New Proposed Title IX Regulations Raise Unique Institutional Concerns For Rights Of Accused

As colleges and universities review the Department of Education’s proposed new Title IX regulations revising process by which allegations of sexual misconduct must be handled, they must consider the potential impact of what appears to be clearly greater protections for those accused of sexual misconduct, including student-athletes.

The proposed regulations will formally replace guidance and interpretation of Title IX from the Obama Administration, which had called for strict enforcement and interpretation of the law and recommended specific procedural actions for colleges and universities (including use of the minimal “preponderance of evidence” standard of proof when assessing sexual assault claims).

Unlike other students, a sexual assault allegation against a student-athlete often results in immediate suspension from the team. Beyond the impact that a suspension has on the student-athlete’s eligibility and the competitiveness of the institution’s sports program, such suspensions attract negative publicity for both the student-athlete and institution. Student-athletes, like other students accused of sexual misconduct, have experienced due process limitations under the current process, particularly with respect to evidentiary restrictions. The proposed Title IX regulations would appear to improve due process conditions for all students who have been accused of violations under their institution’s sexual misconduct policies.

After rescinding the Obama Administration’s Title IX guidance in 2017, Department of Education Secretary Betsy DeVos said of the 149-page document containing the long-awaited new regulations,

“We can, and must, condemn sexual violence and punish those who perpetrate it, while ensuring a fair grievance process. Those are not mutually exclusive ideas.” Devos continued, “… [E]very student accused of sexual misconduct must know that guilt is not predetermined.”

ESPN’s recent review of information received from 32 of the 65 schools that make up the Power 5 conferences concluded that student-athletes are three times more likely than other students to be accused of sexual misconduct. Student-athletes represented 6.3% of the accused in Title IX complaints, while athletes make up only 1.7% of total student undergraduate enrollment.

In response to discipline imposed against them, many accused student-athletes have filed lawsuits against their universities and individual administrators in the sexual misconduct process.

Since 2011, more than 200 lawsuits have been filed by accused students against colleges and universities claiming due process violations during the course of Title IX investigations and disciplinary proceedings.

For many, access to the civil courts offers a last chance for justice and a legal option to help clear their names. Lawsuits brought by the accused have utilized numerous legal theories to challenge disciplinary actions, including breach of contract, violations of Title IX, gender discrimination, defamation, negligent infliction of emotional distress, and other relevant state law claims.

The DOE’s proposed regulations will create a more legalized sexual misconduct process on campus. The DOE hopes to reduce the propensity for litigation following the institution’s hearing process. Decreasing governmental investigatory resource burden and saving institutions money also may result. According to the DOE, the new regulations will decrease substantially the number of investigations into complaints of sexual misconduct and save institutions millions over the next decade.

Moreover, the proposed regulations would provide institutions the autonomy to decide how sexual misconduct cases are adjudicated. To this end, the proposed changes include:

  • The ability for universities to chose the applicable evidentiary standard (either “preponderance of the evidence” or “clear and convincing evidence”) in determining responsibility for the misconduct.
  • The ability for institutions to utilize an informal resolution process to resolve sexual misconduct allegations, if the parties agree.
  • The requirement that schools hold live hearings.
  • Institutions are not permitted to use any individual who was involved in the investigation of an alleged sexual assault to subsequently serve as a fact-finder in any sexual assault hearing that follows the investigation. All hearings must be conducted by a neutral trier of fact and conducted with an initial presumption of innocence.
  • Accusers and students accused of committing sexual assault must be given the opportunity to cross-examine each other and other potential witnesses through an adviser or attorney, and universities would not be able to limit this right. If a party or witness refuses to submit to cross-examination, that person’s testimony could not be relied on by the fact-finder.

Both parties must have equal access to all evidence the school’s designated investigator has gathered, and both parties retain the ability to appeal decisions.

Proponents and critics of the regulations have 60 days (until January 15, 2019) to submit comments before the regulations go into effect.

It is anticipated at this time that the final regulations will mirror the proposed regulations. While the 60-day period is ongoing, colleges and universities are afforded the opportunity to carefully review their current sexual misconduct policies and practices to determine what changes they will implement to comply with the anticipated regulations.

