Will online gambling be legalized?

Deseret News (Salt Lake City), Nov 26, 2008 by Liz Benston Las Vegas Sun

After more than a decade of hit-and-miss efforts by individual casinos and interest groups to develop lobbying strategies for legalized Internet gambling, the American Gaming Association -- the industry's premier trade group -- is rushing to clarify its position.

The new sense of urgency comes as a presidential administration that appears friendlier toward the prospect of legalized Internet gambling prepares to take office.

To present a unified front, members of the association have to work through at least three viewpoints. Some casino companies support federal regulation of Internet gambling. Other members want that authority to rest with the states, like the regulation of non- tribal casinos. Still others, fearing competition from land-based casinos with online outlets, oppose regulation that would open the door to new rivals.

The group's largest members, MGM Mirage, Harrah's Entertainment and International Game Technology -- which have been or are involved in Internet gambling ventures in countries where it's legal -- support legalization.

The association has, of late, supported a more conservative approach, favoring a bill that would study whether to legalize Internet gambling, though some advocates say that might be a waste of time.

It isn't the first time the association's dozens of members have disagreed on policy. In the 1990s, members were divided on whether to support gaming efforts by Indian tribes, some of which were partners with Las Vegas casino giants. The Nevada Resort Association, and later the American Gaming Association, decided to remain neutral.

As a first step, the association has formed a working group to study bills that have cropped up in the past year.

Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services, has introduced a bill to regulate online gambling sites by exempting licensed operators from the federal ban and creating protections against underage gambling, compulsive gambling, money laundering and fraud.

Other bills were introduced in Congress last year and this year to legalize online poker at the federal level.

In California, state Assemblyman Lloyd Levine has introduced a bill to legalize Internet poker for California residents.

At last week's Global Gaming Expo, the gaming industry's largest conference, Internet gambling experts concluded that legalizing online poker -- as either a fallback position or an ultimate goal -- would be more palatable to politicians and the public than legalizing other forms of Internet gambling.

Online sports betting appears to be off the table entirely because of a framework put in place to prosecute phone betting during the mob's heyday, as well as a 1992 law giving Nevada a monopoly on legal sports betting, experts said.

Whether regulatory authority should reside with states or the federal government is also up for debate.

Federal regulation makes sense because it would establish a level playing field for operators while allowing individual states that oppose gambling to opt out, said John Pappas, executive director of the Poker Players Alliance.

A PricewaterhouseCoopers study conducted this year in support of federal regulation estimated that online gambling could generate at least $9 billion in fees and taxes for the federal government over the next decade.

The prospect of federal oversight worries some casino operators. Casinos formed the American Gaming Association in 1995 in part to keep would-be meddling federal regulators at bay.

The Poker Players Alliance, a grass-roots group that has ballooned to 1 million members in just a few years, is pressing to legalize online poker. It argues that poker is primarily a game of skill and should therefore be exempt from the Wire Act, the basis for the federal government's ban on Internet gambling.

The Bush and Clinton administrations have maintained that the Wire Act prohibited all forms of online gambling, in spite of an oft- cited federal appeals court ruling in 2002 that the law primarily applies to sports wagering.

Congress further criminalized Internet gambling in 2006 through a much-criticized law that prohibits banks from processing online wagers. Meanwhile, states' attorney generals have prosecuted online gambling sites and related advertisers.

Internet gambling declined as a result of the 2006 legislation, which prompted several offshore operators to stop accepting bets from Americans. But it's once again on the upswing as bettors gravitate toward black market sites and use other payment mechanisms -- such as wiring money to foreign bank accounts or using foreign credit cards -- beyond the reach of the law.