Why Sen. Heller’s Proposed Federal Ban on Regulated Online Gambling (But Not Poker) Will Be a Tough Sell

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Sheldon Adelson’s push for a federal rollback of state-regulated online gambling appears to be bearing some legislative fruit.

According to a report from the Las Vegas Review Journal, Sen. Dean Heller (R-NV) anticipates that a federal bill banning all forms of regulated online gambling – except for poker – will be introduced in the coming weeks.

It’s not clear who will sponsor the bill.

Heller asserted that there was “no daylight” between himself and Senate Majority Leader Harry Reid on the issue, implying that the bill had Reid’s full support.

Reid did not comment for the LVRJ article.

What would Heller’s bill look like?

We can look to two pieces of legislation that have been floated, but never introduced, for a rough idea of what the bill Heller is describing might look like.

The first is Adelson’s so-called “Wire Act fix,” also known as the Internet Gambling Control Act. Read a recently-circulated draft of that bill that here.

The second is the bill floated by Sen. Reid and the now-retired Sen. Kyl in the 2012 lame duck session, commonly referred to as the “Reid/Kyl bill” and more formally known as the Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012. You can read a draft of that bill here.

Poker unlikely to be only exception

Heller only mentioned a carveout for poker when detailing his plans to the LVRJ, noting that poker “takes a little more skill.”

But if the above bills are any guide, poker is unlikely to be the only exception.

For example, the Wire Act fix draft contains an exemption for fantasy sports and advance deposit wagering on horse races.

And the Reid / Kyl draft contained similar exemptions for horse betting and state lotteries.

Chance of passage seems remote

It’s difficult to see how a bill with these rough outlines would survive either the House or Senate.

Just a few of the potential problems:

  • Delegations from states that already have regulated online gambling – especially New Jersey – will be inclined to push back with extreme force against any such measure.
  • Delegations from states in the advanced stages of introducing regulated online gambling – especially California, but including other large-population states like New YorkIllinois and Pennsylvania – will range from fierce opposition to neutral.
  • It’s tough to comprehend how any Republican hoping to maintain credibility as an advocate for states’ rights could support rolling back existing state-regulated industries. Especially in an election year.
  • Depending on what exemptions do or don’t make it in, the horse racing industry (especially Churchill Downs and ergo Senate Minority Leader Mitch McConnell), the fantasy sports industry and lottery commissioners from around the country will line up against this bill.
  • And the more exemptions that are added, the weaker the support from social conservatives will be.
  • Speaking of social conservatives, the bill can easily be read as a massive expansion of gambling, opening the door to a near-nationwide online poker network. That’s not going to sit well with a wide array of groups.
  • Substantial tribal opposition to such a bill could also manifest (again depending on how the bill is constructed).
  • It’s hard to see Reid throwing his full support behind a bill that will earn the ire of much of his constituency – and financial backers – especially given his narrow win in 2010 against a candidate many considered to be fringe.

In a nutshell: There’s some political upside to proposing this bill (most notably a trip to the Adelson ATM), but very little political upside to actually voting for it.

The Wire Act and online gambling

The LVRJ article echoes a common thread in reporting on regulated online gambling: that the reinterpretation of the Wire Act by the DoJ is what allowed states to offer online gambling:

Heller and U.S. Sen. Harry Reid, D-Nev., have been working together to come up with a bill to restore the Wire Act, which used to prohibit Internet gambling until the Obama administration several years ago loosened the law to allow Illinois to offer lottery tickets online.

This same thread is employed by groups like CSIG who oppose online gambling regulation.

But that is not a wholly accurate representation, because the Wire Act never acted as an unambiguous, blanket prohibition on Internet gambling in all its unregulated and regulated forms.

Read the DoJ’s opinion here and the text of the Wire Act statute here and you’ll see where things get fuzzy: the Wire Act only applies to interstate transactions. It says nothing about, and has no applicability to, intrastate transactions.

New York and Illinois asked specifically about interstate transactions – transactions that involved an out-of-state processor – in their letter to the DoJ that precipitated the DoJ’s Wire Act opinion.

The DoJ’s opinion also brought the agency’s interpretation in line with both the original legislative intent of the Wire Act (so the agency argues at length) and with the conclusion the Fifth Circuit Court of Appeals reached in 2002: that the Wire Act only applies to sports betting.

Photo: spirit of america / Shutterstock.com

- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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