NEW YORK, UNITED STATES – 9/29/2020: New York State Governor Andrew Cuomo holds daily media … (+)
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The existing sports betting infrastructure in New York – consisting of in-person betting in a handful of upstate casinos – was made possible by a 2013 voter referendum that changed Article I, Section 9 of the New York Constitution to “no more than seven casino games of chance Legislative Approved and Required Establishments ”and by enabling laws enacted later that year to allow sports betting as a form of casino gambling. However, the Enabling Act of 2013 did not include a provision for mobile betting, which restricted sports betting to those who were "physically present" in one of the four commercial casinos in the hinterland.
If you accept the premise that sports betting is legal in New York City upstate casinos under the New York Constitution, adding a mobile component tied to servers in those casinos should also pass the constitutional pattern. But what if you questioned the underlying assumption and wondered if sports betting fit the constitutional exception for "casino gambling in no more than seven establishments"? This is the dilemma – and the risk – arising from Governor Cuomo's recent proposal to use a bidding process to determine which companies can operate mobile sports betting in New York.
The lottery-operated model is constitutionally a non-runner
In his State of the State address on January 19, Governor Cuomo opened a legal Pandora’s box when he suggested running mobile sports betting “just like we run the state lottery that is state run and the state generates all the revenue. “There was a fundamental problem with this approach (as I quickly pointed out on Twitter): It would violate the New York Constitution. In the early 1980s, then New York Governor Mario Cuomo (Andrew Cuomo's father) had the same idea: the state lottery should operate sports betting. That proposal was quickly shot down by then New York Attorney General Robert Abrams, who issued an advisory opinion in 1984 stating that a sports betting program operated by the state lottery would violate Article I, Section 9, the specific prohibition on bookmaking and pool sales. and general prohibition of all forms of gambling, and could not be included in the constitutional exception for the state lottery. Instead, according to AG Abrams, lottery-powered sports betting would require a constitutional amendment to be implemented.
So Governor Andrew Cuomo's proposal for a lottery model was a non-runner. He then quickly turned to what appeared to be a less constitutionally risky approach: a competitive bidding process in which the New York State Gaming Commission issued a call for proposals seeking bids from interested wireless operators who had a market access agreement with one of the licensed providers had commercial casinos and then selected and licensed "one or more" of these providers to offer mobile sports betting in New York.
Such a regulation would avoid the direct constitutional conflict set out in the AG's 1984 opinion and offer the state the same revenue potential as the model of the discarded lottery. But it could lead the state down the same risky constitutional path as the lottery model, albeit for a different reason: Choosing a single cellular operator – or even several – would likely come at the expense of several prominent stakeholders who have been included as cellphone participants in sports betting in previous legislative proposals, which, however, under the approach of Governor Cuomo would now be excluded.
Disenfranchised stakeholders as potential constitutional plaintiffs?
Although sports betting must be conducted through the licensed commercial casinos to comply with Article I, Section 9 of the New York Constitution (i.e., "Casino Gambling in No More than Seven Establishments"), two prominent New York lawmakers had a plan that would allow participation of the other major gambling players in the state.
Under the bill introduced by New York Senator Joseph Addabbo Jr. and Rep. J. Gary Pretlow (chairman of their respective chambers' racing and gaming committees), the state's eleven licensed racecourses, five off-track betting companies, are the Operators of video lottery games on the Aqueduct Racetrack and in important professional sports venues would be classified as “partners” of the commercial casinos in the hinterland for the purposes of mobile sports betting. Senate Bill 1183 and Assembly Bill 1257 would allow these companies to "partner" with any of the four licensed casinos to place mobile betting kiosks owned, operated and maintained by the casino and via the Internet connected to the casino. in their branches. This would allow venues like Madison Square Garden, Yankee Stadium, Citi Field, Belmont Park, Saratoga Race Course, and Yonkers Raceway to develop local sports betting lounges connected to the casinos in the backcountry.
As set out in SB 1183 and AB 1257, the three Native American tribes currently offering personal sports betting in their tribal casinos would get an immediate route to mobile sports betting through an agreement with the New York State Gaming Commission and request that they host commercial casinos a mobile sports betting server and associated equipment on their properties free for the tribes. This unique rule would remove any concerns about whether the federal law on gambling in tribal areas – the Indian Gambling Regulation Act (commonly known by the acronym "IGRA") – would allow tribes to accept mobile wagering. By entering into a direct contract with the state gambling commission, the Tribes would avoid the need to amend the federal government-approved mobile sports betting contracts (a requirement by the IGRA) – an unlikely perspective of federal case law and the opinions of federal agencies inferring mobile Bets do not fall within the scope of IGRA and are therefore not allowed. While the Tribes would be subject to state regulation and taxation under this agreement, it speeds up mobile sports betting for the Tribes and eliminates the risks and delays associated with applying for federal approval.