While the regulations’ goal is to equalize accusers and the accused by providing additional rights to benefit accused individuals,

many critics have expressed concern that the regulations go too far, and that institutional sexual misconduct processes may harm accusers’ rights.

For example, critics say the new cross-examination requirement will force accusers to face questioning that could influence the victims’ willingness to report sexual assault. They also say the proposed regulations provide the accused with more power to intimidate and hurt victims.

Jackson Lewis’ Collegiate and Professional Sports Practice Group and its Higher Education Industry Group are well-versed in Title IX issues and will continue to monitor and provide updates on developments in this area. Please feel free to reach out to any member with questions.


NLRB Avoids Question Of Whether UFC Fighters Are Union Eligible Employees…For Now!!!!

National Labor Relations Board (“NLRB”) Region 4 Regional Director Dennis Walsh recently dismissed Section 8(a)(1) and 8(a)(3) unfair labor practice charges filed by mixed martial arts (MMA) fighter Leslie Smith against ZUFFA, LLC d/b/a Ultimate Fighting Championship (‘UFC”) alleging that her contract to fight was not renewed in retaliation for her union organizing efforts and participation in Section 7 protected concerted activities. Mr. Walsh’s decision to dismiss Ms. Smith’s unfair labor practice allegations allowed the NLRB to successfully avoid addressing the issue of whether UFC fighters are employees eligible for potential unionization.

Relying upon the NLRB’s established legal precedent, Mr. Walsh concluded that Ms. Smith was not the victim of unlawful discrimination in violation of the National Labor Relations Act.

The Regional Director concluded that the evidence provided to him could not establish that her union or protected activity was the “motivating factor” in the UFC’s failure to renew her contract as required by Wright Line, 251 NLRB 1083, 1089 (1980).

In fact, Mr. Walsh concluded that since Ms. Smith’s contract with the UFC had expired by its terms, the parties failure to reach an understanding on a new agreement was not an adverse employment action.

Mr. Walsh formally rejected Ms. Smith contention that the UFC had failed to renew her contract because she publically engaged in efforts to unionize MMA fighters since 2016 and he asserted that the NLRB’s proper role is not to second guess a business decision not to continue an agreement in the absence of union animus.

As a result of the Regional Director’s rejection of Ms. Smith allegations and conclusion that she had not been the victim of unlawful discrimination, he decided that it was unnecessary to offer an opinion on whether Ms. Smith was actually a statutory employee eligible to unionize or an independent contractor.

Despite the dismissal of her unfair labor practice charges, Ms. Smith intends to continue her fight challenging the decision and prove that she was not rehired because of her union activity and that all MMA fighters should be properly classified as employees and eligible to unionize. Ms. Smith has filed a formal appeal of the Regional Director’s dismissal of her charges with the NLRB’s Office of Appeals.

In her appeal, Ms. Smith has requested that Region 4 reconsider the dismissal of the unfair labor practice charges and/or conduct a further investigation based upon the facts and evidence set forth in Ms. Smith’s declaration accompanying her appeal filing.

Specifically, Ms. Smith claims that Mr. Walsh’s decision to dismiss her charge was based on “numerous factual misstatements and discrepancies”,

including that she would not fight unless the UFC paid her additional money and extended her contract for two additional fights. In addition, Ms. Smith’s declaration in support of the appeal alleges that the NLRB failed to consider that the UFC had a bias and hostility against unions based upon a former UFC commentator’s express statement to her to “avoid” talking about unionization “if I wanted to continue fighting in the UFC”.

The question of whether UFC fighters are employees eligible for unionization remains an open question for now….will Ms. Smith’s appeal force the NLRB to reach a determination on this issue. Stay tuned…we may soon have a decision.

‘One and Done’ May Soon Be DONE!

The controversial NBA rule that keeps basketball players from beginning their professional careers until they’ve completed one year of college play may soon be history.

The NBA has formally announced that “elite” 18-year-old basketball players will be able to move forward with their professional careers beginning with the 2019-20 season, skipping the current mandate that they play one year of college basketball before being eligible to be selected in the NBA draft.

Beginning 2019, selected “elite” players who turn 18 by September 15th prior to the start of the season would become eligible to sign a “select contract” with the G League, the NBA’s player development league. They would play for a year and earn $125,000 before entering the NBA draft, in lieu of playing at the collegiate level for one year without earning any income.

