market,” Gilliam said.

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