United States: Internet Gaming: Has The Train Left The Station?

Last Updated: May 27 2014
Article by Dennis J. Whittlesey

While he is in the process of negotiating a new gaming compact with the Seminole Tribe, Florida Governor Rick Scott has jumped into the contentious debate on whether Internet gaming should be legal. In this, the Governor has lined up with casino mogul Sheldon Adelson in outright opposition to a component of the gaming industry that has wide support and already is being legalized within several states.

The emergence of the Governor in this debate comes at a time when he is working to develop expanded gaming for the Seminoles, as well as preside over a major review and potential overhaul of his state's gaming industry by the State Legislature. That the Governor does not envision state adoption of iGaming is clearly evidenced by his April 22 letter to the Chairmen and Ranking Members of the House and Senate Judiciary Committees on Capitol Hill urging legislation that would reverse a Department of Justice ruling that the Federal Wire Act does not prohibit intrastate Internet gaming. This ruling reversed official federal policy on the subject, and several states are now allowing Internet gaming within their borders.

Governor Scott's letter warned that iGaming will allow the "invasion" of gaming into "the homes of every American family, and be piped into our dens, our living rooms, our workplaces, and even our kids' bedrooms and dorm rooms," and called for Congressional "clarification" of the Wire Act to prohibit all iGaming within the United States. Copies of the letter were sent to the Senate and House leadership of both political parties.

While there is other public opposition to Internet gaming, development of this segment of the industry continues. Internet gaming is available throughout Europe and has been authorized in New Jersey, Delaware, and Nevada. Authorizing legislation is currently being considered in a number of other states. In a recent assessment, GamblingCompliance.com estimates that 10 states may legalize online wagering this year.

It is not surprising that the Indian gaming industry wants to pursue iGaming given its successful development of land-based casinos. To this point, the growth of tribal gaming has far surpassed anything envisioned when the Indian Gaming Regulatory Act became law in 1988. At this time, recognized tribes operate 450 casinos in 28 states, and they generate in excess of $28 billion annually. The scope of Indian gaming compares favorably to commercial gaming, which generates some $34 billion. Forty-four states have state lotteries, and they generate revenues of more than $17 billion. Rightly or wrongly, tribes feel that they already have the casino management experience and available funds to pursue and operate iGaming.

In short, many tribes are actively exploring online options, although it appears that the most sophisticated effort is being made by the politically powerful California tribal gaming industry. Although there have been setbacks in this effort due to the early departure of several powerful members of the state legislature, the matter is being actively debated in Sacramento, and pressure is building to enact legislation before the 2014 session is over. Effectively, this means by the end of August.

At least two California tribes – Santa Ysabel and Alturas – are indicating that they are prepared to begin online gaming immediately rather than await legislation. Both are proposing gaming websites that would take wagers from off-reservation players, claiming that they already have the legal authority to do so. Alturas has entered into a partnership with Great Luck, LLC and seems poised to commence operations and contest any legal challenges that arise. The only obstacle remaining to the Alturas project is lack of a firm to process wagers. Another element that tribes are discussing would sidestep the question of whether off-reservation players could play by using on-reservation "proxy" players.

While the states are moving forward, there is activity on the federal level in the form of a bill that would ban interstate iGaming. Known as the "Restoration of America's Wire Act," the legislation has generated gaming industry efforts to block it. However, the powerful billionaire gaming mogul Sheldon Adelson is strongly supporting the bill and has persuaded a number of prominent members of Congress to join his cause. This legislation does present a serious threat to iGaming and should be of concern to the iGaming industry and the states that have enacted intrastate iGaming laws or will do so this year. Governor Scott's April 22 letter should serve as something of a clarion call to all entities and parties with a stake in iGaming.

The growing interest in, and state legislation allowing, intrastate iGaming is gaining momentum, and tribes are now actively seeking to participate. While the iGaming "train" has left the station in several states, the fact remains that the iGaming industry needs to be ever vigilant to efforts such as the "Restoration of America's Wire Act" bill or the train could be slowed or stopped.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Dennis J. Whittlesey
 
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