Federal Bill Banning Online Gambling Unlikely to Pass

John Mehaffey March 26, 2014 1133 Reads

There is a lot of talk about a federal bill that was introduced in Congress this week by Senator Lindsey Graham (R-SC).  Texas Governor Rick Perry sent a letter to Congress supporting the bill.  Louisiana Governor Bobby Jindal also publicly opposes online gaming.

This bill is believed to have originated through the efforts of Sheldon Adelson’s Coalition to Stop Internet Gambling.  This organization is lobbying hard to change the Wire Act to the interpretation held by the federal government before December 2011.  That was when a letter released by the U.S. Department of Justice noted that only sports betting was covered by the law that dates back to 1961.

The proposed Internet Gambling Control Act of 2014 would ban all forms of online gambling, except horse racing and fantasy sports.  These games were also exempted from the 2006 Unlawful Internet Gambling Enforcement Act.  Noticeably absent from the list of exemptions are state lotteries and existing regulated online gaming.

The most vocal opposition to this bill will likely come from governors with help from state lotteries.  The ability to purchase lottery tickets over the Internet is already a reality in several states.  More are certain to follow.  A bill that would restrict the sale of online lottery tickets is not likely to have much backing from states that are dependent on this form of gambling.

A possible amendment may include an exemption for lotteries.  That still poses a problem.

The failed Reid/Kyl bill exempted state lotteries.  It was still opposed by the National Governors Association due to an “unnecessary preemption of state authority”.  This would appear to be the restriction on the ability to offer virtual slots and table games, something already legal in Delaware.

The Democratic Governors Association has already come out in opposition of the Internet Gambling Control Act of 2014.  The organization cites many of these points.

When it comes down to it, states’ rights and the Tenth Amendment will cause many that are not interested at all in gambling to oppose prohibition or regulation of online gaming at a federal level.  This already happened with sports betting.  Georgia, Kansas, Virginia and West Virginia filed friends of the court briefs brief over equal sovereignty in a case involving New Jersey while noting the states “take no position on the wisdom of the State and federal sports wagering laws at issue in this case”.

Even if a federal ban of online gambling makes it out of committee, it still has a massive obstacle.  Senate Majority Harry Reid (D-NV) supports regulated online poker.  Many companies from his home state are depending on the industry.  It seems unlikely that a bill that bans something he clearly supports could ever hit the floor of the U.S. Senate.

Congressmen from states that already have online gambling live, are seriously considering it, or have powerful state lotteries might be inclined to oppose any measure that could limit the ability to raise important tax revenue over the Internet.

It is hard to imagine there would be much support from representatives and senators from Delaware, Nevada or New Jersey, especially if the action that is already live is not grandfathered.  There is precedent for allowing existing gaming to exist after a federal ban.  The Professional and Amateur Sports Protection Act exempted Delaware, Montana, Oregon, and Nevada, where sports betting was active or existed in the years before the law passed.  New Jersey is currently challenging the constitutionality of this law.

There is one potential bright spot.  If the Adelson team is able to draw enough attention to the issue, this may be the opportunity for Sen. Reid to get online poker exempted while banning casino games.  This may not be what some Nevada casino support, however, online poker players certainly would not mind.

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