Future NBA Hall of Famer Moses Malone was the first to go directly from high school to play in the professional ranks. In 1974, Malone become a star in the American Basketball Association. Two years later, Darryl Dawkins and Bill Willoughby went straight from high school courts to the NBA. Then, after a 20-year hiatus, the NBA experienced a resurgence of high school players going directly to the NBA with such future stars as Kevin Garnett, Kobe Bryant, and LeBron James.

In 2005, after much criticism over the players’ physical and mental preparedness and many failed efforts by high school players in the NBA, the league and the players association instituted a minimum age of 19 for eligibility to play in the league. David Stern, the commissioner at the time, had proposed a league entry age limit of 20, but agreed to 19 during collective bargaining negotiations.

The most recent collective bargaining agreement, covering the 2017-18 season through the 2023-24 season, states:

-All drafted players must be at least 19 years old during the calendar year of the draft. TO determine whether a player is eligible for a given year’s draft, subtract 19 from the year of the draft. If the player was born during or before that year, he is eligible.

-In addition, any player who is not an “international player” as defined in the collective bargaining agreement, must be at least one year removed from the graduation of his high school class. The one year out of high school requirement is in addition to the age requirement.

The “one and done” rule has created a group of athletes who essentially are forced to delay their professional careers while electing to attend one year of college. In fact, eight of the top nine picks in the latest summer’s draft spent only one year in college.

The league has promised that players would receive training in basketball as well as in “life skills” as part of the G League program. It didn’t disclose how many players would be invited into the program, but the G League said it would be “a very specific group of elite players.”

In addition to receiving compensation for their basketball skills and performance,

these “elite” players would be able to hire agents and accept sponsorship money for shoe and apparel endorsements, which they are currently barred from receiving as amateurs playing in college.

Commenting on the announcement, NCAA president Mark Emmert stated, “We appreciate the NBA’s decision to provide additional opportunities for those who would like to pursue their dream of playing professionally …. Obtaining a college education continues to provide unmatched preparation for success in life for the majority of student-athletes and remains an excellent path to professional sports for many. However, this change provides another option for those who would prefer not to attend college but want to directly pursue professional basketball.”

The formal end to the one and done rule appears imminent. NBA Commissioner Adam Silver is behind the move and current negotiations between the NBA and its players association anticipate elimination during the current collective bargaining agreement and before the 2022 draft.

NCAA Show-Cause Penalties Violate State Law and Are Illegal, California Judge Rules

One of the NCAA’s strongest penalties has been declared illegal in California.

California Superior Court Judge Frederick Shaller issued a final decision finding NCAA “show-cause” penalties to be a violation of California state law.

Arising from a lawsuit filed more than seven years ago by former USC assistant football coach Todd McNair, Judge Shaller, confirming a tentative decision he had reached in August,

concluded the show-cause penalty provision of the NCAA bylaws is illegal because it constitutes an “unlawful restraint” on McNair’s ability to pursue a lawful profession.

In his eight-page opinion, Judge Shaller explained, “McNair’s ability to practice his profession as a college football coach has been restricted, if not preempted, not only in Los Angeles, but in every state in the country.”

McNair had filed a state court action against the NCAA following the NCAA’s extra-benefit investigation focused on former USC star running back, and Heisman Trophy winner, Reggie Bush. At the conclusion of its 2010 investigation, the NCAA concluded McNair “knew or should have known” that Bush was engaged in violations with a potential agent while still playing at USC, and McNair had “provided false and misleading information to the enforcement staff.” The NCAA then issued McNair a one-year show-cause penalty and a one-year ban preventing McNair from recruiting student-athletes to USC or any other school. As a result of the NCAA penalty, McNair’s contract at USC was not renewed and he has not coached at the college level since the penalty was levied against him.

McNair had the defamation count of his lawsuit against the NCAA rejected in May after a jury voted 9-3 in favor of the NCAA following a three-week trial.

Judge Schaller’s final decision concluding the NCAA’s show-cause penalty is unlawful was issued after objections were offered by the NCAA in response to the judge’s tentative decision in August.

The NCAA offered written declarations from Pac-12 Commissioner Larry Scott and Big West Conference Commissioner Dennis Farrell in support of its opposition.

