QUESTIONS PRESENTED FOR REVIEW
I.
Whether the Professional and Amateur Sports Protection Act prohibits Tulania from
offering sports lotteries to generate revenues to help alleviate its substantial budget
deficits and satisfy its constitutional balanced-budget obligations.
II.
Whether Tulania’s proposed sports lottery violates the Tulania Constitution.
STANDARD OF REVIEW
For the purposes of this review, the United States Supreme Court will review all matters
de novo.
1
STATEMENT OF THE CASE
A.
Factual Background
In March 2009, Tulania Governor Deuce McCallister and Ronald Hughes, the Director of
the Tulania State Lottery Office (collectively “Petitioner”), proposed the reinstatement of the
Tulania Sports Lottery (“Sports Lottery”). The National Basketball Association, National
Football League, National Hockey League, Major League Soccer, National Collegiate Athletic
Association and Major League Baseball (the “Leagues” or “Respondent”) allege that the
proposed Sports Lottery violates the Professional and Amateur Sports Protection Act (“PASPA”)
and the Tulania Constitution. (Dist. Ct. Op. 1).1
The sports lottery proposal was approved by the Tulania legislature and the Sports
Lottery Act was signed into law. The Act was established as a solution to Tulania’s record
budget deficit of approximately $800 million in the 2010 fiscal year. Id at 5. The Act was
scheduled to take effect on September 1, 2009 before the start of the upcoming NFL season. Id.
at 6.
Petitioner proposed a three game sports lottery structure to be implemented:
(i)
“Single Game Lottery,” in which players are asked to select the winning team in
any given sports contest with a line;
(ii)
“Total Lottery,” in which players would select whether the total points scored by
both teams in a single game will be over or under a specified number;
(iii)
“Parlay Lottery,” in which players are asked to choose the outcomes on multiple
elements of an event. Id. at 3-4.
1
Citations to the District Court Opinion are renumbered to start from page 1. For example, page
19 of the Competition Problem Packet is page 1 of the District Court Opinion.
2
Two types of betting lines, point-spread lines and money lines, have been proposed to
handicap the aforementioned games. The point-spread line attempts to equalize two teams in a
contest where the favorite gives up points and the underdog takes points. Id. at 4. For example,
if Team A is a 3.5 point favorite over Team B, a player who chose Team A would win only if
Team A outscored Team B by at least 3.5 points. The goal of the promoter, in this case the
Tulania State Lottery, is to have equal amounts wagered on Team A and on Team B. Id.
The second type of betting line is the money line, or the linemaker’s estimate of the
probability of a team winning or some series of events occurring. Id. This type of line includes a
built-in adjustment of the amount a wager on the favorite would win in comparison to how much
a wager on an underdog would win. As with a point spread, the promoter works to ensure half of
the betting dollars to be wagered on Team A and half on Team B. Id. at 5.
Players can place their wagers until the beginning of the underlying contest. The point
spread can fluctuate up until the beginning of the game so that the linemaker can ensure that
equal amounts of wagers accrue on each side of a contest. The changing spread does not affect
wagers already made. In other words, the odds of winning are fixed at the time the player places
the wager so that he or she knows the exact amount of the payoff for a successful wager. Id.
The Sports Lottery structure stems from the Sports Lottery scheme that was previously
implemented in Tulania. In 1976, Tulania debuted a multi-game (parlay) lottery system for NFL
games and planned to further extend the program to include other sports. Id. at 2. Three types of
games were introduced that were collectively known as “Scoreboard.” The first game, “Football
Bonus,” required players to select the winning team of each game in one or both seven game
pools. In order to win, players must correctly select all seven winning teams in the particular
pool. The second game, “Touchdown,” asked players to choose the winners of multiple NFL
3
games in addition to one of three ranges of possible point spread for each game. In order to win,
the player must have correctly selected the winning team and the winning point spread in each of
three, four or five contests. Id. Finally, the third game, “Touchdown II,” required players to
consider a published point spread and predict which team would beat the point spread for each
game. In order to win, players had to correctly choose the teams to beat the published point
spread in at least four games. “Touchdown II” eventually replaced “Touchdown.” Id. at 2-3.
The Federal Government enacted PASPA in 1993 to shield professional and amateur
sports organizations from the damage that Congress believed would occur from sports betting.
Id. at 7. The betting market in the United States is immense. Id. at 6. Estimates of the scope of
illegal sports betting in the United States reach up to $380 billion annually. Id. With the advent
of the Internet to facilitate virtual casinos, the betting market is easily accessible and highly
unregulated. Id.
B.
Procedural History
The decision of the United States Court of Appeals for the Fourteenth Circuit held that
Tulania’s proposed sports lottery violates PASPA as a matter of law and is unconstitutional
under the Tulania Constitution as a matter of law. This decision was heard on appeal from the
United States District Court for the Southern District of Tulania, which held that, as a matter of
law, the Tulania Sports Lottery constitutes a constitutionally legal lottery and that the Sports
Lottery does not violate PASPA.
