The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Back with a vengeance: California swinging on Internet gambling

    "If they can't do it in California, it can't be done anywhere."
    by Taylor Caldwell

    Sometimes a defeat is not defeat after all. I think they understood it better in ancient times. Greek mythology gives us the legend of Antaeus, the giant wrestler who drew his strength from the earth. Every time you threw him down, he only came back stronger .

    And that's what it looks like as California contemplates the legalization of Internet gambling in 2012.

    It's true that persistent attempts to expand Internet gambling out from the horse betting regime (which has been legal for years) to other types of gambling games have come up short since 2008. But not only is California trying again even stronger here, a separate bill proposes to join the rebellion that New Jersey started, challenging federal laws on sports betting. They're trying to set up a one-two punch, and here's hoping it succeeds.

    THE INTERNET GAMBLING BILL

    This time, the Internet gambling bill is a very serious effort. Co-authored by influential Sen. Darrell Steinberg (D), President Pro Tem of the California Senate, this one leaves nothing to chance. Most statutes are statements of intention and policy, and the legislators leave it up to the regulators to write the precise rules. But for online gaming, that hasn't worked so well in California, where benefit of the doubt is in short supply.

    The state's casino tribes and licensed card rooms are fierce rivals, and very few parties actually understand what an in-state Internet gambling system would look like, how it would perform and what the operators would be expected to do, or to bring with them.

    So this bill, SB 1463, takes it down to a rare level. Nearly everything is lined out: who may get a California Internet license (holders of existing California land-based gambling licenses), what it costs to apply (between $1 million and $5 million) licensing procedures (including applications, background checks, comprehensive audits and financial statements, just for starters) and the fee due on granting of said license ($30 million). It covers what sort of games can be offered (poker only for the first two years, after that, whatever the state approves).

    The obligations and responsibilities of the operators are likewise spelled out in detail. The bill touches on the equipment and software they must install to protect each individual player, including his sensitive information and his monetary accounts, how much they will be expected to do to prevent unauthorized and under-age access to gambling, what reports and inspections a licensed operation will be subject to and how to handle disputes with players.

    It makes one feel the writers of the new regulations won't really have all that much to do. Which is just as well, for this bill is described as an urgency measure, to go into effect immediately once it passes and is signed by Gov. Jerry Brown.

    The aim is clear, and set forth unambiguously in the preamble. California aims to use this bill, if passed, to get $200 million in new, never-before-tapped revenue by the end of fiscal 2012. Since even after years of cuts, shortfalls and financial legerdemain, California's deficit is still visible from space, the prospects of this revenue enhancing measure look better than any similar bills have in years.

    THE SPORTS BETTING BILL

    Even more interesting is the new bill to allow online sports bets in California. SB 1390 is authored by Sen. Rod Wright (D), long the standard bearer and go-to guy for all things Internet gambling in the Sacramento Statehouse.

    It would allow card rooms, race tracks and their satellite betting facilities to offer non-parimutuel bets on pro and college sports "including, but not limited to, exchange wagering, parlays, over and under, money line, and straight bets."

    The Indian tribes are excluded, as they already enjoy a monopoly on land-based casino style gambling (particularly slot machines) guaranteed by a revision to California's state constitution. The bill further exempts the above operators from illegality under the penal code.

    Of course, this completely contradicts the Federal law known as PASPA. It ought to. The Professional and Amateur Sports Protection Act (28 U.S. Code sec 3704 and following) is a bad law. Passed in 1992 as a show of public piety, it purports to address a problem which scarcely exists. There is a threadbare shibboleth of the professionally righteous, a moth-eaten urban legend, which says that wicked gamblers are ever on the prowl, waiting to corrupt the pure spirit of American sport and the players.

    It is a superstition dating back to the Jazz Age, a contemporary to the solemn panics of Prohibition, White Slavery and the holy crusade against Prussian militarism. It is also blissfully free of facts: a glance at the police blotter in any large city with a few sports concessions will show that while America's professional athletes can and do misbehave (no more and no less than any other group, the sanctifying effect of organized sport notwithstanding), throwing games for money is simply not in their repertoire.

    Nonetheless, since 1992 no U.S. state government or tribal gambling authority may authorize bets on sporting events. Except for the ones who already had it - Oregon, Delaware, Montana and especially Nevada (apart from Nevada, these were tangential and unprofitable efforts, based on lottery variations, that soon died out anyway).

    But just because the Congress passes a law doesn't mean it's right. PASPA, to put it plainly, is unjust. It violates the Commerce Clause of the U.S. Constitution and also its Fifth, Tenth and Eleventh Amendments. To put that in plain English, Congress has no more right to dictate gambling policy to the state governments than it would to decree the colors on their state flags.

    The plain fact of the matter is that sports betting is the backbone of the wagering industry in general today, including Internet gambling. Which means that PASPA is on an equally ignominious footing with the Volstead Act, which fastened Prohibition on the USA for 13 weary and futile years.

    It is an attempt to limit and forbid something that people are well going to do anyway. Criminalizing the activity does not suppress the activity; rather it only serves to drive the business into the hands of operators who have no incentive to cooperate in protecting personal privacy, problem gamblers or the public revenue.

    So California may soon be fighting PASPA, too. But let there be no doubt, this will be a long and uphill battle. Any state which seeks to legalize sports betting can expect an immediate lawsuit from the U.S. Department of Justice.

    Odds are that the lower federal courts will reflexively vote in favor of Uncle Sam. And let us not hold it against them too much - where is the judiciary which will seek to limit its own power? No, one way or the other, this one is headed for the U.S. Supreme Court. But win, lose or draw, it is a good fight to be in.

    For at the end of the day, it comes down to this: if you can't trust Americans using their own private computer links to amuse themselves with their own money, in the privacy of their own homes, on their own time ... well, then, how can you possibly trust them with the power of the vote?

    Mr. Owens is a California attorney specializing in the law of Internet and interactive gaming since 1998. Co-author of INTERNET GAMING LAW with Professor Nelson Rose, (Mary Ann Liebert Publishers, 2nd ed 2009) ; Associate Editor , Gaming Law Review & Economics; Contributing Editor, TSN. Com Comments and inquiries welcome at to mowens@trade-attorney.com.

    Copyright 2012


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