Articles were written by attorneys for attorneys and published in the “Sports Law” issue of the printed publication, Communiqué (May 2017):
- Professional Sports and Wagering in Las Vegas By Greg Gemignani, Esq. and Jennifer Roberts, Esq.
- Nil for N.I.L.: Why Student Athletes Are Denied Compensation for their Name, Image, and Likeness By Erica C. Smit, Esq. and J. Stephen Peek, Esq.
Additionally, CCBA President Tami D. Cowden takes a look at the new building in Las Vegas that is now host to the Nevada Appellate Courts in her message, A Classic in the Golden West.
Also included in the printed magazine are practical features and highlights for Nevada attorneys including:
- A 2-page “Cheat Sheet” for Eighth Judicial District Court Civil Practice By Craig D. Friedel, Esq.
- News and Notes by Las Vegas Justice Court Presiding Criminal Judge Diana Sullivan
- Business Court News By Paul C. Ray, Esq.
- Nevada Appellate Court Summaries By Joe Tommasino, Esq.
- Pro Bono Corner: Attorneys Stand Up for the Profession By Elizabeth Brickfield, Esq.
- Memories of Francis Lynch by “Ask Mr. Lawyer” Sal Gugino, Esq.
- Photos from CCBA’s 40 Year Club Induction Ceremony and Luncheon
- A look back at the 2016-2017 Downtown Cultural Series
© 2017 The following articles were originally published in Communiqué, the official publication of the Clark County Bar Association. (May 2017). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, 717 S. 8th Street, Las Vegas, NV 89101. Phone: (702) 387-6011.
Professional Sports and Wagering in Las Vegas
By Greg Gemignani, Esq. and Jennifer Roberts, Esq.
Now that 31 of 32 owners of NFL teams voted in favor of the Oakland Raiders moving to Las Vegas and the season for our professional hockey team, the Vegas Golden Knights, will soon begin, some have questioned how the presence of professional sports in our city will fare among the presence of regulated sports wagering.
You may ask why this even matters because there are now 36 states where you can gamble at a casino, which is a striking increase from the two states that had casinos in 1978. Despite casino gaming becoming part of the entertainment landscape in America, there is only one state in the United States that offers full-scale wagering on sporting events—Nevada.
The reason our state has this near monopoly on sports wagering is a federal law referred to as PASPA, a law passed in 1992 officially known as the Professional and Amateur Sports Protection Act. 28 U.S.C. §§ 3701-3704. PASPA was enacted with the backing of former New York Knicks star turned U.S. Senator, Bill Bradley, as a means to prevent the spread of state-authorized sports wagering, including sports-based lottery products that were beginning to emerge. PASPA prohibits any government, including Native American tribes, from authorizing a sports lottery, gambling, or wagering scheme based upon competitive games in which professional or amateur athletes compete (or intend to compete) or “on one or more performances of such athletes in such games.” Id. § 3702.
PASPA incorporates a few exceptions for states that had authorized sports wagering systems in place during certain periods of time before the bill was passed, including Nevada, Delaware, Montana, and Oregon. Id. § 3704. Of the four states with current exemptions, Delaware is the only other state besides Nevada that is offering sports wagering. However, after some legal challenges, Delaware is limited to accepting wagers on three-team parlay cards for NFL games. For clarification, a parlay is a wager on two or more events. For example, on one ticket, a bettor can select the Denver Broncos to win against the Los Angeles Chargers; the Green Bay Packers to win against the Chicago Bears; and the Cleveland Browns to win against the New England Patriots. The bettor has just entered into a three-team parlay in which all teams selected must win their games in order for the ticket to be a winner. In the case of Delaware, the three-team parlay on NFL games means that they cannot accept wagers on any other professional or college sport and can’t even take wagers on the NFL Super Bowl (because there are only two teams involved in the game).
