Why Is The Nevada Attorney General Supporting A Possible Federal Ban On Online Gambling?

John Mehaffey November 25, 2015 1832 Reads

Nevada Attorney General Adam Laxalt announced on Ralston Live on Tuesday that he supports The Restoration of America’s Wire Act (RAWA), a federal bill that would ban the regulated U.S. online gaming industry, including licensed operations approved by the Nevada Legislature.

Laxalt intends to sign a letter circulating among state attorneys general that encourages Congress to pass RAWA.

What Laxalt said on Ralston Live

Laxalt asserted that a September 2011 opinion from the U.S. Attorney General’s office that paved the way for regulated interstate online gaming was an abuse of power during an interview on Ralston Live.

“Congress spoke on this issue and has an existing Wire Act,” Laxalt said.

There was some question as to the legality of interstate online gaming before the DoJ September 2011 opinion. Former U.S. Attorney General Eric Holder was blamed by Laxalt for “changing that landscape.”

RAWA would not only ban online gaming across state lines, including interstate lotteries and the Nevada and Delaware poker liquidity sharing agreement, it would outlaw regulated intrastate online gaming that was widely believed to comply with federal law before the 2011 DoJ opinion was ever released.

There is concern that RAWA would also criminalize Nevada’s mobile sports betting industry. Mobile betting accounts for about 30 percent of the state’s sports handle.

Jurisdictions acted assuming intrastate online gaming was legal under UIGEA

Washington D.C. already approved online gaming within city limits by the time the U.S. Department of Justice weighed in on interstate online gaming in September 2011. Congress had the ability to veto this law but failed to act within the 30 days required to do so. Washington D.C. repealed this law in 2012.

Nevada sportsbooks launched online and mobile betting in 2010. Online poker regulations were passed by the Nevada Legislature in 2013.

The New Jersey legislature passed a comprehensive online gaming bill in 2011 that was vetoed by Governor Chris Christie. A second attempt to legalize online gaming in New Jersey was signed into law by Christie in 2013.

These jurisdictions concluded that federal law permitted the ability for states to legalize and regulate intrastate online gaming.

Laxalt ran on states’ right platform

Laxalt made the issue of the federal government’s overreach a platform for his 2014 campaign for the Nevada attorney general position. His website states that “we live in an America with a federal government that hurts our economy, tramples state’s rights, and limits personal liberty.”

Laxalt apparently does not believe that RAWA falls under the definition of an abuse of the federal government’s power.

States’ rights platform in action

Laxalt has participated in two key battles against the federal government since he was sworn into office in January. Laxalt joined 25 other attorneys general by signing a memo admonishing President Obama’s immigration executive order.

Laxalt testified at a congressional hearing against President Obama’s position on the issue. Nevada Governor Brian Sandoval voiced his disagreement with Laxalt’s involvement in the matter.

That was not the only time Laxalt went against Governor Sandoval’s wishes on a topic against the federal government. Laxalt sued to stop restrictions on federal land that attempt to protect the sage grouse. Sandoval described Laxalt as acting in his own “personal capacity,” according to the Las Vegas Review-Journal.

Ralston questioned why online gaming is different

Veteran Nevada political journalist Jon Ralston did not let Laxalt’s states’ rights position in some cases, but not for online gaming, go by without challenging it. Ralston asked Laxalt how a federal preemption of Nevada’s gaming laws wouldn’t violate that belief.

“Gaming is a different animal,” Laxalt responded. “You need to know where sources of money are coming from.”

Ralston followed that up with a question about Sheldon Adelson’s influence in Laxalt’s opinion. Laxalt denied discussing the topic with Adelson, one of online gaming’s most powerful opponents. Adelson, and his company Las Vegas Sands, are behind the Coalition to Stop Internet Gambling (CSIG), according to numerous media reports.

Laxalt reiterated that Congress, and not the U.S. Attorney General, should decide if online gaming is permitted by states.

Sandoval disapproves of Laxalt’s RAWA position

Sandoval does not agree with Laxalt’s support of RAWA. In a statement released to Jon Ralston, Sandoval states, in part:

I am very concerned that anyone representing the state’s legal interests would speak out against current state law in our leading industry. At its core, this is a state’s rights issue and I disagree with the Attorney General that a federal government one-size-fits-all solution is in the best interest of Nevada.

Nevada Gaming Control Board disagrees with Laxalt

A.G. Burnett, Chairman of the Nevada Gaming Control Board, also disagrees with Laxalt’s position. Burnett said, in part:

I disagree on his position regarding RAWA. States should be left to regulate gaming as they choose, and the regulatory agreement between Nevada and Delaware has been a success. Without a carve-out for state-regulated online poker, the activity simply couldn’t exist in a legal, regulated format. I am concerned that would mean that offshore operators would still be able to offer illegal, unregulated online poker, while licensed and suitable entities are banned from doing so.

Full statements from Sandoval and Burnett are available at Ralstonreports.com.

Laxalt’s ties to Coalition to Stop Internet Gambling

While Laxalt may have not spoken directly to Adelson about RAWA, it is easy to make some connections to those more involved with the lobbying effort. Robert Uithoven was Laxalt’s campaign manager.