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SUMMARY OF THE ARGUMENT
The Tulania Sports Lottery Act does not violate the Professional and Amateur Sports
Protection Act as a matter of law. The federalism principles outlined in Gregory state that
federal courts will interpret a statute to preserve rather than destroy the States’ substantial
sovereign powers, absent an unmistakably clear expression of Congress’s intent to alter the usual
constitutional balance between the states and the Federal Government. Because raising revenue
is one of the most plenary of sovereign powers and because there is no Congressional intent
stating the contrary, the Supreme Court must preserve Tulania’s sovereign power to hold the
types of sports lotteries it chooses. Furthermore, examining the legislative history of PASPA is
indicative that Congress did not intend to prohibit expansion of sports lotteries. Also, the
proposed lottery will not harm the integrity of the respective sports leagues
The Sports Lottery is a constitutionally legal lottery. The term “lottery” should be
interpreted according to the American rule defining chance to encompass not only games of pure
chance but also games in which chance is the dominant factor. Tulania’s intent to adopt the
American rule is evidenced by the State’s broad legislative text, by the prior adoption of a sports
lottery system that incorporated the American rule, and by public policy.
While Tulania intended for these games to be assessed under the American rule defining
chance, most of the games proposed by the Sports Lottery nonetheless survive the stricter
English rule defining chance. Lottery offerings that incorporate a point-spread line eliminate the
element of skill, even for the Single Game Lottery, because every player has an equal chance of
receiving a distribution of money. Lottery offerings that incorporate a money line determine
winners by chance, since the money line accounts for the disparity of both events considered.
5
ARGUMENT
I.
TULANIA’S PROPOSED SPORTS LOTTERY IS CONSISTENT WITH THE
PROFESSIONAL AND AMATEUR SPORTS PROTECTION ACT AS A
MATTER OF LAW.
The Professional and Amateur Sports Protection Act (“PASPA”) prohibits any person or
governmental entity from sponsoring, operating, advertising, or promoting:
a lottery, sweepstakes, or other betting, gambling, or wagering scheme based,
directly or indirectly (through the use of geographical references or otherwise), on
one or more competitive games in which amateur or professional athletes
participate, or are intended to participate, or are intended to participate, or on one
or more performances of such athletes in such games. 28 U.S.C. §3702.
Section 3704 contains four (4) exceptions, one of which is the source of contention in this
litigation. Section 3702 shall not apply to –
a lottery, sweepstakes, or other betting, gambling, or wagering scheme in
operation in a State or other governmental entity, to the extent that the scheme
was conducted by that State or other governmental entity at any time during the
period beginning January 1, 1976, and ending August 31, 1990. 28 U.S.C. §
3704(a)(1).
Because Tulania conducted a lottery based on professional sports in 1976, its newly
proposed sports lottery qualifies for this exception. The Leagues contend that this exception
only permits Tulania to conduct the same lottery structure it conducted between 1976 and 1990.
(Dist. Ct. Op. 7) The language in PASPA, however, allows Tulania to conduct any sports lottery
under state control because it conducted a state sports lottery in 1976 and because the Leagues’
narrow interpretation of the statute’s meaning would interfere with state sovereignty, upsetting
the federal-state balance. This dispute between Tulania and the Leagues highlights ambiguity of
§ 3704(a)(1), the exception at issue.
A.
The Gregory federalism principals apply because Tulania is exercising
a core sovereign function.
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Bruesewitz v. Wyeth Inc., 561 F.3d 233, 240 (3d Cir. 2009) states that when a court is
interpreting a statute with two plausible readings, it has the duty to accept the reading that does
not favor preemption. “Unless Congress conveys its purpose clearly, it will not be deemed to
have significantly changed the federal-state balance.” US v. Bass, 404 U.S. 336, 349 (1971). In
areas involving federal balance of powers, the requirement of a clear statement assures that the
legislature has faced and intended to bring into issue the critical matters involved in the judicial
decision. Id.
The Court of Appeals incorrectly held that the Statute was unambiguous, and therefore,
the Gregory v. Ashcroft, 501 U.S. 452 (1991) federalism principles did not apply. The Gregory
federalism principles must apply here because the Statute is ambiguous and Tulania is exercising
the “core sovereign function of raising revenues in order to comply with is constitutional
balanced-budget requirement. “Absent an ‘unmistakably clear’ expression of intent to ‘alter the
usual constitutional balance between the States and the Federal Government, federal courts will
interpret a statute to preserve rather than destroy the States’ ‘substantial sovereign powers.’” Id.
at 460-61.
