Congress Rolling the Dice on Online Gambling

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Hypocrisy, unlike this city’s delicate Cherry Blossoms, knows no seasons. And it was in full, glorious bloom last week at the House Judiciary Committee, which, on one hand, condemned the Federal Communications Commission’s decision to regulate the Internet in the name of net neutrality and, on the other, promoted a bill in subcommittee that would empower the federal government to ban Internet gambling in all 50 states, including New Jersey, Delaware, and Nevada, where residents enjoy the luxury of losing money betting from the comfort of their homes.

This is a high-stakes game over an Internet gambling pot worth about $12 billon, according to Democratic Rep. Sheila Jackson Lee of Texas. That compares with about $35 billion in revenues from marble and mortar casinos.

Casino companies with starkly different views of the Internet are on both sides of the measure. Billionaire Sheldon Adelson, chairman and CEO of the Las Vegas Sands and, reportedly, the Republican Party’s single biggest contributor, favors stuffing the Internet gambling genie back in the bottle, lest technology do to him what it did to bookstores. But, MGM Resorts International, another gaming giant, opposes the bill. MGM Resorts sees profit online, as does the American Gaming Association, whose ranks include tribal casinos, race tracks with casino operations, and technology companies. Jim Murren, chairman and CEO of MGM Resorts also serves as chairman of the AGA. MGM has an online gambling license in Nevada. But MGM’s Website currently only offers free games where players rack up reward points redeemable at casinos in Mississippi and Las Vegas.

You have to admire the audacity of congressional double speakers like judiciary’s chairman, Bob Goodlatte, a Virginia Republican. One minute he was blasting the FCC for destroying an Internet that has been “dynamic, competitive, open, and free” by planning to regulate it as a telephone utility. The next minute, he was sitting at a hearing of the subcommittee on crime, terrorism, homeland security and investigations to back the anti-Internet-gambling measure, announcing his support for banning Internet gambling because it facilitates money laundering, breaks up families, and even causes suicides. Gee willikers, Goodlatte sounds like he’s waging a war against sin and not, as some critics contend, aiding and abetting deep-pocketed constituents.

The history of this Internet gambling fracas began before there was an Internet. In 1961, at the urging of then-Attorney General Robert Kennedy, Congress passed the Wire Act to stop the Mob from using telephone and telegraph to process bets on horse racing and sporting events. When offshore Internet casinos preying on Americans emerged, the Justice Department used the Wire Act to crack down on them, even though it was unclear that the law applied to poker and casino games in addition to sports betting.

In 1978, Congress passed the Interstate Horseracing Act, which allowed off-track wagering licensed by the states. Today, residents of 22 states can place bets on the horses online on a number of Websites, including one owned by the Daily Racing Form newspaper. In 2006, President George W. Bush signed the Unlawful Internet Gambling Enforcement Act to block banks and payments processors like credit card companies from unlawful Internet gambling. This was directed at offshore operators. The law allowed betting within a state authorized by state law as long as the statutes blocked minors and out-of-state residents from participating. Even so, the Justice Department continued to interpret the Wire Act as applying to all forms of gambling. Then in 2011, the department abruptly reversed itself and decided that the whole act was limited only to sports betting. The flip-flop paved the way for states to enact online gambling statutes.

REP. JASON CHAFFETZ, a Republican from the anti-gambling state of Utah and an Adelson donation beneficiary, introduced his Restoration of America’s Wire Act last year and introduced a newer version this year. In the Senate, Adelson beneficiary Lindsey Graham, a Republican from South Carolina, another anti-gambling state, introduced companion legislation. Chaffettz claims he wants to make sure online gambling in places like New Jersey doesn’t become accessible from states like his. Opponents of the bill say geo-location technology employed by licensees in gambling states already prevents this.

The message of the pro-ban crowd is couched entirely in the jargon of a moral crusade. Emeritus law professor John Warren Kindt of the University of Illinois, who favors the bill, testified that “Internet gambling is as addictive as crack cocaine” with a “feeder market in every living room, workstation, and school desk.” Michael Fagan, an adjunct professor at the Washington University School of Law, in St. Louis, said online gambling will lure thousands of Americans into “wholly nonproductive losses of vast sums, which could have been better saved, invested, or spent on real goods and services rather than, effectively, thrown away.”

The bill’s critics talk about the Constitution and benefits of state regulation. Andrew Moylan, executive director of the R Street Institute, a free-market think tank, cautioned that the bill as currently written sets dangerous precedent “in suggesting that mere use of a communications platform like the Internet subjects all users and all activity to the reach of the federal government, no matter its location or nature.” Parry Aftab, executive director of WiredSafety, a consumer-protection company, said state regulators were doing a great job of keeping children off the sites and curbing traffic to offshore online gambling shops, which have no interest in screening customers. “The best way to protect families and consumers in connection with online gambling is regulating it, not prohibiting it,” she said.

Goodlatte hasn’t released a timetable for the bill. I’m betting that the committee will mark it up by summer’s end. To paraphrase Fagan, casino lobbying money could have been invested. But buying influence, unlike gambling, is not tossing it away.

 


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March 31, 2015: posted in News And Reviews No Comments

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