On Monday, the Interactive Media Entertainment and Gaming Association (iMEGA) announced that it had filed a lawsuit to declare the Professional and Amateur Sports Protection Act of 1992 (PASPA) unconstitutional. The lawsuit is being filed in New Jersey, where the organization stands side by side with State Senators Raymond Lesniak and Jeff Van Drew. Also taking part in the legal proceedings are the Thoroughbred Breeders Association of New Jersey, Standardbred Breeders and Owners Association of New Jersey, and the New Jersey Thoroughbred Horsemen’s Association. PocketFives.com sat down with iMEGA Chairman Joe Brennan to discuss the lawsuit.

Upon becoming law in 1992, PASPA gave states that did not allow wagering on sports one year to approve it. After that time period, no further expansion of sports betting would be allowed. Four states – Nevada, Delaware, Oregon, and Montana – have laws on the books allowing wagering on sports. New Jersey, however, was not able to pass legislation during the one year window and has been shut out of the market ever since. Faced with declining casino revenues, lawmakers in New Jersey are now turning to sports betting to raise much-needed funds. Brennan explained, "The casino industry in New Jersey is already down because of the economy and even further down because of the competition from nearby states. As a result, Atlantic City has seen its base erode. That has seriously affected the tax haul." Delaware may soon ramp up its sports betting program, which could cause Atlantic City revenues to tumble even further.

For Brennan, iMEGA, and the other parties involved in the case, PASPA boils down to a violation of the Tenth Amendment, which states that "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Since PASPA was passed in 1992, according to Brennan, it has not been tested due to a prospering economy: "In the time between when it was passed and now, we had one minor recession. Now, we have a really bad one. During the bulk of the 1990s and even after the dot-com crash, states were flushed with cash and didn’t have a problem raising revenue. Now, New Jersey is billions of dollars in debt."

Recently, the New Jersey Casino Control Commission released revenue figures for Atlantic City casinos in February of 2009 in comparison to February of 2008. Area casinos racked up $310.3 million in "win," or revenue, down 19.2% year over year. Slot machine revenue slid 19.0% to $214.3 million, while win from table games plummeted 19.7% to $96.0 million. Casinos in New Jersey pay 8% of their gross revenue as taxes to the Casino Revenue Fund, which helps senior citizens and those with disabilities. During the 2009 calendar year to date, casino win is down 14.5% in comparison to the same time period in 2008.

By overturning PASPA to allow sports betting, states such as New Jersey could gain access to a massive pool of revenue. For example, the Nevada Gaming Control Board released wagering statistics for the 2009 Super Bowl between the Pittsburgh Steelers and Arizona Cardinals. A total of $81.5 million was bet on the game, with Nevada sports books posting a $6.7 million win. Last year, a total of $92.1 million was bet on the game between the New York Giants and New England Patriots. However, sports books posted a $2.6 million loss as a result of the upset. During the last ten Super Bowls, over $800 million has been wagered.

With March Madness currently going on and bettors lining up to place a wager on the 64 team tournament, Nevada's 176 sports books have been busy. In February of 2008, a total of $116.7 million was wagered on pro and college basketball. In March of last year, with the onset of conference and NCAA tournaments, that number mushroomed to $238.9 million before falling to just $74.9 million in April. While those numbers also include action on the NBA, you can see the sizable jump in wagers.

iMEGA is interested in the case as a result of New Jersey's desire to allow online intrastate wagering on sports. Brennan revealed, "New Jersey wants the opportunity to give our members a chance to do business within the state." The organization, which was founded 12 years ago, seeks to preserve the growth of the internet and is based in Washington, D.C. The legal challenge asserts that PASPA violates the Commerce Clause of the United States Constitution along with the First, Tenth, and Eleventh Amendments. In addition, it tramples on equal protection, due process, and privacy rights. No dates for court hearings relating to the matter have been announced.

Online poker players will also recall that iMEGA is suing to declare the Unlawful Internet Gambling Enforcement Act (UIGEA) unconstitutional. It awaits word on a possible date in the Third Circuit Court of Appeals, which may occur in April. In addition, iMEGA is one of several parties battling against the Kentucky Justice and Public Safety Cabinet over the seizure and potential forfeiture of 141 internet gambling domain names. The latest development saw the Kentucky Court of Appeals rule in the industry's favor by a two to one margin. The State has since appealed to its Supreme Court.

Stay tuned to PocketFives.com for the latest from iMEGA's legal proceedings.