Farrell’s declaration expressed concern that his conference schools would be unable to rely on the NCAA’s disciplinary mechanisms if the show-cause penalty was not legal.

Scott asserted, “If California law prevents institutions in that state from honoring such commitments, it is hard to see how the Pac-12’s Member Universities in California could continue to meet the requirements of NCAA membership.” He continued, “[T]he Court’s tentative ruling would place at risk the competitive and scholarship opportunities that flow from NCAA participation for the Pac-12 California Member Universities.”

Judge Schaller rejected the opinions expressed in both declarations, stating that they are “completely speculative and irrelevant to the issue….[T}he proposed testimony of Scott and Farrell is deemed inadmissible and is not considered.”

Following issuance of the court’s opinion, the NCAA stated, “The NCAA disagrees with the court’s ruling, which is wrong as a matter of law….We will explore all avenues for relief to ensure that NCAA member schools in California can continue to abide by the same rules as the rest of the NCAA’s membership.”

While the Commission on College Basketball recently recommended that the NCAA consider potential “lifetime” bans as part of the show-cause penalty process, Judge Shaller’s ruling means that the NCAA has lost the benefit of their disciplinary muscle to deter bylaw violations in California. Will other states follow and conclude similarly?


Dallas Mavericks Investigation Report Recommends Women in Leadership and Anonymous Workplace Climate Surveys to Combat Sexual Harassment

Following a February 2018 Sports Illustrated article regarding alleged sexual harassment and misconduct within Dallas Basketball Limited, the Dallas Mavericks basketball organization (“Mavericks”), the Mavericks commissioned an independent investigation into the claims.  The investigators, comprised of two outside law firms, interviewed 215 witnesses and analyzed 1.6 million documents.  The investigation report was publicly released on September 19, 2018.

The lengthy report details a number of allegations regarding sexual harassment or other misconduct by the former CEO, the former Human Resources Director, and other employees.  Allegations ranged from inappropriate touching and sexual advances, to watching pornography at work, to domestic violence.  The report also highlights concerns regarding management’s failure to appropriately address employee complaints and stated that “there were no internal controls or governance structures in place[.]”

One of the most interesting components of the report is the remedial recommendations made by the investigators.

The investigators’ very first recommendation was to increase the number of female employees, including those in leadership positions, within the company.  The report observed that “Research has shown that the single most important thing that companies can do to reduce sexual harassment and gender discrimination in the workplace is to employ, and promote, more women.  Having women in executive leadership positions is particularly critical.”  The report noted that when the investigation began, there were no female executives.  Shortly thereafter, Cynthia Marshall was hired as President and CEO, and there are now eight women in executive positions (out of eighteen total).

The investigators also recommended that the Mavericks “[c]onduct anonymous workplace culture and sexual harassment climate surveys on a regular basis” to identify problems.  Further, the report illustrated instances where management failed to make important personnel decisions, and indicated the company’s culture “lacked any hierarchy and consisted of blurred lines of decision-making on some issues.”  The report stated that “Numerous studies have concluded that unstructured decision-making leads to increased risk and a higher prevalence of sexual harassment in the workplace, as policies are less likely to be enforced strongly and promptly, and disciplinary consequences become less clear and uniformly applied.”  Thus, the investigators recommended the Mavericks establish clearly-defined decision-making roles.

The report further recommended that the Mavericks expand its Human Resources department and hire a full-time General Counsel – both of which have now been done.  Of course, the investigators also recommended robust sexual harassment training and emphasized the importance of including leadership in these trainings.

The investigators’ recommendations demonstrate that traditional remedies, such as conducting trainings and redefining policies, may be insufficient, particularly when actions of the organization belie those policies and training efforts.  Instead, employers should address sexual harassment through more nuanced approaches aimed at creating a culture of inclusivity and trust in organizational leadership.


NHL Secures Federal Court Victory As Class Action Status Denied In Concussion Case

U.S. District Court Judge Susan Richard Nelson has denied the class-action status sought by a potential class of several thousand current and former players suing the National Hockey League (NHL) alleging that the league was negligent in its care and prevention of head trauma and that it fraudulently concealed the long-term impact of head injuries while promoting violent play.

The decision is a significant victory for the NHL.

In a forty-six page order, Judge Nelson acknowledged the potential costs and duplication of effort in pursuing individual claims but focused on the ”widespread differences” in the various state laws regarding the subject and standard for medical monitoring.