New Jersey was given an exemption under PASPA on the condition that it enacted a state statute to permit sports wagering in casinos within one year of the enactment of PASPA. However, New Jersey was unable to enact such a statute and the PASPA exemption for New Jersey expired. That brings us forward to 2012, when New Jersey decided to legalize sports betting with the support of a majority of state voters through referendum. This prompted a challenge from the major college and professional sports leagues, which have automatic standing to pursue an injunction under PASPA pursuant to 28 U.S.C. § 3703. See NCAA v. Gov. of N.J., 730 F.3d 208 (3d Cir. 2013), cert. denied, 134 S.Ct. 2866 (2014). After the court ruled against New Jersey’s effort to legalize and regulate sports wagering at tracks and licensed casinos, New Jersey tried a different approach by decriminalizing sports wagering (hence, not authorizing) at tracks and licensed casinos, but this was again challenged by the leagues and the federal district court of New Jersey and the Third Circuit Court of Appeals issued opinions in favor of the sports leagues once again. See NCAA v. Gov. of N.J., 832 F.3d 389 (3d Cir. 2016). New Jersey has filed a petition for certiorari with the Supreme Court of the United States, but the petition has neither been granted nor denied at the time this article was written.
So, as of right now, Nevada is the only state with full-scale sports wagering. In order to operate a sports book, a nonrestricted gaming license for a sports pool is required. NRS 463.160, NRS 463.1605. This means that the owners, officers, directors, etc., must go through the strict suitability investigation by the Nevada Gaming Control Board. A sports book is often operated in conjunction with a race book, which accepts pari-mutuel wagers on horse or greyhound racing, but a race book license is a separate license from a sports pool license.
A sports pool license authorizes the operator to accept wagers “on sporting events or other events by any system or method of wagering.” NRS 463.0193. This allows for fixed odds betting, such as point spreads or money line; parlay wagering; or pari-mutuel wagering on sports. This “other events” language provides sports books authorization to offer wagering on non-traditional activities like the World Series of Poker; esports; and the NFL Draft (with administrative approval of the Nevada Gaming Control Board). Significant press has been dedicated to “mobile sports wagering” in Nevada. However, for decades, Nevada has permitted account wagering for sports betting. Account wagering is a form of betting in which patrons put money on deposit in an account with the sports book operator and then places wagers using funds from that account from any location in the state, including within the sports book. For many years, account wagering was primarily accomplished through landline telephone calls. More recently, account wagering has evolved to include mobile devices that use GPS, cell tower data, and other communications data to ensure that wagering against an account only occurs within the borders of the state.
Although there have been concerns expressed about the commingling of professional sports and sports wagering, such concerns are misplaced. First, sports betting is already happening in an illegal environment. In fact, the illegal sports wagering market in the United States is estimated to account for $80 billion to $380 billion in wagers per year. Will Hobson, Sports gambling in U.S.: Too prevalent to remain illegal?, The Washington Post (Feb. 27, 2015). Therefore, sports wagering is already a significant domestic activity despite being an illegal activity outside of Nevada, which means that it is being conducted with no consumer protections, no event integrity protections, and no tax revenue to offset the social costs of sports wagering. Meanwhile, legal regulated sports wagering in Nevada provides those benefits. Second, the United Kingdom has successfully operated a system of regulated sports wagering mixed with professional sporting events for years. In the U.K., sports teams, sports leagues, and regulated sports book operators often work together on sponsorship, game enhancement, and integrity issues.
Las Vegas has joined the big leagues with the addition of two professional sports teams. If PASPA is repealed or successfully overturned someday, we expect sports wagering to be just another highly regulated gaming entertainment option with consumer protections, integrity protections, and tax revenue that benefit the consumers, leagues, and states across the nation.
Gregory R. Gemignani, Esq. is a member of Dickinson Wright PLLC. Gemignani’s practice focuses primarily on intellectual property law, gaming law, technology law, internet law, online gaming law, and online promotions law.
