US tries its luck easing online gambling stand

Mar 01, 2012 by Rob Lever
A man plays poker on an Internet gaming site from his home in Manassas, Virginia. Despite a new crackdown on Internet gambling this week, the US government appears to be easing its stand on many forms of online betting, prompting states to swing into action to tap a new revenue source.

Despite a new crackdown on Internet gambling this week, the US government appears to be easing its stand on many forms of online betting, prompting states to swing into action to tap a new revenue source.

The turnabout by Washington came quietly in December when the Justice Department released an opinion stating that only sports betting should be prohibited under a 1961 federal law known as the Wire Act.

This opens the door to online poker, which is hugely popular on the Internet, and possibly other casino games along with state lotteries, say analysts.

The opinion is a marked reversal from Washington, which previously maintained that all online wagering aside from horse racing was a violation of US federal law -- a stand which prompted a complaint at the .

Ken Adams, a Nevada-based gaming industry consultant, said the opinion was "quite possibly the most important event of 2011 for the ... theoretically creating a legal path for all other forms of wagering on the Internet."

Adams said that by saying sports betting is illegal, "that automatically means everything else is legal."

He said it was confusing to see news this week that US authorities seized the website Bodog and announced the indictment of four Canadians on charges of illegal sports betting and .

But despite this, Adams and other analysts say there is now a path ahead for Internet gambling in the United States, if legislation is passed by individual states to enable this.

Nevada has already approved such a measure to allow online gambling by residents within the state and other states that pass enabling legislation.

I. Nelson Rose, a Whittier Law School professor and industry consultant, said he believes at least a handful of states may legalize Internet poker or lottery sales this year based on the ruling.

He said it may take some time to work out licensing and regulations, and possibly more time to determine procedures for gambling across state lines. Eventually, he said states could work out reciprocal arrangements with other countries or jurisdictions.

"State legislators and governors are desperate to find ways to raise revenue without raising taxes," said .

"Gambling is seen as a painless tax, so every state is looking into expanding legal gaming. They can now do so. The only exception is sports betting, which cannot be introduced into a state that does not already have it, due to a different federal statute."

The American Gaming Association estimates that online gambling generates $30 billion a year worldwide, and that states could collect up to $2 billion in tax revenue with some online games.

But some say the stakes could be much higher.

The potential revenue "is a number we don't know, but it's going to be much higher than anyone expects," Adams said.

"In a normal casino context, 80 percent of people will play slot machines, and about 80 percent of the population of the US has a propensity to make a wager," says Adams. "That's as big as the movies."

The United States had been a major market for global-based online gambling firms, but during the crackdown in recent years, "most of the big companies said they lost 60 to 70 percent of their revenue," said Adams.

Some say the situation won't be clear until Congress passes legislation to set guidelines and safeguards for online gaming.

"We need Congress to make clear" what is legal, says Mark Lipparelli, chairman of the Nevada Gaming Control Board.

"Federal regulation is the best way to ensure that the best protections are in place to protect consumers, and will ensure there is not confusion because of different state regulations," said Michael Waxman of the Safe and Secure Internet Gambling Initiative, which represents financial firms with a stake in online gaming.

The latest move by the US government leaves unresolved the issue of a longstanding dispute with the Caribbean nation of Antigua and Barbuda, a gaming haven which filed a WTO complaint against Washington for unfairly restricting trade -- and won.

Waxman said that in order to comply with the WTO, "federal legislation would need to be passed to create a level playing field. It remains to be seen whether that's going to be accomplished."

Antigua said in February it would "re-engage" the WTO on the dispute.

"Now that the entire basis for the United States objection to allowing our trade in remote gaming services has gone away, it is increasingly impossible to understand why the has not complied with this decision," Antigua Finance Minister Harold Lovell said.

Explore further: Twitter admits to diversity problem in workforce

add to favorites email to friend print save as pdf

Related Stories

Nevada adopts rules for Internet poker licenses

Dec 23, 2011

(AP) -- Nevada gambling regulators on Thursday unanimously approved rules that allow companies in the state apply for licenses to operate poker websites, a move that puts Nevada in a position to capitalize if Congress reverses ...

Four Canadians indicted on US gambling charges

Feb 28, 2012

US authorities seized the gambling website Bodog on Tuesday and announced the indictment of four Canadians on charges of illegal sports betting and money laundering, including founder Calvin Ayre.

The next frontier in gambling: E-gaming

Oct 20, 2011

Bally Technologies Inc. showcased its most popular games, including Cash Spin, on several platforms here this month at the Global Gaming Expo.

US online gambling laws against WTO rules: EU

Mar 26, 2009

The European Commission said Thursday that US laws restricting online gambling went against WTO rules but that Brussels would seek a negotiated solution to the dispute.

Hearing airs tribes' issues with Internet gambling

Nov 17, 2011

(AP) -- Native American tribes said Thursday they want their share of the jobs and revenue if online gambling is allowed in the U.S, but they don't want to lose their sovereignty to get it.

Recommended for you

UK: Former reporter sentenced for phone hacking

27 minutes ago

(AP)—A former British tabloid reporter was given a 10-month suspended prison sentence Thursday for his role in the long-running phone hacking scandal that shook Rupert Murdoch's media empire.

Evaluating system security by analyzing spam volume

47 minutes ago

The Center for Research on Electronic Commerce (CREC) at The University of Texas at Austin is working to protect consumer data by using a company's spam volume to evaluate its security vulnerability through the SpamRankings.net ...

Surveillance a part of everyday life

1 hour ago

Details of casual conversations and a comprehensive store of 'deleted' information were just some of what Victoria University of Wellington students found during a project to uncover what records companies ...

European Central Bank hit by data theft

2 hours ago

(AP)—The European Central Bank said Thursday that email addresses and other contact information have been stolen from a database that serves its public website, though it stressed that no internal systems or market-sensitive ...

Twitter admits to diversity problem in workforce

4 hours ago

(AP)—Twitter acknowledged Wednesday that it has been hiring too many white and Asian men to fill high-paying technology jobs, just like several other major companies in Silicon Valley.

Social Security spent $300M on 'IT boondoggle'

16 hours ago

(AP)—Six years ago the Social Security Administration embarked on an aggressive plan to replace outdated computer systems overwhelmed by a growing flood of disability claims.

User comments : 0