Compromise Internet Gambling Ban Proposal Drifts Through Federal Corridors

Today’s public release of a draft proposal seeking a compromise ban on internet gambling at the United States federal level represents illustrates several different levels of futility in the e-gaming discussion. 

The proposal (it is not a bill, and shows no signs of becoming one), is the type of thing that businesses and lobbyists create all the time, and then peddle around the corridors of Congress hoping to generate support – and perhaps even a sponsor or two.  The bare-bones draft measure is of interest to the online-poker and greater online-gambling world because it contains a carveout for online poker while reinstituting a ban on other forms of online gaming that have been left unaddressed since a controversial, late-2011 opinion on related topics issued by US Attorney General Eric Holder.

What’s the source of this latest proposal?  No one has said, publicly, and it was dumped onto the public scene by D.C. political blogger John Ralston, at his prominent RalstonReports blog.  Ralston frequently delves into gaming legislation among several other topics that he covers, but he was dismissive of this effort, writing only “Here’s what’s floating around DC — I smell a Nevada company,” before dumping in the body of the proposal, seemingly converted from a PDF and left unedited.

Cleaner, edited versions of the document are starting to appear (for those who are interested), but the most curious element of the proposal has to do with how it will attempt to supercede traditional United States “states rights” regarding gambling matters.  It’s a larger issue than most people realize, and one of the reasons why this wanna-be bill likely isn’t going anywhere.

One difference between the United States and many other countries is the extreme variance, state-to-state, on laws regarding all sorts of personal-conduct matters.  These areas traditionally have been under the purview of the states, literally for centuries, meaning that the US is a quiltwork of interconnecting, often competing laws on all sorts of issues, whether its gambling (including lotteries), alcohol or tobacco consumption (and for many years, even the age of legality), fireworks and explosives, drugs, speed limits and driving privileges… it’s an exhaustive list.

There’s nothing quite like it anywhere else in the world, though perhaps the states of Germany come closest, or perhaps even the European Union in its modern form.  The areas around state borders within the US proliferate with businesses that are legal in one state but illegal (or far more expensive) in its neighbor. 

All of modern Nevada is in essence a tribute to such border-hopping.  The large Las Vegas metropolis is barely 30 miles into the state from southern California, at the center of a huge, flat desert bowl, and it was developed that way.  Reno is much the same, though more of a traditional resort town (along with Lake Tahoe), and it’s the Nevada point of entry for northern California and Oregon, particularly the rich Bay Area.  Most of the casinos in the state are concentrated in border or near-border towns, from Mesquite, catering to a snippet of Arizona and southern Utah, to little Jackpot, NV, up near the Idaho border.

If you want to gamble in Nevada, you don’t go to the heart of Nevada.  There’s not much action there.

Such development exists across the United States; it’s a part of how the country works, and it’s built on the state-by-state, patchwork quilt of state-level conduct laws.  And that’s where this latest proposal (curiously, as Ralston surmises, probably authored by a Nevada casino company) runs into problems.

Here’s an edited, trimmed-down overview of the draft proposal, which is titled the “Internet Gambling Prohibition and Control Act of 2014”:

(1) Illegal Internet gambling results in the proliferation of gambling activity, increases in gambling addiction and other socially undesirable behavior.

(2) [The UIGEA] makes it a Federal crime for gambling businesses to knowingly accept most forms of payment in connection with the participation of another person in unlawful Internet gambling. [Author’s note: This means that it is not and never has been a federal crime for Americans to play on such sites.] That statute was intended to convey Congress’s clear opposition to Internet gambling by providing help to enforcement efforts against unlawful Internet gambling operators and to limit unlawful Internet gaming involving United States persons.

(3) At the time of the UIGEA’s enactment, it was clearly understood that [the Wire Act], along with [the Travel Act and Illegal Gambling Business Act], prohibited Internet gambling.

(4) Notwithstanding that understanding, on December 23, 2011, the Department of Justice released a memorandum opinion of the Office of Legal Counsel dated September 20, 2011, that reversed the Department’s longstanding position by construing the Wire Act to apply only to sports-related gambling activities in interstate and foreign commerce.  [This was the controversial Holder opinion, drafted primarily to convey to states that it was legal to sell lottery tickets online.]

(5) That opinion has led to the further proliferation of gambling offered by offshore operators, as well as state legislation, some enacted, that will permit Internet gambling not only within the respective States but possibly foreign jurisdictions – as well.

(6) Although States, under our Federal system, are due substantial deference when it comes to regulation within their borders, the Internet by its nature is an instrumentality of interstate commerce and its regulation appropriately lies within Federal purview.

The proposal admits that the various US states “are due to substantial deference when it comes to regulation within their borders,” but then attempts to wall off all of the Internet as a commerce medium that the states themselves shouldn’t be allowed to regulate.

What the proposal doesn’t state is that the Internet doesn’t belong to the US of A, even though the country often pretends otherwise.  It’s an international medium, not an interstate one. 

The problems are multiple.  First, it’s the attempt to nullify states’ rights, when several states have already introduced or legislated various forms of online gambling. 

Second, a law such as this proposal would create would also establish a logical extension into all other activities where the states currently exercise control.  Note that the proposal says that it’s not the gambling that should be under federal control, it’s the whole of interstate commerce, or in other words, a blanket expansion of the US’s Commerce Clause to cover all of everything online, alpha to omega and all stops in between.  That’s likely to raise huge protests from the business world far beyond the tiny percentage of American e-commerce involved with gambling business.

Third, despite its carveouts for online poker, the proposal (like the nasty Sheldon Adelson-sponsored bills also before the US Congress), would attempt to create a retroactive ban.  That’s also unlikely to fly.  The United States federal government really, really, really hates the specter of legalized sportsbetting, yet it was still forced to grandfather Nevada in when the Wire Act and other gambling-related codes were passed.

Fourth, of course, is the silly notion that the US can really, truly govern the Internet, short of instituting a totalitarian solution such as the infamous Great Firewall of China.  The “foreign jurisdictions” mentioned in the proposal might voluntarily not market to the US in light of other trade agreements, but they certainly don’t have to, and as history has shown, the control of the Internet itself is something the rest of the world won’t cede to US control.

All of this makes this proposal a giant loser, not to mention that it’s floating around D.C. in the months before an important mid-term general election.  There’s really no reason for politicians from either major US party to champion this bill, and meanwhile, more and more states are regulating or banning online gambling on their own.

This proposal is an example of trying to get the US federal government involved in the matter, in a bad way and several years too late.  Such a blanket ban would have had a chance to succeed before states got involved on their own, but not now.  One of the fortunate things for online-poker and online-gambling proponents is that the same argument holds true regarding the nasty Sheldon Adelson-backed blanket bans also circulating the halls of the US Congress – they’re unlikely to succeed as well.

It would be interesting to know who floated the bill, and which politicians might have been favorable to it.  As mentioned in a report by OPR’s Chris Grove, the general measure closely mirrors the stance argued for US Sen. Dean Heller, Nevada’s junior senator, a Republican who backed online poker but is against all other forms of online gambling.  Yet the public may never know.

Haley Hintze

Veteran poker writer and editor Haley Hintze offers a uniquely independent and entertaining look at many of the most newsworthy topics in poker.  Noted for her lengthy series that helped expose the cheaters behind the Absolute Poker and UltimateBet scandals, she remains a champion of consumer interests and fair play.

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