Jennifer Roberts, Esq. is the Associate Director of the International Center for Gaming Regulation at UNLV. She also owns her own boutique law firm, Roberts Gaming Law, Ltd. Her legal practice focuses on federal, state, and local liquor laws, as well as land use and zoning; business licensing and compliance; and regulatory and administrative law. She teaches gaming law at the William S. Boyd School of Law at UNLV and the S.J. Quinney College of Law at University of Utah.
Nil for N.I.L.: Why Student Athletes Are Denied Compensation for their Name, Image, and Likeness
By Erica C. Smit, Esq. and J. Stephen Peek, Esq.
The National Collegiate Athletic Association (“NCAA”) prohibits student athletes from receiving compensation for their athletic performance. Under the NCAA Bylaws, a student athlete is allowed to receive a grant-in-aid for the cost of attendance at a university, but cannot otherwise profit off of his or her name, image, and likeness (“NIL”). Student athletes have challenged these bylaws as antitrust violations under the Sherman Act. The Sherman Act prohibits agreements that restrain trade in an effort to promote free trade and dismantle monopolies. See 15 U.S.C. § 1 (2012).
Undoubtedly, the NCAA Bylaws, in the technical sense, constitute restraints of trade. Yet, the Sherman Act only prohibits “unreasonable restraints on trade” because, otherwise, all contracts could be considered a restraint of trade as they limit parties’ freedom to negotiate. See NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 98 (1984). Accordingly, the issue becomes whether prohibiting student athletes from receiving compensation, even if only for their NIL, is an unreasonable restraint of trade under the Sherman Act.
Antitrust laws and college sports
To state a claim under Section 1 of the Sherman Act, a student athlete must prove the existence of three elements: “(1) a contract, combination, or conspiracy; (2) a resultant unreasonable restraint of trade in a relevant market; and (3) an accompanying injury” to interstate commerce. Agnew v. NCAA, 683 F.3d 328, 335 (7th Cir. 2012). The first and third elements are not at issue because student athletes sign contracts regarding their NIL and compensation, which indisputably affects interstate commerce. Thus, the focus remains on the second element—whether the NCAA Bylaws are unreasonable restraints of trade.
The NCAA and its member institutions “have created a horizontal restraint—an agreement among competitors on the way in which they will compete with one another.” Bd. of Regents, 468 U.S. at 99. Generally, horizontal restraints of trade, such as price fixing, are considered illegal per se. Yet, the Supreme Court of the United States has refused to apply the per se rule to the NCAA, recognizing that it is “an industry in which horizontal restraints on competition are essential if the product is to be available at all.” Instead, the court applied the “Rule of Reason,” which focuses on whether the challenged restraint enhances competition by weighing the procompetitive effects of the restraint against the anticompetitive effects. See Agnew, 683 F.3d at 335-36.
After weighing the procompetitive effects against the anticompetitive effects, the student athlete must show the NCAA’s “legitimate objectives can be achieved in a substantially less restrictive manner.” Tanaka v. USC, 252 F.3d 1059, 1063 (9th Cir. 2001). However, to be considered “viable under the Rule of Reason,” the “alternative must be ‘virtually as effective’ in serving the procompetitive purposes of the NCAA’s current rules, and ‘without significantly increased cost.’” O’Bannon v. NCAA, 802 F.3d 1049, 1074 (9th Cir. 2015).
O’Bannon v. NCAA
The issue of student athlete compensation for NIL was addressed in O’Bannon v. NCAA. In O’Bannon, the Ninth Circuit Court of Appeals analyzed whether the district court’s decision, which required NCAA member schools to pay student athletes $5,000 per year in deferred compensation for their NIL, was a less restrictive alternative to the NCAA Bylaws, which completely prohibited this type of compensation.
