How California Became the ‘Holy Grail’ for the Sports Betting Industry

With the fifth-largest economy in the world, a population close to 40 million, and an abundance of big-time sports teams—19 major-league professional franchises spread across pro football, baseball, soccer, men’s basketball, women’s basketball, and hockey—California has been called the “holy grail of sports betting markets.” (New York state has 13 pro franchises in those sports, and that counts three that play in northern New Jersey. Texas has 12.)

But as of 2022, wagering on sports events remains illegal in California.

Since 2018, three states have passed legislation legalizing sports betting but have yet to implement the new laws. Another 19 now allow legal sports betting via the internet, and 20 permit gambling on sports events in person at sports “books,” that is, gambling establishments often located inside larger casinos.

Florida remains in a state of uncertainty. The Sunshine State legalized sports betting in 2021—but bets were allowed only through a single online app with the operation run exclusively by the Seminole Tribe. However, legal actions challenging how the Seminoles won the lucrative contract forced the app to shut down.

Where did this tsunami of legalized sports betting come from? Until 2018, only the state of Nevada allowed legal betting on individual games or other sporting events. Three other states, Montana, Oregon and Delaware, permitted limited forms of sports betting.

PASPA: A 1992 Law Banned Sports Gambling

Those four states were permitted to allow sports gaming only because they were “grandfathered” when, in 1992, Congress passed the Professional and Amateur Sports Protection Act, better known as PASPA, or alternatively the Bradley Act.

The law, which banned sports betting on a nationwide basis, was sponsored by New Jersey Democratic U.S. Senator Bill Bradley. Prior to becoming a senator, Bradley played NBA basketball for the New York Knicks—where he put together a stellar 10-year career in which he was key to the Knicks winning two NBA championships (in 1970 and 1973, the only two the Knicks have ever won) and culminated in Bradley’s induction into the basketball  Hall of Fame. 

Even though the state that elected him, New Jersey, badly wanted to add sports betting to the Atlantic City casinos that it had legalized in 1976, Bradley (who ran for the Democratic presidential nomination in 2000) led the opposition, declaring that sports gambling turned athletes into “roulette chips” and that sports wagering in the state’s casinos was against “the best interest of New Jersey's children.”

Though his PASPA bill faced some wrangling in Congress, mostly over the exemptions granted to the four grandfathered states—which Bradley tried to remove, even hoping to outlaw Nevada’s sports betting industry which had existed since 1949—the bill passed overwhelmingly, 88-5, in the U.S. Senate and easily by voice vote in the House of Representatives, before it was signed by President George H.W. Bush.

Though all but the four grandfathered states already outlawed gambling on sports events, PASPA enshrined the ban as federal law. (Horse racing, dog racing and jai alai were exempted from the PASPA betting ban.) The bill included a provision that gave non-grandfathered states a full year to pass legislation legalizing sports betting. No state, not even New Jersey, took advantage of the opportunity.

SCOTUS Opens the Sports Betting Floodgates

New Jersey eventually seems to have regretted its 1993 decision. In 2012, the state—then under Republican Gov. Chris Christie—passed a new law legalizing sports betting at casinos and horse racing tracks, in defiance of PASPA. The legislation brought an immediate lawsuit from the National Collegiate Athletic Association, which was quickly joined by the four major U.S. pro sports leagues—the NFL, Major League Baseball, the NBA and National Hockey League.

New Jersey claimed that PASPA violated something called the anti-commandeering doctrine, which states that the federal government cannot “commandeer” the state legislative process by requiring states to adopt or enforce federal laws or regulations. The rather controversial doctrine is not articulated in the U.S. Constitution. In fact, according to John Marshall Law School Professor Steven Schwinn, in a 2017 article, the Constitution actually argues in favor of commandeering.

The NCAA won the suit in federal District Court, and in the Third Circuit Court of Appeal. The doctrine, the courts held, applied only when Congress affirmatively imposed a requirement, not when it simply prevented a state from taking a specific action.

In other words, the federal government could not tell a state what to do. But it could tell states what not to do.

New Jersey appealed to the U.S. Supreme Court, but the high court did not “grant cert,” refusing to hear the case. When New Jersey put its new law into effect in 2014, the sports leagues sued again.

This time SCOTUS took an interest.

The lower courts ruled the same way they had in the first lawsuit, brushing aside the commandeering claims by the NCAA and the pro leagues. But when the case reached the Supreme Court, the justices reached a very different conclusion. By a vote of 7-2, the court ruled that PASPA did indeed violate the anti-commandeering doctrine, striking down the 1992 law as unconstitutional.

For states looking to grab new tax revenue by legalizing sports betting, the SCOTUS ruling was a bonanza. The Supreme Court decision came down in May of 2018. By the end of November, seven states had permitted legal sports books to open for business. Six more states joined the party in 2019. Four more, plus the District of Columbia, followed in 2020, and another eight opened up legal sports betting operations in 2021.

California stood pat. That decision, or lack of one, led to the situation in 2022, when Californians may find up to four propositions to legalize sports betting on the ballot in November.