Delaware Sports Betting: Single-Game Bets Were a Risky Gambit
By CRIS BARRISH The News Journal
In 2003, a legislative task force concluded that one thing about sports betting in Delaware was apparent: single-game bets "would be prohibited.''
The report issued by the task force relied substantially on a legal opinion paid for by Delaware's three racetrack casinos. The memo said it was "fairly clear'' that federal law would not permit single-game betting here.
As late as this January, when a House committee began considering the issue, Deputy Finance Secretary Tom Cook said the Markell administration -- in office only a week -- would be pursuing only "parlay'' bets. Such a bet would involve at least two games or two components of one game, such as the winner against the point spread and total points scored.
Yet by March, even as the National Football League threatened to sue, Gov. Jack Markell decided to pursue single-game betting. In doing so, the governor relied on the advice of two key appointees, legal counsel Michael A. Barlow and chief of staff Thomas P. McGonigle, also an attorney.
The Markell team -- anxious to find revenues with a budget deficit projected at $800 million -- persuaded casino owners their gambit could succeed. Also known as a head-to-head or straight bet, the popular single-game wager involves picking the winner of a single sporting event using a point spread.
Last week, the administration's strategy failed miserably.
The U.S. Court of Appeals for the 3rd Circuit -- one step below the U.S. Supreme Court -- delivered a knockout blow to single-game betting, ruling that Delaware's plan so obviously violates federal law that a trial wasn't even necessary.
Although a 1992 federal ban on sports betting in America exempted Delaware because it briefly had parlay betting in 1976, a three-judge panel in Philadelphia made it clear that straight bets could not occur here.
The exemption for Delaware and three other states permits them to have sports betting "to the extent" it was previously "conducted." America's major sports leagues sued the state in July, arguing that the federal law allows Delaware to have only parlay bets on NFL games, as was offered in 1976.
While the swiftness of the ruling was a surprise -- the appeals panel was only asked to rule on a request by the sports leagues to grant an emergency injunction to stop Delaware before the lawsuit is heard -- some observers said the decision was a no-brainer.
P. Gary Ward, a lobbyist for sports gambling who has been pushing for years to reinstitute a sports lottery in Delaware, said he has always made it clear to lawmakers and state officials that single-game bets would not fly. Ward said Markell and his aides would not meet with him.
"The 1992 federal law clearly states you had to operate it as you did in 1976,'' Ward said. "What we had was parlay. So that meant we could only have parlays, not a win bet."
While he applauded Markell for pursuing sports betting, Ward said he was surprised the governor tried to push the envelope so far. To do battle with pro football, baseball, basketball, hockey and the National Collegiate Athletic Association, the state hired a team of outside attorneys, some being paid $500 an hour. Through July, the state had been billed $66,022, Barlow said Friday. Outside attorneys have not yet submitted their tab for August, when lawyers spent hundreds of hours on the case.
State officials had projected sports betting could bring the state $17 million this fiscal year in revenues by direct wagers and crossover betting by sports gamblers who play slot machines.
While the appeals court ruling explaining Monday's order has not yet been released, Markell acknowledged single-game bets are out. Less certain is whether bets on other sports besides pro football are permitted, and exactly what kind of parlays can be offered.
Markell called Barlow and McGonigle "very talented lawyers" whose views on the legality of single-game betting he continues to support. "We thought that the legislation supported us and that federal language was unclear."
The governor has not decided if the state will appeal. But Markell said he would not apologize for trying to drum up revenues. "We thought we had a reasonable shot, but it was never going to be a slam dunk for us."
Single bet 'prohibited'
Long dormant in Delaware after it fizzled in 1976 amid controversy over odds and low revenue, the push to bring back sports betting gained steam in 2002, when a House task force was convened to study the issue.
The nine-member task force included casino operators, horse-racing officials, legislators and members of the public. To assist the deliberations, the heads of Dover Downs, Delaware Park and Midway Slots paid Wilmington corporate attorney William E. Manning to evaluate Delaware's odds of success under federal and state law.
Manning, of the firm Klett Rooney Lieber & Shorling, issued a memo that November. He would not comment for this story, but the 13-page document he wrote spends several pages on Delaware's exemption under the Professional and Amateur Sports Protection Act.