As the District Court correctly stated, “Tulania’s asserted interest – operation of a sports
lottery to raise revenues to help close a historical budget gap – is ‘the most fundamental sort for a
sovereign entity.’” Id. at 460. Lawrence v. State Tax Comm’n of Miss., 286 U.S. 276 (1932)
involved a Mississippi resident who brought an action to set aside the assessment of a tax upon
the part of his net income that arose from his work outside the state of Mississippi. The Court
stated “the obligation of one domiciled within a state to pay taxes there, arises from unilateral
action of the state government in the exercise of the most plenary of sovereign powers, that to
raise revenue to defray the expenses of government ….” Id. at 279 (emphasis added). In other
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words, the Supreme Court reasoned that raising revenue is one of the state government’s most
important sovereign powers. Because raising revenue is the main purpose for the sports lottery,
state sovereignty should be recognized. Therefore, the Leagues’ interpretation that PASPA does
not allow Tulania to implement different sports lotteries “upsets the usual constitutional balance
of federal and state powers.” Gregory, 460 U.S. at 460.
B.
The legislative history of PASPA makes it clear Congress did not
intend to prohibit expansion of sports lotteries.
When there is ambiguity as to how the statute should be interpreted, the court must look
to the legislative history to determine the intent of Congress. Gregory v. Ashcroft, 501 U.S. 452
(1991). There is no statement or indication in the legislative history that Congress intended to
restrict the exception to the exact sports lotteries that were conducted in 1976. In fact, the
legislative history reveals that Congress originally drafted the Bill to state such, but the clause
was broadened over time to expand the scope of the activities permitted under the exception.
The language in the Bill originally stated “to the extent that the activity actually was
conducted in that State pursuant to the laws of that State, between September 1, 1989 and August
31, 1990.” S. Rep. No. 102-248 (1991), available at 1991 WL 258663, reprinted in 1992
U.S.C.C.A.N. 3553. However, the Bill was modified and now reads “to the extent that the
scheme was conducted by that State or other governmental entity at any time during the period
beginning January 1, 1976, and ending August 31, 1990.” 28 U.S.C. §3704(a)(1) (emphasis
added). “Where Congress includes limiting language in an earlier version of a bill but deletes it
prior to enactment, it may be presumed that the limitation was not intended.” Russello v. US,
464 U.S. 16, 23-24 (1983). The original construction of the Bill referred to the specific
“activity” conducted but the statute now refers to the “scheme” conducted, broadening the scope
of the application of the statute to any jurisdiction that had a sports lottery between 1976 and
8
1990. The Statute does not define the word scheme, but the type of “scheme” at issue should be
determined through the eye of the beholder, since the existence of a scheme depends on the level
of generality at which the activity is viewed. H.J. Inc. v. Northwestern Bell Telephone Co., 492
U.S. 229 (1989). The word “scheme” in this broad Bill refers to a previously authorized state or
government sports lottery in which the winners of lottery games were determined by the outcome
of professional sporting events. Because Tulania enacted a sports lottery during the specified
period (between 1976 and 1990), as long as the new proposal is likewise a lottery based on
professional sports, it falls within the statute’s intended meaning of “scheme,” and thus will be
permitted under the exception.
Furthermore, the Senate Report states: Oregon and Delaware [and Tulania] may conduct
sports lotteries on any sport, because sports lotteries were conducted by those states prior to
August 31, 1990. S. Rep. No. 102-248, at 9-10 (1991), available at 1991 WL 258663, reprinted
in 1992 U.S.C.C.A.N. 3553, 3560-61. The Senate Report further supports the Tulania’s position
that it is permitted to conduct lotteries affiliated with professional sports leagues other than the
just the National Football League.
C.
Implementing the proposed lottery will not harm the integrity of the
respective sports leagues.
The Court of Appeals fails to provide any factual evidence to substantiate its holding that
sports lotteries threaten the integrity of professional and/or amateur sports. (App. Ct. Op. 12).
To the contrary, the District Court of Delaware found that the record shows that extensive
gambling on NFL games has existed for several years and has not injured the Leagues or their
reputations. Nat’l Football League v. Governor of Delaware, 435 F. Supp. 1378 (D Del. 1977).
As the District Opinion correctly stated in its opinion, the “Leagues’ entanglements with the
gambling industry undermine their reputational harm argument.” (Dist. Ct. Op. 36). For
9
example, the Sacramento Kings are owned by Joe Maloof, who also owns the Palms Casino, one
of the largest casinos in Las Vegas. (Dist. Ct. Op. 17). Several other casinos have formed
partnerships with professional sports teams, including Harrah’s Casino, a partner of the New
York Mets, and Mohegan Sun Hotel & Casino, a partner of the New York Yankees. Id. In
addition, other Major League Baseball clubs have sponsorship deals with casinos. Id. Neither
professional or amateur sports teams nor leagues would willingly enter into deals with
companies associated with the gambling industry if it could potentially ruin their reputation.
If the Leagues are concerned about their reputation despite the several entanglements
each League has with the gambling industry, each League can advertise that it is not affiliated
with the Tulania sports lottery system on its website and publications. Furthermore, Tulania
would be willing to include a disclaimer that the sports lotteries are not affiliated with the
respective Leagues. These steps will diminish any potential confusion as to the lotteries’
affiliation with the Leagues, and will further ensure that no harm will befall the Leagues’
reputations.