She concluded that this issue would “present significant case management difficulties.”

Judge Nelson’s opinion stated that the class could contain up to 5,000 players, and depending on the history of and state of legal residence for each player, the judge said she would be forced to apply a wide range of legal standards based upon the distinct variances of applicable state laws.

Noting that a player who played for a New York franchise like the New York Rangers or New York Islanders would have to show proof of current injury to state a medical monitoring claim, while players who played for a Florida team, or those who have retired there, would not, Judge Nelson concluded, “Given those differences, the court finds that resolving these claims in a single class action would present significant case management difficulties.”

In another victory for the NHL,

Judge Nelson also rejected the players’ argument that New York law should be applied for the entire class because that is where the NHL is headquartered.

Rather than one state law applying, the judge found instead that the law of the state where a player spent most of his career — or for players who moved around often, the state where they currently live — should be applied.

The players had also proposed a class of living players who had been diagnosed with a degenerative neurological condition, such as Alzheimer’s. Similarly, the judge found that the legal issues for this proposed class were also too varied and individual.

Responding to the decision, Attorney Charles Zimmerman, an attorney for the players, asserted that the ruling was only procedural and that the individual players are prepared to move forward. Commenting on the future status of the cases, Zimmerman stated, “We will continue to litigate….on a case-by-case basis. Players with traumatic brain injuries …will prevail as we move forward.”



Seventh Circuit Upholds NCAA “Year In Residence” Requirement For Transfers

The Seventh Circuit has rejected antitrust claims filed against the NCAA by former Northern Illinois University student-athlete Peter Deppe and upheld the NCAA’s rule delaying the athletic eligibility of student-athletes who transfer to alternate schools without serving a “year in residence” at their new school before becoming eligible to resume their collegiate career.

The Circuit Court’s decision supporting the NCAA’s year in residence requirement follows the recent NCAA Division I counsel’s voluntary modification of the transfer process. The rule change eliminated the NCAA’s long-standing “Permission to Contact” process for Division I athletes in favor of a simple notification standard allowing student-athletes to initiate the transfer process by simply providing written notification of the desire to transfer to his or her institution.

Deppe, a former punter for the Northern Illinois football team, claimed that he had been promised an athletic scholarship following his success of the field. Unfortunately, the special team’s coach who allegedly made the scholarship promise to him left the school and the head coach refused to honor the commitment that was made to him.

Following the refusal of the head coach to honor his assistant’s commitment to Deppe, Deppe was offered the opportunity to play for the University of Iowa but subsequently learned that an NCAA Bylaw would prohibit him from playing during his first year at the school. The University of Iowa informed Deppe that as a result of his inability to be able to play for the team immediately that they would be forced to pursue a different punter for the squad for the upcoming season.

Deppe initially challenged the NCAA Bylaw restricting his ability to play immediately upon his transfer by filing a proposed class action suit against the NCAA in March of 2016 alleging that the NCAA rule was anti-competitive in violation of federal anti-trust laws. U.S. District Judge Tanya Walton Pratt dismissed Deppe’s action on the basis that the NCAA bylaw furthers its mandate to promote competition among amateur college sports programs. Deppe appealed Judge Walton’s decision to the Seventh Circuit arguing that the lower court decision gave the NCAA “carte blanche” to violate anti-trust laws.

In response to Deppe, the NCAA argued to the Circuit Court that its bylaw promotes a pro-competitive environment by maintaining the proper balance between academics and athletics.

The NCAA successfully argued that the potential movement of student-athletes by changing schools during each year of their eligibility would “completely divorce the athletic and academic experience for NCAA student-athletes.

So while the ease to move forward with a potential transfer has been put in place by the NCAA,

the Seventh Circuit has reinforced the NCAA mandate that their rule requiring student-athletes to spend one year in residence at their new school remains in full force and effect pending other anticipated court challenges to the rule.

For more information about the proposal, and institutional obligations and best practice related to implementation of the notice of transfer system, please contact Gregg Clifton or John G. Long at Jackson Lewis P.C.