First introduced by Senator Addabbo and Rep. Pretlow in May 2019 (and passed by the Senate in June 2019), this structure provides the best (and perhaps only opportunity) for the New York horse racing industry and Native American tribal casinos to participate in mobile Sports betting in view of the restrictions imposed by the state constitution and the IGRA. The important thing is that it has the support of all the major stakeholders: the casinos, the racetracks, the horsemen, the tribal game operators, and the professional New York sports teams.
Governor Cuomo's proposal would likely unravel this negotiated solution. Here's why: The draft budget that includes Governor Cuomo's proposal does not include any affiliate or tribal participation in mobile sports betting. Instead, it simply states that mobile sports betting “via one or more platform providers” would be permitted in accordance with a tendering process monitored by the state gambling commission. This concise language seems to leave room only for the select few cellular operators (i.e. DraftKings, FanDuel, Bet365, and Rush Street Interactive) that have market access agreements with the casinos in the backcountry.
In other words, the racetracks, OTB outlets, video lottery facilities, tribal casinos, and professional sports venues would be completely excluded from the process.
The downside risk of disenfranchising so many key stakeholders – especially after being included in the Addabbo / Pretlow proposal – is that one or more of these entities could be encouraged to deny the legitimacy of the entire "casino-based" sports betting regime (enacted ) Questioned by law in 2013) on the basis that it violates the New York Constitution's prohibition on bookmaking, pool sales, and other forms of gambling.
The main focus of such a lawsuit would be whether sports betting falls within the exception for "casino gambling with no more than seven facilities" set out in Article I, Section 9 of the New York Constitution. And ironically, the 1984 AG statement, made public after Governor Cuomo expressed a preference for a lottery model, could serve as a playbook for such a legal challenge. It contains almost all of the arguments a potential challenger could bring up.
Constitutional exceptions are narrowly construed
The most troublesome part of the Abrams statement is the "Constitutional Construction" section, which sets out the rules of interpretation that should be used to determine the scope and meaning of a constitutional provision.
Importantly, this section begins by recognizing that the “state-run lottery allowance” that New York Governor Mario Cuomo intended to use as a vehicle for sports betting is expressed as an “exception” to Section I of Article I 9s "specific prohibitions against bookmaking, pool sales and lotteries, (and) general prohibition (against) other forms of gambling." The inclusion of the words "bookmaking" and "pool-selling" in the constitutional prohibition was considered significant by AG Abrams as they deal with crimes related to betting on sporting events. Since bookmaking and pool sales are synonymous with sports betting, AG Abrams viewed the inclusion of these two words as a specific ban on sports betting in the state constitution.
And seeing sports betting as expressly prohibited by the constitution, it's easy to see why AG Abrams concluded that the state lottery exemption, approved by New York voters as a constitutional amendment in 1966, wasn't comprehensive enough in sports betting. In order to reach this conclusion, AG Abrams relied on the following rule of constitutional interpretation: “(i) It goes without saying that an exception to a general policy set out in a constitution or statute must be interpreted narrowly in order to avoid the risk of the constitution to avoid an exception that is so broad that it swallows the rule. "Consistent with this rule, AG Abrams decided that the word" lottery "as used in the constitutional exception" must be given a narrow (rather than broad) interpretation. "
AG Abrams interpreted the language of "lottery" narrowly, arguing that the exception could not be read as tacitly lifting "the prohibition of other enumerated forms of gambling", including the prohibitions on bookmaking and pool sales. "To do this," added AG Abrams, "the words of the prohibition become violent." It stated that the systematic implementation of a system of betting on the outcome of sporting events is “pool selling or bookmaking” and that “(b) both are expressly prohibited” under Article I Section 9. “To claim that so not the case, "Abrams closed," would render these specific constitutional words meaningless. "
The rule that constitutional exceptions be interpreted narrowly has long been recognized by the New York appeals courts. In White v. Cuomo – dealing with the constitutionality of a 2016 law authorizing daily fantasy sports competitions – the Third Division noted that "(b) because public policy continues to oppose gambling," exceptions to the constitutional prohibition on gambling must be strictly interpreted in order to make sure they don't consume the rule themselves. "
There is a risk here that a potential challenger to the existing sports betting regime in New York could invoke this principle of interpretation to argue that the constitutional exception approved by voters in 2013 for "casino gambling in no more than seven establishments" is also not an appropriate one Funding is for the legal approval of sports betting. A prospective plaintiff would rely heavily on Abrams' analysis to argue that the phrase "casino gambling in no more than seven establishments" should be interpreted narrowly rather than broadly. With a narrow interpretation of these words, a potential challenger could argue that – just like with the exception of the state lottery – the exception "casino gambling" cannot be read to override the constitutional prohibition on bookmaking and pool sales otherwise. These specific words would become meaningless made.