II.
TULANIA’S PROPOSED SPORTS LOTTERY IS CONSTITUTIONAL UNDER
THE TULANIA CONSTITUTION AS A MATTER OF LAW.
A.
Tulania would apply the American rule defining chance to assess the
proposed sports lottery structure.
A lottery is comprised of three elements: prize, consideration and chance. Nat’l Football
League, 435 F. Supp. at 1384. The issue here is the appropriate way to define the element of
chance, as there is a jurisdictional split over whether to apply the minority English rule or the
majority American rule, and Tulania courts have not uniformly ruled on whether the pure chance
rule or dominant factor rule applies. Under the English rule, or pure chance rule, a lottery
10
consists of the distribution of money or property by chance only. A lottery exists under this
approach if skill or merit plays no role in the game. By contrast, under the American rule, or
dominant factor rule, chance must be the controlling element. Skill may be an element so long
as the dominant element is chance. As stated in People ex rel. Ellison v. Lavin, 71 NE 753, 756
(1904), “The test of the character of the game is not whether it contains an element of chance or
an element of skill, but which is the dominating element that determines the result of the
game[.]” We urge the Supreme Court of the United States to find that Tulania has adopted,
intended to adopt, and would continue to adopt the American rule defining chance.
i. The English rule may not be implied from the text of the Tulania
Constitution when read in conjunction with the subsequent Constitutional
Amendment.
The Tulania Constitution was amended in 1973 to authorize “Lotteries under State
control for the purpose of raising funds.” (Dist. Ct. Op. 1-2). One year later, the State enacted
further legislation authorizing lottery games that “affiliate the determination of the winners of a
game with any racing or sporting event held within or without the State.” The term “lottery” as
used in the Tulania Constitution should be interpreted to encompass both games of pure chance
and also games in which chance is the dominant factor, as no limiting language was adopted.
There is no clear language in Tulania’s 1973 Constitutional amendment nor in the 1974
sports lottery legislation that evidences Tulania’s intent to adopt the more restrictive English
rule. The stricter English rule therefore should not be implied. See Nat’l Football League, 435
F. Supp. at 1385, noting that that absent clear language in the Delaware Constitution to adopt the
English rule, the American rule must have been intended and therefore must be adopted by the
court. Tulania’s Constitution broadly authorizes lotteries under State control for the purpose of
raising revenue. Tulania did not attempt to define or limit what was meant by the term “lottery,”
11
therefore the strict English rule must not be implied into the Tulania Constitution and the
American rule must be presumed.
In Nat’l Football League, the Supreme Court of Delaware faced the same issue of
whether to apply the American or English interpretation of chance to their sports lottery
structure. The Court analyzed the same sports lottery structure that Tulania implemented in
1976. In addressing the proper interpretation of “chance,” the Court noted that the American
rule “appear[ed] to be the weight of authority at the present day.” Id. at 1385. The Court
subsequently concluded that the contemporaneous approval of Delaware’s lottery amendment
with their lottery statute, combined with the current American rule trend, was sufficient to
interpret “lottery” as to encompass not only games of pure chance, but also games in which
chance is the dominant factor. Id. at 1386. Consistent with this conclusion of the Delaware
Court, the near contemporaneous approval of Tulania’s 1974 sports lottery legislation with the
1973 Constitutional amendment, and the still current American rule trend, it is appropriate to
analyze the sports lottery scheme under the American rule.
Furthermore, the American rule is currently the predominate rule in the United States.
Over the past four decades, the trend has been away from the stricter English rule and towards
the more expansive American rule. Id. at 1384. See, e.g., Morrow v. State, P.2d 127, 129
(Alaska 1973). Included in the majority of states that have adopted the American rule are
influential states like Massachusetts (Commonwealth v. Lake, 57 N.E.2d 923, 926 (Mass. 1944),
noting that where both elements of chance and skill are present in the game, if the element of
chance rather than of skill predominates, the game is a legal lottery), California, (In re Allen, 377
P.2d 280 (Cal. 1962) (en banc), acknowledging the difference between a game of skill and of
chance and holding that the card game “bridge” is a game of skill), and Missouri (State ex Inf.
12
McKittrick v. Globe-Democrat Pub. Co., 110 S.W.2d 705, 713 (Mo. 1937)(en banc), stating that
a contest may be a lottery even though skill, judgment, or research enter thereinto in some
degree, if chance in a larger degree determine the result itself).
Both the constitutional language and the sports lottery legislation is consistent with the
adoption of the American rule because the language broadly authorizes “lotteries” that determine
lottery winners with the outcome of sporting events with no limitation, as consistent with the
current trend of American rule adoption. The English rule should therefore not be implied.
ii. Tulania’s previous sports lottery structure included games that allowed
players to use skill, which evidences Tulania’s intent to adopt and apply the
American rule.
