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Outlook for lame-duck action on online gambling gets fuzzier | WATCHDOG


By Johnny Kampis 

As the 114th Congress enters its lame-duck session between the election and the start of the 115th Congress in January, industry observers speculate that a bill to abolish online gambling could be rammed through.

That might make a nice going away present for longtime U.S. Sen. Harry Reid, D-Nevada, who is rumored to have worked with Las Vegas Sands Corp. Chairman Sheldon Adelson to try to enact a ban in the last lame-duck session in 2014. The Senate minority leader is retiring in January after 24 years in Congress.

But Reid disavows any such effort this time around, and efforts by House lawmakers to take a broader look at the issue of federal gambling regulation might put a crimp in any Senate plans.

Adelson, a major Republican donor who owns the Venetian and Palazzo casinos in Las Vegas, gave $20 million on Sept. 20 to the pro-GOP super PAC Senate Leadership Fund, which is run by Steven Law, the former chief of staff for Senate Majority Leader Mitch McConnell, R-Ky.

The next day, three Republican senators introduced a measure that would ban financial institutions from processing transactions related to online gambling. Similar House legislation failed to gain traction last year.

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The Taxpayers Protection Alliance is among a coalition of groups fighting a bill that would banish online gambling from the U.S. David Williams, president of the TPA, told he’s not trying to take sides on whether online gambling is good or bad, just trying to keep Washington out of what has historically been the purview of the states.

“Basically, the federal government should stay out of it and it should be left up to the states. If a state wants online gambling, they should be allowed to do it. If a state doesn’t want to do it, that’s also their choice,” he said.

Williams chides Adelson for his attempts to use the power of Congress to aid his business.

“He’s trying to stop online gambling because he wants people to go to Vegas and his hotel and gamble down with him,” Williams said. “I don’t begrudge him that, but just don’t use the federal government to try to get legislation passed to protect your own interests.”

Online poker’s roller-coaster ride

Online poker in particular saw tremendous growth in the first few years of the new millennium, aided by the story of amateur player and Tennessee accountant Chris Moneymaker, who won the World Series of Poker Main Event in 2003 after earning his seat into that poker tournament through a qualifier on online poker site Poker Stars.

Poker Stars and its ilk, based in other countries, always operated on the outskirts of American law. Regulators pointed to the Interstate Wire Act, passed in 1961, as banning online wagering of any kind in the U.S.

On Sept. 30, 2006, the U.S. Senate passed the Unlawful Internet Gambling Enforcement Act (UIGEA), a House-passed measure later attached to an anti-terrorism bill, pretty much assuring its passage. President George W. Bush signed it into law two weeks later.

The act was designed to choke off the funds used to play online poker, making it illegal for the transfer of money between online gaming sites and financial institutions such as banks and credit card companies. It didn’t technically make it illegal for people to play online poker for real money, but it certainly made it much harder to do so.

Some online poker sites, such as Poker Stars and Full Tilt Poker, continued to operate in the U.S. but were shut down by federal law enforcement on April 15, 2011, a day known as “Black Friday” among those in the online poker community.


Since then, though, legal actions have muddied the online gambling waters.

It remains unclear if the original Wire Act even applies to most online gambling of today, including poker. It specifically references a bettor using “a wire communication facility” to make “bets or wagers on any sporting event or contest.”

In September 2011, the U.S. Department of Justice issued a legal opinion that “interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.”  The U.S Court of Appeals  for the Fifth Circuit ruled that the Wire Act applied only to sports bets and not to other types of online gambling.

Of note is that since the DOJ’s opinion, issued six months after the raids on online poker sites, no other offshore sites have felt the force of the federal hammer despite several online poker operations continuing to accept U.S. customers.

“[The 2006 law] really changed the landscape of online gambling,” Williams said. “There’s a lot of dispute of what it means and what it’s supposed to mean.”

‘The Edsel of gaming’