The memo noted a Senate Judiciary Committee report on the pending 1992 bill that said it didn't intend to prevent Delaware from expanding its 1976 sports lottery "Into other sports" but does not "intend to allow the expansion of sports lotteries into head-to-head betting."
"We believe," the memo said, "that a wager which depends on the results of more than one game is important, both to meet [the federal law's] requirements and to maintain consistency with games run in Delaware" in 1976.
Later, the memo didn't mince words. "One particular point, however, seems fairly clear -- any wager permitted in a proposed game should involve more than merely the outcome of one sports contest."
The House report, which incorporated the Manning memo into its findings, as well as an NFL opinion that no sports lottery could be reinstituted, concluded any new sports lottery should "feature games structured to avoid what all counsel agreed would be prohibited -- 'head-to-head' betting on single events." The report also warned that Delaware "should assume there may be a legal challenge to any renewal of sports betting."
Former House Majority Leader Joe Petrilli, a Republican who served on the task force, said the Manning memo convinced him single-game bets would be off-limits in Delaware. When he found out Markell had decided to pursue it, "I just assumed they did their homework.''
Testing the federal law
Markell, McGonigle and Barlow said they were aware of the Manning memo, but decided there was enough ambiguity in the federal law that Delaware could navigate single-game betting through the legal loophole.
McGonigle said the governor's office carefully reviewed the legal issues. "While we recognized the litigation risks in light of the NFL's threat of a lawsuit and the lack of case law on these issues, we believed, and still believe, the better legal reasoning is that the Delaware Sports Lottery as proposed does not violate state or federal law."
The administration figured they could argue that, because the state's law permitting a lottery on any sport was the "scheme" in 1976, federal law would permit what state law "authorized" then even if straight bets were not "conducted."
Neither the administration nor the Attorney General's Office would discuss any conversations they had on the issue. Barlow also would not say whether the administration authored its own legal opinion -- but said if he had written one, it would be exempt from public disclosure under attorney-client privilege. "While I am sure some will Monday morning quarterback the outcome, it is not fair to say we did not carefully consider these issues."
Larry Hamermesh, a business law professor at Widener University, said Markell and his aides knew "there was a possibility they would get slammed on head-to-head betting" but figured it was worth it to test the meaning of the federal law.
"Even if they had gotten some other expert opinion, it doesn't sound like it would be any different than the Manning memo," Hamermesh said. "But when you take a case like this one, you don't make progress in being shy in what you ask for."
Markell did follow advice in Manning's memo and sought an opinion from the Delaware Supreme Court on the legality of a new sports lottery. The query included a request for guidance on straight bets.
The state constitution prohibits gambling except for lotteries under state control to raise revenues. The state Supreme Court ruled in May the sports betting law passed by the Legislature in April was constitutional for parlay games because they are determined more by chance than skill -- the crucial factor in deciding whether something is a lottery.
The high court passed on the question of single-game betting.
Nevertheless, Markell and the casinos began planning to offer straight bets. The governor said such wagers are the most attractive ones for sports gamblers.
Ed Sutor, chief executive of Dover Downs, said that while he considered Manning's memo to be a persuasive argument against straight bets, he bought into the administration's rationale about how Delaware's plan could comply with federal law. Going for single bets "was embraced by the administration and the industry said, 'Yeah.' We did not fight it at all."
The leagues sued in late July, after the state began devising rules for sports bets and casinos began spending money hiring people and retrofitting space for a sports book. A few days later, the leagues sought the injunction to stop Delaware from offering single bets and wagers on any sport besides pro football.
Gregory M. Sleet, chief judge of the U.S. District Court in Delaware, refused the injunction, noting the leagues had not demonstrated a likelihood of winning the lawsuit. Though Sleet also pointed out that Delaware also had not shown it was likely to prevail in the lawsuit, the decision buoyed the administration's confidence in their position.
But the appeals court agreed to hear the leagues' case for an injunction. And Monday, after reviewing new legal briefs on the federal law by both sides and holding a two-hour hearing, the trio decided it was crystal-clear Delaware's plan violated federal law. No trial was necessary.
So unless Delaware wins an appeal to the full appeals court or with the U.S. Supreme Court -- one legal experts say is a long shot -- straight bets are out.
