Legal US online gambling: a fight to the birth 19/01/2010

Anthony Cabot, partner and gaming group leader, Lewis & Roca

WHILE MUCH focus has been placed on the prospects of Federal legalization that would legalize Internet gambling, more attention should be placed on state efforts like the recent legislation in New Jersey. 

Expectation that the Federal government would pass legislation that would ever do more than defer to state gambling laws is unwarranted. Or in other words, the ‘opt out’ provisions of the current Federal bills are probably wishful thinking.

What New Jersey State Senator Raymond Lesniak realised, however, is that states can already ‘opt in’ by passing legislation that permits intrastate Internet wagering. For a model on how this could work, we need not look further than the state lotteries.

In 1964, New Hampshire was the first state in the United States to sponsor a lottery to raise public funds. Since then 37 other states have followed in its footprints. In this vain, the likely path to the acceptance of Internet gaming will be on a state-by-state basis. Once a state, like New Jersey, implements it successfully, other states will follow. 

But the Lesniak bill will likely see significant opposition. A major problem facing intrastate wagering is that gambling has too many stakeholders and their respective interests often do not often align. 

In any given state, there can be casinos, gaming device manufacturers, state lottery lotteries, lottery operators, horse tracks and owners, Native American interests, card room interests, and tavern owners - basically anyone who currently receives gaming revenues.

These groups can be further broken down into those who support intrastate Internet gambling because they see it as a possible revenue source, and those who oppose it because they either see it as a revenue drain, or potentially as making a competitor stronger.

As witness with both the casinos in Nevada and the tribal casinos in California, different players in the same industry can have opposite views on the same issue. For example, despite its efforts to convert them, Harrah’s has casino competitors that still oppose Internet gambling. 

This is further complicated by different players attempting to use the political process as essentially a land grab – to position the legislation to give them either a monopoly or special position if intrastate wagering should become legal.

This internal political struggle is usually more devastating to the chances of legislative success than the opposition from anti-gambling forces. And these are the dynamics to watch in the ensuing months in New Jersey and California. 

The New Jersey bill is a start, but Senator Lesniak and others should appreciate that the lottery bill in New Hampshire failed five times between 1953 and 1963 before it was eventually passed. The road is long.

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Posted: 19/01/2010