In further determining that Tulania would adopt the American rule defining chance to
assess the 2009 sports lottery structure proposed by Governor McCallister, most telling is that
Tulania historically applied the American rule to assess previous sports lottery schemes. Tulania
debuted sports lotteries in 1976.2 The legislation was aware that these games involved an
element of skill and nevertheless continued to authorize their operation, evidencing their
adoption of the American rule. Since the current sports lottery structure is authorized by the
previous scheme, Tulania’s prior adoption of the American rule evidences their intent to again
apply this rule to the proposed structure.
The 1976 Sports Lottery operated games that involved an element of skill. This previous
three game scheme was collectively known as “Scoreboard.” The first game, “Football Bonus,”
required bettors to pick the winners of each of seven games in a pool. The second game was
referred to as “Touchdown” and required bettors to choose the winners of multiple NFL games
2
The 1974 legislation authorized for sports lotteries to be conducted within any professional
sporting realm. The 1976 “Scoreboard” games, however, were applicable to NFL matchups
only. Although “Scoreboard” only applied to one type of sport, it is important to note that the
Tulania legislature clearly stated that sports lotteries could apply to any professional sporting
event (emphasis added).
13
and one of three ranges of possible spread ranges. A third game later replaced “Touchdown.”
(Dist. Ct. Op. 20). Because these games would not have been constitutional under the English
rule, it is reasonable to presume they were assessed under the broader American rule.
“Football Bonus” was classified as a lottery because although some skill is involved in
the form of understanding of the game of football and of the teams participating in each of the
weekly matchups, chance predominates over this potential skill advantage because of the mutual
game set up. “Touchdown” also allowed for a player to rely on some skill that he or she may
have when picking the matchup winner in addition to one of three possible spread ranges.
Knowledge of the matchup could be utilized to select the likely winner and the more likely
spread, but this skill advantage is nonetheless trumped by a chance multiplier that negates any
advantage created by skill. By comparison, the Delaware Supreme Court in Nat’l Football
League analyzed the same three-game structure, finding that chance rather than skill is the
dominant factor in the games. Nat’l Football League, 435 F. Supp. at 1386-1387. It is therefore
reasonable to infer that Tulania would have intended for the American rule to apply to the
previous game structure and would again apply the American rule to the 2009 proposed lottery
scheme.
Furthermore, Tulania has had over 30 years to implement an explicit rule evidencing a
wish to adopt the English rule if they desired. Tulania, however, has not acted in this manner.
Even when PASPA authorized gambling in the state of Tulania, the legislature remained silent
on the issue. Tulania’s past lottery offerings in conjunction with an absence of legislative action
when ample opportunity to do so was present, evidences Tulania’s implicit acquiescence to the
American rule.
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iii. Adoption of the American rule supports public policy within the state of
Tulania.
Promotion of the American rule is supported by public policy. The purpose behind
promotion of the sports lottery scheme is to help alleviate current budget deficit concerns within
Tulania. Adoption of the less restrictive American rule allows for a broader range of lottery
games to take place. If more games were permitted, the state would accrue greater revenue to
help repay the State’s budget deficit. The revenue generated from the Sports Lottery would
alleviate the burden on Tulania’s taxpayers forced to repay the $800 billion budget deficit
Legalizing sports lotteries would also create a control mechanism over the current sports
betting market. Estimates of the scope of illegal sports betting in the United States ranges up to
$380 billion annually. We believe that the proposed sports lottery structure will encroach on the
money being spent in illegal gambling markets by offering a legal alternative in the form of a
lottery. It will create an outlet for individuals who wish to engage in sports-related games while
nonetheless allowing Tulania to maintain control. Tulania will be better able to exercise control
over these individuals by creating a legal alternative and the American rule would support this
broad policy initiative.
Finally, sports lottery games are considered a hobby amongst sports fans. As the sports
lottery becomes established, increased interest in more types of sporting events and in more team
matchups will likely follow. An increase in fan base lends itself to only benefit sports leagues,
through higher competition attendance rates and larger television audiences. The Leagues will
not be disadvantaged by having a greater fan base following.
In conclusion, Tulania evidenced its intent to follow the majority of states in adopting the
broader, American rule defining chance, as it pertains to lotteries. This is evidenced by the
absence of legislative language adopting the English rule, by Tulania’s prior lottery structure
15
exhibiting acceptance of the rule, and by public policy reasons to help alleviate budget deficits
and help the State gain control over illegal gambling markets. The term “lottery” should
therefore be interpreted to encompass not only games of pure chance, but also games in which
chance is the dominant determining factor.
B.
