Sportsbetting initiative stopped in its tracks by federal appeals court

Hopes that the state of Delaware would prevail in litigation launched against its sportsbetting ambitions by the national sports leagues were dashed Monday in a surprise ruling by a federal appeals court.

Instead of ruling on whether an urgent injunction should be granted halting the state's sportsbetting initiative until a case on the constitutionality of a recent Delaware law could be argued, the appeal court went directly to the question of constitutionality...and ruled Delaware out of order.

The acrimonious legal dispute between the major sports leagues and Delaware broke out earlier this year when the state legislature passed a law permitting the state to embark on sportsbetting to plug budget deficits.

The leagues opposed the law, saying that it violated the federal Professional and Amateur Sports Protection Act and covered single game betting which took it out of the exemptions granted to Delaware in earlier federal legislation.

With the start of the US football season on the horizon, and Delaware gearing up to launch its sportsbetting, the leagues went to court with a request for an urgent injunction to halt the state's actions until a court had decided on the constitutionality question. This was turned down by a lower court judge, and the leagues appealed his decision, going to a federal appeals court.

On Monday a three judge panel in the appeals court went straight to the heart of the matter instead of debating the need for an injunction...and their finding was not helpful to Delaware, because it ruled that the state would violate a 1992 federal ban on such wagering, essentially halting Delaware plans to start taking bets next month.

"We're very disappointed with today's ruling," said Michael Barlow, counsel for Delaware's state governor, Jack Markell.

Delaware was one of four states exempted from the federal ban on sports betting because it once ran an NFL sports lottery in 1976 that required parlay, or multiple bets, on at least three games.

The 1992 law restricts sports betting to the four states that met a deadline to sign up for it: Nevada, where Las Vegas sports books determine the odds for sporting events across the country; Delaware; Montana; and Oregon.

But the leagues argued that the exemption does not allow Delaware to offer bets on single games, or on sports other than professional football.

Judge Theodore McKee of the appeals court said that the Delaware betting plan as currently envisioned violates the federal ban. The court was expected to issue a formal order later Monday, followed by a written opinion later.

Associated Press reported that state administration officials will later decide whether to appeal the ruling to the full appeals court, or to the U.S. Supreme Court.

The governor, through a spokesman, said the state still plans to offer parlay betting on professional football games, which federal law still allows.

Lawrence Hamermesh, a professor of corporate and business law at Widener University, told Associated Press that pursuing an appeal would be difficult. The state's chances are slim because there was no split on the three-judge panel, and there is no broad impact from the ruling, he said.

"This is a one-off situation," said Hamermesh, who described the state's position as "pretty weak."

"We were hoping the court would rule on the merits," said Kenneth Nachbar, an attorney representing the NFL, NBA, NHL, NCAA and Major League Baseball.

Nachbar and NCAA spokesman Erik Christianson both said they were pleased with the ruling.

During Monday's 2 hours of legal argument, Judge McKee asked what would happen if Delaware launched sports betting as planned in September, then had it declared illegal by the district court several months later. Individual bettors would have lost hundreds or thousands of dollars on what essentially was an illegal state scheme, he said.

"What happens if you're wrong?" McKee asked Andre Bouchard, an attorney representing the state.

"Caveat emptor," Bouchard replied, citing the Latin admonition of "buyer beware."

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