By Hilary Russ
PHILADELPHIA (Reuters) - Federal appeals judges on Wednesday scrutinized New Jersey's 2014 law allowing sports betting, peppering lawyers during oral arguments with questions about the state's latest attempt to legalize the activity by partially repealing a prohibition against it.
"At some point a partial repeal is so specific that it is really authorizing," said Judge Kent Jordan, asking Theodore Olson, who represented New Jersey, to grapple with the issue.
New Jersey tried to allow sports wagering in 2014 by repealing a prohibition against it at casinos and racetracks. The National Collegiate Athletics Association and professional sports leagues sued the state.
They and the U.S. government argued that New Jersey's strategy is tantamount to authorizing the activity in particular locations.
The hearing in the U.S. Court of Appeals for the Third Circuit in Philadelphia was before 12 judges who agreed to re-hear New Jersey's appeal after a three-judge panel previously sided with the sports leagues.
Just over two weeks ago, Americans placed an estimated $4.1 billion of illegal bets on the National Football League championship, Super Bowl 50, according to the American Gaming Association.
Congress banned legalized U.S. sports betting in 1992 in all but four states, particularly Nevada.
But with New Jersey's eroded casino industry and sluggish economy, the state first allowed sports betting in 2012 until it was stymied by the Third Circuit. It continues to try, fighting the legal battle while other states watch.
Olson argued that Congress is not allowed to commandeer a state's regulatory powers.
"What we have here is a vague, micromanaged tinkering" of the state's ability to make its own regulations, Olson said.
But the only such commandeering cases to pass muster involved states that were forced to take immediate action to comply with Congress' mandate, said Paul Clement, arguing for the leagues.
Federal demands on states "are both commonplace and constitutional," he said.
What matters is "what is the law that's left after the partial repeal," which in this case "clearly authorizes" sports betting, he said.
Paul Fishman, U.S. Attorney for the District of New Jersey, warned that the wrong kind of partial repeal could be problematic.
"There would be bookies on the boardwalk," he said.
To avoid that, New Jersey's latest law hinted at some kind of oversight because casinos are licensed and regulated. But that is further proof that the scheme is tantamount to authorization and violates the federal ban, he argued.
Whichever side loses is likely to ask the U.S. Supreme Court to consider the case.
(Reporting by Hilary Russ; Editing by Alan Crosby)