New NCAA ‘Notice to Transfer’ Model Replaces Controversial Permission to Contact Rule

The NCAA Division I counsel has acted to formally adopt the highly anticipated proposal that modifies the requirements for an athlete to transfer and to eliminate the NCAA “Permission to Contact” process for Division I athletes. Currently, student-athletes must seek their current NCAA institution’s permission prior to engaging in recruiting contact and subsequently transferring to a different NCAA institution.

Effective in October 2018, the Division I Proposal 2017-108 amends Bylaw as follows: Notification of Transfer. A student-athlete may initiate the notification of transfer process by providing his or her   institution with a written notification of transfer at any time. The student-athlete’s institution shall enter his or her name information into the national transfer database within two business days of receipt of a written notification to transfer from the student-athlete.

Additionally, the proposal codifies severe penalties associated with an institution’s failure to abide by the new procedure.

The amendment’s goal is to reduce and effectively eliminate the interference and influence of coaches or university affiliates from other institutions encouraging student-athletes to transfer without having received permission to contact to do so.

Proposal 2017-108 now codifies a mandatory Level II violation for instances in which university employees tamper with student-athletes prior to the student-athlete clearing the notice of transfer process.

Adoption of the proposal has been received very favorably in the media, but the new system raises concerns with institutions. Division I members are still required to maintain adequate “Academic Performance Rate” scores in order to receive the opportunity for postseason access.

Student-athletes who transfer-out of Division I institutions without meeting specific academic performance benchmarks damage the institutional APR scores of their former school, and the new transfer system will force institutions to monitor student-athlete affairs closely with APR in mind.

Institutions will no longer have the option to decline permission to contact as a mechanism to deter transfers of student-athletes who do not meet APR retention point exceptions.

The notice of transfer system raises a number of unanswered questions that should be answered next fall. For more information about the proposal and institutional obligations and best practice related to implementation of the notice of transfer system, please contact Gregg Clifton or John G. Long at Jackson Lewis P.C.


Following Supreme Court Decision New Jersey Considers Sports Gambling Law

New Jersey is considering a bill that would establish the framework of operation and regulation for wagering at casinos and racetracks on the results of certain professional, collegiate sports, or athletic events. The Garden State has long been at the forefront of advocating for state autonomy and discretion regarding sports wagering. State legislators introduced Assembly Bill No. 3911 on May 7, 2018, in anticipation of  the Supreme Court decision (Murphy v. National Collegiate Athletic Assn., No. 16-476 (May 14, 2018) ending the prohibition against states enacting legislation permitting gambling on sporting events previously contained in the Professional and Amateur Sports Protection Act of 1992 (PASPA).

New Jersey’s bill supplements and amends sections of existing New Jersey casino and gaming law.

Most significantly for the NCAA and its member institutions, however, is the legislation’s general prohibition on wagering on collegiate events that occur within the state of New Jersey or involve any New Jersey college team.

Specifically, the limitations placed on wagering on New Jersey collegiate contests or any contests involving New Jersey schools are contained in the “prohibited sports event” definition. The prohibited sports event is defined as “any single collegiate sport or athletic event that takes place in New Jersey or a single sport or athletic event in which any New Jersey college team participates regardless of where the event takes place.”

However, a “prohibited sports event” does not “include the other games of a collegiate sport or athletic tournament in which a New Jersey college team participates, nor does it include any games of a collegiate tournament that occurs outside New Jersey even though some of the individual games or events are held in New Jersey.”

Therefore, the mere participation of a New Jersey school in the NCAA or NIT tournament will not prevent gamblers from betting on tournament contests held in New Jersey involving non-New Jersey schools. Gamblers will be prevented only from placing wagers on tournament games or events involving any New Jersey-based schools.

For example, if a New Jersey school, such as St. Peter’s, Monmouth, Princeton, Rutgers, or Seton Hall, participates in the NCAA or NIT tournament, any wagers on those schools would be prohibited. However, wagers would be permitted on other tournament games involving non-New Jersey schools, even if those games take place in New Jersey. So, a regular season game involving Duke-North Carolina in the Prudential Center in Newark would always be considered a “prohibited sports event” and not subject to wagering. However, a Duke-North Carolina NCAA tournament game taking place in the same Prudential Center location would be available for wagering in New Jersey.

Practically speaking, except for tournament games, New Jersey gamblers will only be able to place wagers on regular season collegiate sporting events occurring in states other than New Jersey that do not involve New Jersey-based schools.