The Ninth Circuit determined both procompetitive and anticompetitive effects exist. The court recognized the NCAA Bylaws have anticompetitive effects because member “schools have agreed to value the athletes’ NILs at zero.” To counter-balance against this anticompetitive effect, the NCAA offered “the promotion of amateurism” as a procompetitive effect. The NCAA claimed that prohibiting compensation widens the choices available to student-athletes. Though the Ninth Circuit ultimately agreed the promotion of amateurism is procompetitive, the court rejected the NCAA’s claim that its bylaws widen student athletes’ choices, stating, “if anything, loosening or abandoning the compensation rules might be the best way to ‘widen’ recruits’ range of choices; athletes might well be more likely to attend college, and stay there longer, if they knew that they were earning some amount of NIL income while they were in school.”
After determining that both procompetitive and anticompetitive effects exist, the Ninth Circuit analyzed “whether there are substantially less restrictive alternatives to the NCAA’s current rules.” Demonstrating that such alternatives exist is the student athlete’s burden, which, in the NCAA market, is an even higher burden than general antitrust claims because the U.S. Supreme Court has required courts to generally afford the NCAA “ample latitude” to manage college athletics.
As related to student athletes’ NIL, the Ninth Circuit vacated the district court’s decision, which concluded $5,000 per year in deferred compensation—untethered to education expenses—was a less restrictive alternative to the NCAA’s current rules. The court stated a rule allowing schools to pay student-athletes cash compensation cannot be equally effective in promoting amateurism as not paying student athletes, and the district court’s conclusion to the contrary “ignored that not paying student-athletes is precisely what makes them amateurs.”
Even though evidence submitted to the district court supported the concept that smaller amounts paid to student athletes poses less of a threat to amateurism than large sums of compensation, the Ninth Circuit determined this line of reasoning was a slippery slope. The court cautioned that
“[o]nce that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point; we have little doubt that plaintiffs will continue to challenge the arbitrary limit imposed by the district court until they have captured the full value of their NIL.”
If such is the case, “the NCAA will have surrendered its amateurism principles entirely and transitioned from its ‘particular brand of football’ to minor league status.” Accordingly, the Ninth Circuit vacated the district court’s decision requiring the NCAA to allow its member schools to pay deferred compensation to student-athletes.
Aftermath of O’Bannon
Since O’Bannon, the NCAA has maintained its prohibition on student athlete compensation for NIL. Also, the Supreme Court of the United States denied certiorari of O’Bannon, leaving O’Bannon as the law of the land in the Ninth Circuit. It is not clear from the O’Bannon decision, however, whether the Ninth Circuit would prohibit compensation to student athletes under the Olympic model, as O’Bannon focused on a rule allowing schools to pay students cash compensation, not private sponsors. While O’Bannon recognized that college sports would be more transformed by the introduction of professionalism than the Olympics, the issue of the Olympic model was not before the court.
The Olympic model, which has been proposed in the media as a viable alternative to complete prohibitions on compensation, would allow student athletes to “receive money based on individual deals, such as endorsements or autograph signings” while the NCAA retains its licensing and broadcast rights. See John Soloman, NCAA Critics Offer Ways to Pay College Players, CBSSports (June 4, 2014), http://www.cbssports.com/college-football/news/ncaa-critics-offer-ways-to-pay-college-players/. Nevertheless, concerns exist regarding “whether rogue boosters would set up fake endorsement spots to funnel money to players.” Id.
The concept of the Olympic model as a viable alternative to the NCAA Bylaws is in its infancy, and the quirks and concerns have yet to be addressed. Will the Olympic model or some variation thereof be the solution to this battle between student athletes and the NCAA? The jury is still out on that issue. Until then, student athletes will receive nil for their NIL.
Erica C. Smit, Esq. is an associate at Holland & Hart LLP, where she practices commercial litigation and labor and employment law at both the trial and appellate levels.
J. Stephen Peek, Esq. is a partner at Holland & Hart LLP and an AV-rated trial lawyer with over 45 years of experience in complex commercial litigation.
Communiqué is published eleven times per year with an issue published monthly except for July by the Clark County Bar Association, P.O. Box 657, Las Vegas, NV 89125-0657. Phone: (702) 387-6011.
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