Uithoven is a board member of CSIG. Uithoven is also the founder and president of j3 STRATEGIES, a lobbying firm hired by CSIG. Adam Laxalt’s sister Tessa is an associate at j3 STRATEGIES, according to the company’s website. Both of these facts were first reported by Haley Hintze.

Adelson was a contributor to Laxalt’s 2014 campaign. Politico reported that Adelson was involved in a “Stop Miller Now” campaign, referring to Laxalt’s opponent in the Attorney General’s race in 2014, former Nevada Secretary of State Ross Miller.

Laxalt involved in first online gaming bust in Nevada history

One of Laxalt’s first high profile cases after taking office involved unlicensed online poker. Bryan Micon, operator of SealsWithClubs, woke up to a raid initiated by Nevada gaming agents in February.

SealsWithClubs was quickly shuttered. Laxalt announced charges against Micon at a press conference in April.

Micon temporarily relocated to Antigua before returning to Nevada to settle charges related to SealsWithClubs.

The Micon case is much different than poker sites licensed under Nevada law. WSOP.com and Real Gaming, the only two online poker rooms currently licensed in Nevada, are approved to operate by state gaming regulators.

RAWA encourages black market

As Nevada Gaming Control Board Chairman Burnett mentioned in his statement to Jon Ralston, unlicensed gaming sites would thrive in an unregulated environment. Many offshore sites left the regulated markets of Delaware, Nevada and New Jersey after online gaming was legalized.

Threatened enforcement actions by the New Jersey Division of Gaming Enforcement appear to have been a contributing factor in this change in policy. The respect for state regulation was cited by the Winning Poker Network in its decision to stop accepting players in states where online poker is legal.

Closing regulated sites would only encourage these sites to return, moving the jobs created by regulated gaming to other countries. It would also shut off tax dollars state governments currently generate from licensed gaming sites.

Nevada companies potentially affected by RAWA

The list of companies that would lose revenue from being forced to leave the regulated U.S. online gaming market include Caesars Entertainment, IGT, MGM Resorts, Boyd Gaming, Treasure Island, Aliante Casino, Station Casinos, CG Technology, South Point, William Hill, GeoComply and Scientific Games. These companies operate online poker, mobile sports apps, provide casino content or supply support services to gaming companies in Nevada and other regulated states.

It is safe to argue that Nevada companies losing revenue would affect the number of jobs available within the industry. Laxalt promised to stop federal interference with Nevada job creators when he ran for office in 2014.

Laxalt’s campaign website includes this statement:

Far too often we’ve seen the federal government’s overreach tie the hands of Nevada’s job creators. Excessive regulations and mandates raise operating costs and stifle innovation, crushing the pioneer spirit that fostered our great state.

Laxalt’s position on job losses attributed to the “federal government’s overreach” apparently does not pertain to Nevada’s largest industry, one that employs nearly 400,000 people.

Congress already decided states have the right to legalize online gaming

Laxalt’s position omits an important fact about U.S. online gaming. Congress already decided that states should have the right to legalize and regulate online gaming within their borders. The Unlawful Internet Gambling Enforcement Act (UIGEA) explicitly gave that right to states in 2006.

There is nothing ambiguous about the UIGEA language pertaining to state-regulated online gaming. Existing gaming sites in Nevada, Delaware and New Jersey, as well as states with online lotteries, adhere to the regulations set forth in the UIGEA, as demanded by Congress.

The UIGEA passed the U.S. Senate by a 98-0 margin. The U.S. House of Representatives voted 421-2 in favor of it. RAWA lobbyists and supporters continue to ignore the fact that 99.6% of Congress voted to permit regulated online gaming if explicitly approved by state law.

Nevada legislature voted unanimously to approve online poker

The Nevada Legislature approved online poker in the state by a larger margin than Congress did. The bill passed both chambers in Nevada unanimously within hours of its introduction. The Nevada legislature felt the bill was so important that it was declared to be an emergency measure. Governor Sandoval signed the online poker bill into law the same day it passed the Nevada Legislature.

Laxalt’s support of RAWA is contrary to what 100% of Nevada lawmakers, its governor, and 99.6% of Congress already approved.

Nevada Legislature rejected online gaming repeal this year

It wasn’t just the 2011 Nevada legislature that approved of online gaming in the state. Las Vegas Sands pushed AB 414 during the 2015 Nevada legislative session.

AB 414 attempted to repeal some language pertaining to the future expansion of online interstate gaming compacts. The bill died in the Nevada Assembly Judiciary Committee without a vote.

Wire Act only applies to interstate sports betting

Laxalt implies that the Wire Act’s interpretation by the U.S. Department of Justice is incorrect. It is clear that the Wire Act only applies to sports betting, and even then, only to interstate transactions. Its full title is the “Interstate Wire Act of 1961,” making it difficult to assert that it also covers intrastate transactions, ones RAWA would criminalize, much less gaming not connected to sports.

RAWA seemingly dead, but the fight against it never is

The opinion that Congress never determined the legality of state regulated online gaming is inaccurate. It is a line lobbyists use for a lack of any other facts to back up the position that states were never given the right to determine the legality of online gaming. UIGEA language, and its nearly-unanimous passage, clearly refutes this assertion.

RAWA has seen little in the way of congressional support, but it never hurts for constituents to contact lawmakers to have their voices heard. The more states’ rights and online gaming supporters that speak out, the less likely a bill like RAWA becomes federal law.