By 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
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
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
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
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
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
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