The proposed Sports Lottery structure is proper under the Tulania
Constitution because the games do not involve skill and the distribution of
money occurs by chance
The Tulania Sports Lottery has proposed a three-game structure to be implemented:
Single Game Lottery, Total Lottery and Parlay Lottery. Two different lines, the point-spread
line and the money line, are used to handicap the Sports Lottery games to ensure money is
distributed by chance. The proposed three-game structure will be assessed under both the pointspread line and the money line to determine the proposed Sports Lottery structure is proper under
the Tulania Constitution.
i. The point-spread line and the over/under line eliminate the element of skill,
resulting in a pure chance determination of eventual winners
The Court need not rely on the adoption of the American rule to determine that the
proposed sports lottery structure is proper under the Tulania Constitution when the game
involves a point-spread line or over/under line. The three sports lottery offerings contemplated
by the Sports Lottery do not violate the Tulania Constitution, regardless of whether the American
rule or the English rule applies, since they contemplate distributing money by pure chance.
Under the “Single Game Lottery”, a player is asked to select whether a team is going to
perform better than the point spread or worse than the point spread. For example, if Team A
were a 3.5-point favorite in a contest over Team B, a player selecting Team A would win the
wager only if Team A won the contest by 4 points or more. Under the “Total Lottery”, a player
16
is asked to select whether the total points scored by both teams in a single game would be over or
under a specified number (an “over/under” bet).
The Single Game Lottery, Total Lottery and Parlay Lottery structures handicap a sporting
event by the use of a line to balance bets. These structures are designed to eliminate any element
of skill involved in selecting an outcome, since the betting line incorporates all relevant factors
in the point-spread line or the over/under line (past records, statistics, weather, injuries, et cetera)
that a skillful player would otherwise use to his advantage. The line therefore equalizes players
with skill and players with no skill – thus rendering the decision of whether to select Team A to
cover the spread a pure chance preposition.
Empirically speaking, every player has the exact same 50/50 chance of selecting whether
a team is going to perform better or worse than the spread, regardless of that particular player’s
level of skill. This is akin to asking a player to predict whether a quarter will land on a head or
on a tail. The critical element is to understand that both players are contemplating future events
that are equally likely to occur and over which they have no influence over the outcome. A
player cannot correctly predict whether a quarter will flip a head or a tail because of the degree
of chance involved, including the velocity at which the quarter is flipped and the angle at which
the quarter will hit the ground. As Judge Stapleton correctly noted in Nat’l Football League,
sports are inherently subject to a myriad of unpredictable and uncontrollable variables, including
weather, playing conditions, injuries, mood of the players. Nat’l Football League, 435 F. Supp.
at 1386. “Some educated predictions can be made about each of these variables, but each is also
subject to last minute changes and to an element of the unknowable, or to put it another way, to
an element of chance.” Id.
17
If we start with a fair point-spread line, meaning a 50/50 preposition to begin with, and
inject the a myriad of elements of chance, it becomes clear that there are too many unpredictable
elements that can and do enter an eventual game to conclude that skill can override chance to
help a player consistently beat the point-spread line. This has been born out by academic studies
that have concluded, “published point spreads are highly predictive of the outcome of the
underlying contest” (50/50 prepositions) and that “sophisticated gamblers are at a disadvantage
against the house and have no advantage against unsophisticated gamblers.” R-40. There are no
strategies that allow bettors to prevail consistently on the basis of skill. See, e.g., Nat’l Football
League, 435 F. Supp. at 1385.
The probabilities that a quarter will land on a head or that Team A will win by 4 or more
points are 50/50 propositions, neither of which can a player use his skill to influence the event or
gain an advantage for himself or disadvantage another player by his skill, because of the amount
of chance involved in determining the winner of a lottery game once a line is properly
handicapped. To say that a player can use skill to determine whether a team is going to perform
better than the spread is akin to saying that a player can use skill to predict the flip of a head or
tail on a fair quarter. Both encompass too many variables of chance to offer any reliable
prediction of a future event.
The conclusion that money is distributed by chance, when the sporting event is
handicapped against a line, is contingent upon an accurate point-spread line. The line is
generated by a sports book, to ensure half of the players wager on Team A and the other half
wager on Team B. The sports book has no stake on the outcome of the event and makes money
through commission. Thus, the District Court properly found that the players are not matching
wits with the bookmaker. R-40. The line fluctuates to ensure there is a balance of bets on Team
18
A and on Team B, and intrinsically adjusts to reflect all available data (past records, statistics,
injuries), and forecasts. Stated more simply, the line already accounts for all the information that
a knowledgeable sports fan would otherwise consider. The practical effect of the line ensures
that an avid sports fan has an equal chance to win the sports lottery as a person who cannot even
identify the team’s logo. See, e.g., Nat’l Football League, 435 F. Supp. at 1385.
Nevada’s experience demonstrates that the line so accurately and intrinsically reflects all
the elements of skill that players consider in formulating their projections that a player cannot be
expected to win consistently. R-40. Once a fair line is established, whether a team performs
better or worse than the point spread comes down to chance. There are too many unpredictable
elements that can and do enter into a game - unknowable, immeasurable, or unforeseeable
variables – that will determine whether a team will perform better or worse than the line
anticipates. Nat’l Football League, 435 F. Supp. at 1387.