Regulation of sports wagering is to be overseen by the New Jersey Division of Gaming Enforcement, which will be responsible for taxation and for ensuring the integrity of sports gambling. Gross sports betting revenue will be taxed at 8 percent and online sports betting revenue will be taxed at 12.5 percent. The proposed legislation currently provides that casinos and racetracks operating a sports pool will be charged an annual “integrity fee” equal to the lesser of $7.5 million or 2.5 percent of gross revenue attributable to wagers placed on sporting events.

Under the bill, a casino or racetrack may establish a sports wagering lounge independently at the casino or racetrack, as a partnership between a casino and a racetrack, or it may authorize a casino service industry enterprise to operate a sports pool on its behalf. Wagers may be placed on any sporting event in-person in a sports wagering lounge located at a casino or racetrack, or online. Persons placing wagers must be at least 21 years of age. In order to operate a sports wagering pool, a casino or racetrack must obtain a permit from the Division of Gaming Enforcement. Permits will cost a minimum of $500,000 and will remain valid for one year. The legislation strictly prohibits gambling on all high school sports, but permits wagering on international sports events in which a majority of participants are at least 18 years of age (e.g., many Olympic sports).

It remains to be seen whether other states will follow New Jersey’s lead in creating broad based restrictions on gambling on collegiate events that occur within state borders.

Jackson Lewis will continue to monitor the progress of this New Jersey bill as well as other proposed state and federal gambling legislation. If you have any questions, please contact an attorney in the Jackson Lewis Collegiate and Professional Sports Practice Group.

Supreme Court Strikes Down Law Banning States from Legalizing Sports Gambling

The U.S. Supreme Court has struck down the federal law known as the Professional and Amateur Sports Protection Act of 1992 (PASPA) that bans states from permitting gambling on sporting events. Murphy v. National Collegiate Athletic Assn., No. 16-476 (May 14, 2018).

This decision effectively ends Nevada’s long-time monopoly in this arena and opens the floodgates for states to pass their own legislation regarding sports wagering.

The original action spent close to eight years winding its way through federal courts before landing before the Court. New Jersey challenged the constitutionality of PASPA, alleging the law violated the Tenth Amendment by “commanding” the states to act (or not act) in a certain way. This, New Jersey argued, violated the Tenth Amendment’s anti-commandeering principle and encroached on the goals of public policy, which have generally favored allowing the states to legislate, free of federal interference and constraint.

Justice Samuel Alito, writing for the Court majority, explained the problem with PASPA is that “state legislatures are put under the direct control of Congress.” He continued, moreover, that “[a] more direct affront to state sovereignty is not easy to imagine.”

States around the country have been hoping to receive a cut of the nearly $150 billion that Americans spend on illegal sports wagering each year. States also stand to gain by taxing sports gambling in a variety of ways. Numerous states have been prepared to launch sports gambling legislation in the event of a favorable decision. Governor Phil Murphy of New Jersey, in particular, stated that New Jersey would be ready to act “sooner than later.”

Still unclear is the effect the decision will have on major sports leagues and organizations such as the NFL, MLB, and NCAA. In the past, the leagues have taken positions opposing legalized sports wagering. However, as of late, many prominent sporting organizations, led by the NBA and Commissioner Adam Silver, have expressed support for sports gambling and the positive effects it might have on professional and amateur sports across the nation.

This support, of course, comes with the caveat that the NBA, NFL, and others want a “seat at the table.” For example, Commissioners Robert Manfred and Roger Goodell of the MLB and NFL (respectively) have indicated that gambling laws should preserve the “integrity” of their sports. When discussing a pro-sports gambling law proposed in West Virginia, Manfred stated, “[The MLB is] not opposed to the idea of West Virginia passing a sports betting bill . . .. We’d just like them to pass one that creates a framework that protects the integrity, recognizes the variety of interests at play here and quite frankly puts the state in a position to maximize the revenue return from it.”

Expect leagues to lobby both the states and Congress to adopt gambling legislation assuring them some form of control over wagering and permitting them a revenue stream from bets placed and payouts awarded.

Jackson Lewis will continue to monitor the progress of state and federal gambling legislation and keep you updated with any and all developments. If you have any questions, please contact a Jackson Lewis attorney.