Justice James Hardesty raised the issue and referenced the court's landmark ruling last year that said the Nevada Constitution prohibits local and special laws where a general law applicable to everyone should apply.
That ruling late in the 2011 legislative session sent the governor's two-year spending plan into a tailspin and led to 11th-hour negotiations to plug a $650 million budget hole.
During Tuesday's oral arguments on the arena measure, Scott Scherer, attorney for Taxpayers for the Protection of Nevada Jobs, argued initiative backers used false information to gather signatures for the arena proposal slated for the November ballot.
Caesars wants to build the arena on land owned by the casino company and finance it by a nearly 1 percent sales tax increase within a three-mile taxing district.
The opposition group, which includes other casino companies MGM Resorts and Boyd Gaming Corp., argues that signature gatherers misrepresented where the arena would be built and that people in northern Nevada were told the proposed arena would be built in Reno.
Scherer also said the legal description of the measure was faulty because voters weren't told that restrictions written into the initiative would essentially prohibit competing arena proposals. One provision requires the arena be built within two miles of 95,000 lodging rooms.
"The effect of this initiative is to exclude ... all competing arena proposals," Scherer said.
At least three other sites in Las Vegas have been discussed, and the University of Nevada, Las Vegas is considering its own project on the UNLV campus.
Jason Woodbury, arguing for the project backers, agreed that three previous proposals would be prohibited if the measure is approved, but said it wouldn't bar other locations.
"Over 1,700 acres of property would be eligible under the proposal" for an arena site, he said.
But the measure also says the land for the arena cannot be paid for with any fees or taxes raised through the initiative, leading Justice Ron Parraguirre to remark, "But then you'd have to have a good Samaritan come up with the land."
Scherer countered that the area near the heart of the Strip is "the most expensive real estate" in the Las Vegas Valley.
Justices took the arguments under advisement.
After gathering enough signatures in 2010, the arena initiative went to the 2011 Legislature, where state lawmakers refused to pass it. Instead, they approved a competing ballot measure that would prohibit different sales tax rates in a county — which would kill the Caesars proposal.
Unless the Nevada Supreme Court blocks the Caesars plan, both measures will appear on the November general election ballot. The one that receives the most votes would win.