When there is a “bad line” or no line at all (that is to say a player is asked to predict the
winner of an event without an accurate handicap), a player may use his skill to gain an
advantage. The collapse of the Delaware sports lottery after a “bad line” was offered to players
for December 12 games provides proof that players can use skill to gain an advantage when a
line is not fair. R-21. When the line is fair, however, the spread pushes players towards a 50/50
preposition, where the outcome is based purely on chance. The Tulania Sports Lottery would
eliminate the risk of offering “bad lines” by instituting modern technology that would sync their
line to the most reliable and up-to-date lines in the world, like those offered in Las Vegas
Assuming arguendo, that a player can use his skill to win against the point spread, not
because of chance, but because he is more skillful. Assuming arguendo would violate the
English rule defining chance, but would still be considered a chance event under the American
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rule and therefore permissible under the Tulania Constitution. Ignoring academic studies which
widely accept professional sports gambling as an efficient market and that published point
spreads are highly predictive of the outcome of the underlying contest, if we assume players can
use skill to create an advantage against the point spread, the impact of any player’s skill could
only be negligible. R-40. The point-spread line intrinsically incorporates a forecast of a
particular game, based on balancing the bets on Team A and Team B, which pushes the player to
a 50/50 preposition in determining whether Team A will outperform the spread. Even assuming
a particular player is more skillful, the American rule allows lottery games in which chance is the
dominant determining factor. Bell Gardens Bicycle Club v. Dept. of Justice, 42 Cal. Rptr. 2d
739, 749 (Cal. Dist. Ct. App. 1995). Once a fair line is established, whether a team performs
better or worse than the point spread comes down to chance – if not pure chance, than definitely
dominated by enough chance to “thwart the exercise of skill.” See, e.g., US v. Marder, 48 F.3d
364, 369 (C.A.1 (Mass.), 1995).
When a player is asked to correctly choose the outcomes on multiple elements, the
element of chance is multiplied directly by the number of predictions that must be properly
made, further assuring that the player is engaging in a pure chance preposition. For example,
under the Single Game Lottery and Total Lottery structures, a player has a 50% chance of
winning each event. Under a Parlay Lottery, a player must correctly choose the outcomes on
multiple events, each of which is a chance preposition as defined above. Therefore, if a player
chooses the outcomes of 3 elements, he must correctly predict all 3 elements to succeed.
Therefore, the element of chance is multiplied directly by the number of events (50% x 50% x
50%), reducing that player’s chance of winning to 12.5%
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ii. The money line handicaps the proposed Sports Lottery by eliminating the
element of skill, resulting in the distribution of money by chance
The point spread is concerned with who will win and by how much, whereas the money
line is solely interested in who will win. The money line represents the probability that an event
will occur, by handicapping how much the State Lottery will pay the player for a winning wager.
The line includes an “edge” for the State Lottery, which is comparable to the commission in a
point-spread bet. The Tulania sports lottery contemplates a game structure that incorporates a
money line for two different types of events: (1) events where the underlying preposition is a
50/50 chance and (2) events where one team is considered the favorite and another team is
considered the underdog.
1. Money line events which handicap 50/50 prepositions result in the
distribution of money by pure chance
If a money line handicaps a 50/50 preposition, pure chance would dictate the winner,
therefore the English and American rules defining chance are satisfied. For example, if a money
line handicaps a coin flip, no skill is involved in selecting heads or tails, and money is distributed
to the player whose selection is affiliated with the determination of the coin. This type of money
line would resemble -100 or +100 before the line accounts for the “edge” being paid to Tulania
sports lottery. Thus all three games proposed by the Sports Lottery that use a money line to
handicap an event involving a 50/50 preposition would satisfy the English rule and American
rule defining chance. The Single Game Lottery involving teams who are evenly matched (0
points against a point-spread line) is a pure chance preposition when handicapped by a money
line because the winner of the game is dictated by chance. The Total Lottery contemplating a
money line to handicap an accurate over/under line equally represents a chance preposition.
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As discussed previously, there are simply too many unpredictable elements that can and
do enter a game that determine a game that is evenly handicapped. Since, the proposed events are
using a money line to handicap an event that constitutes a pure chance event, it is not possible for
a player to account for all of these factors to remove the element of chance from a sporting event.
Therefore, where the money line contemplates an event constituting a 50/50 preposition, money
is distributed to the winning player by pure chance, thereby satisfying the American rule and
English rule defining chance, even for Single Game Lottery games.
