The Mouthpiece


By Martin Owens
Contributing Editor


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    Martin Owens

    Who are online gambling's friends in US politics?

    "You know you got to have friends..."
    Bette Midler

    Conventional wisdom says that Republicans, as conservative fundamentalist types, are most likely to vote against gambling, including Internet and interactive gambling, and to suppress it where it exists. Democrats, on the other hand, being more liberal, tend to let gambling work out its own destiny, and it least not attempt to throttle it. But it seems conventional; wisdom was stood on it head by recent developments.

    Chris Christie, the conservative Republican governor of New Jersey, is backing Internet gambling within his own state, and even sports betting. Legalizing sports betting absolutely means a head- on collision in court with the Federal government and the big sports leagues- not the sort of behavior we expect of law-and-order GOP types. On the other hand, it was under the Obama administration that the Full Tilt prosecutions took place. So much for the Democrats leaving gambling alone.

    Are the major parties, then, each reversing their long-standing policies about gambling.

    No. That's because neither party has a real policy about gambling. Neither does the Federal government, neither do most of the state governments. It's easier that way. Politicians at all levels, you see, bear a heavy burden. They are expected to uphold public morality, and at the same time provide public services at little or no cost to the public. One of the perennial easy answers is licensing of gambling. Predictably, gambling, and today Internet gambling, tends to expand in times of tight budgets and tight money. Why don't the conservative/fundamentalists fight to the last? Simple. Because as much as they have been brought up to abhor Wicked Gambling, they absolutely hate higher taxes. There comes a point where the bottom line takes over.

    The Republican side

    To be sure, the Republican campaign platform for 2012 specifically calls for the suppression of Internet gambling, allegedly to make the Internet "family-friendly". But wait a minute. Didn't the US Department of Justice just issue an opinion last year, saying that the Wiretap act only covered sports betting? Thus clearing the way for Internet poker and other games? Well, the Republican platform calls that a distortion, and implies that legislation will be forthcoming to correct it. Of course the real distortion was the DOJ's previous opinion that all Internet gambling violated the Wire Act. Not only was this a deliberate misreading of the statutory language, but it was an unconstitutional overreach. The US Department of Justice has no more business telling state governments what their gambling policy should be, than it has dictating the colors of the state flags, or which plants should be the state flowers. The pronouncement itself hardly matters: a political party's platform is about as legally binding as the messages in Chinese fortune cookies . To be fair, the little fortunes in the cookies are usually much clearer.

    Because counterbalancing the usual blather about public morality is the traditional Republican respect for states' rights, as well as their aversion to new taxes

    Democrats and bipartisan efforts

    Once again, the Democrats are officially silent on the matter of gambling law and gambling expansion, particularly via the Internet. However, every election year spawns rumors of a new Internet gambling bill in Congress or the Senate, supposedly with bipartisan support. True to form, there are whisperings of a deal between retiring Sen. Kyle (R-Arizona) and Senate Majority Leader Harry Reid (D-Nevada). Leaks from several lobbying organizations indicate that Reid and Kyl mean to jointly sponsor a measure to outlaw all Internet gambling in the USA, except for what is licensed. The usual carveouts for lotteries, Indian gaming, and racetracks are anticipated.

    The usual lack of progress is also anticipated. It's quite clear that nothing is going to happen until the national election, now less than two months off. Previous efforts to slip in such bills during the "lame duck" session before January have never prospered, and there is no particular reason to believe it will be any different this time. For one thing, the House and Senate have much bigger fish to fry; for another, none of these gambling reform bills has ever actually come up for a floor vote-getting out of committee is the high water mark, and even that has only happened once in the last eight years or so. And at the time of this writing, the hypothetical Reid/Kyl bill has not even been assigned a bill number. If a national regime of Internet gambling licensing emerges this time, it will be lightning out of a clear sky indeed..

    State level

    There has been legislation about Internet and interactive gaming at the state level. There has been litigation. But to date, no US state is actually allowing online gambling. Only Nevada, New Jersey, and the Virgin Islands have the necessary state laws in place to allow licensing at all. Other candidates, such as California, Florida, and even Iowa, are still wrestling with what they want and how to get it. Typically this shakes out as a three-way standoff.

    There are the state legislators. Some oppose the expansion of gambling on general principles; others simply would rather not deal with such a controversial subject until they have to. Successfully establishing a state licensed Internet gaming program requires a clear understanding of what the system would look like and how it would operate, together with lots of political will to overcome inertia and opposition. So far, very few state lawmakers have exhibited these qualities.

    There are the vested gambling interests- parties who already hold state licenses or compacts, such as lotteries, Indian gaming, racetracks, and brick-and-mortar casinos. While most now understand that online and interactive gambling can not be stopped, there is still an ongoing struggle over who will control it.

    And finally there are the Internet gaming operators themselves, who want to see a reasonable prospect that their efforts would pay off, and that they would be free from arbitrary interference by the authorities.

    The parade can't move forward unless and until they all get at least part of what they want. And so far that hasn't happened .if there is progress being made to break this perennial logjam, it's not evident right now.

    The Dark Horse on the Outside

    The final irony is that the various state governments, perhaps even the Feds, may have waited too long. As they browse through the minutiae of whether a gaming server must be located within the state it serves, whether race tracks can offer Internet poker or only Indian casinos, or how much they can charge each applicant- technology is moving toward a place where such questions will hardly be relevant.

    Gambling, along with the money to pay for it, is shifting to what is called the "mobile space"- iPads and other tablets, along with new multi-capable 4G smart phones. Further, what used to be called amusement or skill gaming has taken advantage of broadband and digital technology to become a huge market in its own right-estimates run as high as $80 billion by 2016. But most interesting is the reemergence of "quasi-gambling" - using gambling style formats such as poker or sports betting, but avoiding the legal classification of gambling by modifying the elements of consideration and prize. Zynga's Texas hold 'em game is the prime example, but others are moving quickly to take advantage. This dark horse, to borrow a racetrack terminology, is coming up fast on the outside.

    And it represents a double threat to existing licensees and prospective state revenues. Mobile gambling may or may not make great inroads among existing gamblers today. But as the older generations fade away, their replacements may not see the need to do their gaming at brick-and-mortar sites at all. If children today aren't actually born with a cell phone in their hand, it's close enough. The new technology has spawned a new format, which looks like it will skip over the need for traditional regulation altogether. Raising the real possibility that the old guard will be left squabbling in ever decreasing circles over a shrinking pie.

    It's been said here before, but the powers- that- be would be wise to make a deal with the future-while there's still a deal left to make.

    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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