Think of it from this standpoint: suppose you deleted the words "bookmaking" and "pool sales" from Article I, Section 9 of the New York Constitution and replaced them with the functional equivalent of "sports betting". Now try to read the casino gambling exception alongside the main constitutional prohibition. It would go something like this: “(N) o. . Sports betting or any other type of gambling except. . . .casino gambling in no more than seven establishments. . . will hereinafter be approved or approved in that State. "There is no need to even imagine this hypothesis: this is exactly what AG Abrams may have been referring to when he wrote in his final 1984 statement that" Sports betting is not permitted under Article I Section 9 of the New York Constitution. "
From this point of view, one can more easily assess the obvious risk that a New York court will have to judge whether sports betting – which are prohibited by the state constitution by the specific prohibitions on bookmaking and pool sales – can seek a safe passage through the portal of Casino- Gambling when those words (or their functional equivalent) are not used in the exception and the courts need to interpret constitutional exceptions narrowly rather than broadly. Would the sports betting exception be considered so broad by a court that it "consumes the rule itself" – exactly the concern AG Abrams is expressing?
It is not a safe bet that a court would invalidate the New York Sports Betting Act on this principle of interpretation, especially since the state constitution does not define the words "casino gambling" and expressly gives the legislature the authority and responsibility to determine the means and methods through which casino Gambling is implemented. For this reason, the constitutional exceptions that allow the state lottery, pari-mutuel wagering on horse racing, and casino gambling include the key phrase: "As approved and required by law," which means it is a matter for state lawmakers to " to approve and mandate “how betting on these constitutionally legal forms of gambling will work.
Legislative history and timing should set the scales in favor of legality
Ultimately, what can save the New York Sports Betting Act from possible unconstitutionality is timing. Casino-based sports betting was approved under the Upstate New York Gaming Development Act of 2013, which provided the legal framework for casino gambling in New York, given voters approving a constitutional amendment to make No. more than seven facilities. “What matters is that this Enabling Act was approved by the legislature and signed into law by Governor Cuomo in June 2013, more than four months before the referendum.
This impeccable timing is a good sign of the legality of the sports betting measure. Typically, if the Enablement is enacted “almost simultaneously” with a constitutional amendment to which it applies, the New York courts will postpone the legislature's interpretation of the constitutional provision. As the New York Supreme Court put in the Kolb v. Holling case: "(g) The actual respect is certainly due to a legislative representation of a constitutional provision, especially if it is made almost at the same time as such a provision." The Court stated that “(t) these (simultaneous) exhibitions are of great importance, as they prove the sense of the language of the time.” This recognition is particularly justified if the legislature that issued the statutory provision is the same legislative body who drafted the proposed constitutional amendment.
In contrast, the Enabling Act attached to the state lottery constitutional amendment and approved by voters in 1966 made no reference to sports betting. It was not until 1984 – almost two decades later – that sports betting was offered for the first time as an option for the state lottery. This significant time gap was one of the factors that led AG Abrams to conclude that a lottery-operated sports betting system was prohibited by the state constitution. He said 18 years was "too long an interval to be taken as evidence of the intent that guides the drafters of the amendment".
While the merits appear to favor the constitutional legitimacy of the Sports Betting Act of 2013 – given its near-simultaneous enactment and the constitutional language that gives lawmakers the power to "approve and dictate" the parameters of casino gambling – the result is far from a slam dunk. The AG's 1984 statement, which few knew about until Governor Cuomo published his lottery proposal in early January, provides disenfranchised stakeholders (and others) with a roadmap for challenging the 2013 bill. At least, the statement raises some interesting questions about the scope of the constitutional Exception for casino gambling on and whether this properly includes sports betting.