2. Money line events which are not 50/50 prepositions eliminate players
from using their skill to improve their expected distribution of money
The Court of Appeals erred in determining that money line games, which contemplate
events involving a favorite and an underdog, implicate an element of skill. Even if a player may
use his judgment in evaluating the possible outcomes of the contest, this does not implicate the
exercise of skill. Petitioner concedes that if the NFL champions were matched against eleven
individuals, the outcome of the game would not be decided on chance, and that most lottery
players would predict the NFL champions to prevail. This analysis, however, ignores the
function of the money line. The money line incorporates the probability of a team winning or
some series of events occurring, so that the line reflects the amount that the player on the favorite
must bet and the amount the bettor on the underdog can win in order to create an “edge” for the
Tulania Sports Lottery. Similar to the point-spread line, the money line fluctuates so that
approximately equal amounts of wagers accrue on each side of a contest or series of events. The
Tulania Sports Lottery will incorporate a fair line to ensure players are facing a decision that
comes down to risk aversion and not skill. The element of skill is eliminated since the money
line reflects the fairness of the game and compensates individuals for the riskiness of their
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wagers. Therefore, skilled and unskilled player are faced with the same money line, which
intrinsically handicaps the event.
A player may inject his skill only when the money line does not properly incorporate the
probability of a team winning or some series of events occurring. For example, if a player is
contemplating the outcome of a fair coin flip with the following money line, head set at +110 and
tail set at-220, he may use his skill to determine that coin may equally be a head or a tail. A
skilled player could synthesize this information to create a positive expected payout (probability
of event x payout) and the game would therefore inject an element of skill to the existing element
of chance. An unfair money line would favor skilled players with knowledge of probabilities and
coin flips and disfavor unskilled players with no such knowledge.
The Tulania Sports Lottery would offer a fair money line that incorporates all of the
information that a skilled player could otherwise use to his advantage. The element of skill
would be eliminated with a fair money line and assuming rational, risk-neutral players, the player
would be equally compensated for whichever outcome he selects. The money line is about risk
aversion and not skill when the money line evenly splits wagers between the two event
outcomes. The money line eliminates the element of skill, since both skilled and unskilled
players face the same expected payout value for whichever outcome they select. Furthermore,
that payout is fair to skilled and unskilled players, since no skilled player would be able to create
a net positive expected payout because of that player’s superior skill, and no unskilled player
would face a net negative expected payout because of that player’s inferior skill. Therefore,
since players cannot inject their skill to create a net positive expected payout against a fair
money line, especially considering the “edge” of the Tulania sports lottery, the distribution of
money is a pure chance event that satisfies the English and American rules. The same logic
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follows for the Parlay Lottery, since the element of chance would increase with the number of
outcomes selected.
The “Parlay Lottery” requires players to choose outcomes on multiple elements, thereby
multiplying the element of chance with each additional outcome: “the unknowable factors in
each game are multiplied by the number of games….” on which the player bets. Nat’l Football
League, 435 F. Supp. at 1386. Even if a player selects outcomes that are likely to occur, the
Parlay Lottery structure ensures that chance, and not skill, is the dominant factor. For example,
suppose a player contemplates a money line parlay involving two relatively certain events: Team
A (favored to win by 70% over Team B) and Team C (favored to win by 70% over Team D).
Assuming arguendo that for any single event a player could use his knowledge of Team A’s
likelihood of winning to increase the likelihood that he would receive a payout. Under the
multiple event structure contemplated in the Parlay Lottery, however, the player must accurately
predict two winners, Team A and Team C, thus ensuring chance is the dominant factor,
statistically speaking, because it would outweigh the player’s skill used to predict the two
winners.3 Therefore, since the Parlay Lottery requires players to choose outcomes on multiple
elements, even relatively certain events, the American rule is satisfied when chance is the
dominant factor that determines whether the player will receive a distribution of money.
In conclusion, the proposed Sports Lottery games are proper under the Tulania
Constitution. While Tulania intended for these games to be assessed under the American rule
defining chance, most of the games proposed by the Sports Lottery nonetheless survive the
stricter English rule defining chance. Proposed lottery offerings that incorporate a point-spread
line eliminate the element of skill, even for the Single Game Lottery, because every player has an
3
Team A (70% chance of winning) x Team C (70% chance of winning) = 49% chance of
winning the Parlay Lottery, since both outcomes must be properly predicted.
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equal chance of receiving a distribution of money. The fair point-spread line, combined with the
unpredictable elements of a sports event, which can and do enter into an eventual game, make it
impossible for a player to inject his skill to effectuate an advantage. Proposed lottery offerings
that incorporate a money line are assessed differently depending on whether the underlying event
is a 50/50 preposition or not. If the underlying event is a 50/50 preposition, money line
handicapping satisfies the stricter English rule, even for Single Game Lottery offerings. When
the underlying event involves a favorite and an underdog, a money line accounts for the disparity
of both teams and both skilled and unskilled player are faced with the same money line. Parlay
Lottery offerings are dominated by chance, even against a money line, thereby satisfying the
American rule.
CONCLUSION
For the above-stated reasons, Petitioner respectfully requests that this Court reverse the
decision of the Court of Appeals for the Fourteenth Circuit.
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