battle for control of online gambling519

February 2, 2012

February 2, 2012. Washington. The nation’s capital seemingly struck gold in 2010 when it raced to become the first jurisdiction in the United States to legalize and regulate online gambling. With tens of millions of Americans, and hundreds of millions of foreign players, all waiting for a legitimate and legal online gambling outlet in the US, Washington DC could have reaped a fortune in tax revenue. Yesterday however, the city abruptly repealed its first in the nation online gambling law.

Until now, the only legitimate online gambling sites for Americans have been casinos in Europe, in countries such as Germany, Switzerland and Austria. Other less trustable online casinos also exist throughout the Caribbean. And that’s the situation driving the recent surge toward legalized online casinos in the US.

Washington’s online gambling legalization law has had its critics since its passage. They argue that the online portion of the statute wasn’t part of the original 2009 lottery law, but was instead slipped into a 2010 budget bill. While the law allows for typical casino games such as poker and blackjack, the program was never launched. Now, with the DC city subcommittee voting 3-2 for repeal, the prohibition will go before the entire Washington city council for a full vote. That vote should come in the next few days or weeks.

Online gambling is coming

One thing is abundantly clear – legalized and regulated online gambling is coming to America. The only question is who will be getting rich from it. At the moment, Nevada, New York, Hawaii and Illinois all have online gambling legislation in the works. For bankrupt states and cities, the windfall of tax revenue from online gambling sites based in their jurisdiction would be a budget saver. Until now, it looked as if Washington and the others were headed for victory and financial salvation.

State versus Federal

Online gambling is set to be the next fierce political battle between the States and the Federal government. According to one councilman from Washington DC who supported the online gambling law, the nation’s giant casinos have teamed up with Congress to steal the right, and the revenue, away from the states.

Just like medical marijuana, which is legal in 16 states and the District of Columbia but illegal according to the Federal government, Congress is racing to draft legislation that would recognize state-based online gambling as illegal, but federal-based online gambling as legal. That move would keep the power and revenue from online gambling for themselves. Seeing their opportunity to buy their own monopoly of the multi-billion dollar industry, the world’s largest casinos have apparently entered the game.

Washington DC councilman and online gambling supporter Michael A. Brown (i) accused “casino interests” of repealing the city’s law. “I believe that casinos have now reared their head in our city” he told the Washington Post. The paper goes on to quote the independent Brown saying that online gambling “will be federalized and we won’t get any of the revenue.”

When asked which casinos and corporations were influencing the change of heart within the Washington DC city council, Brown could only admit, “I don’t know. I’m not sure.” An informal poll by the Post found that 9 of the city’s 12 council members planned to vote for a repeal, reversing the city’s historic leap in 2010. Referring to the city’s apparent abandonment of the massive amount of anticipated tax revenue, Brown insisted, “They’re laughing at our procedure now, that we’re going backwards.”

Critics who suspect major corporate casinos are behind Washington DC’s policy reversal suggest their reasoning is obvious – it’s cheaper to influence one set of Congressmen than 50 sets. Also, negotiating one nationwide sweetheart deal with Congress would be easier than fighting for 50 different state contracts to run their online gambling programs.

HR 1174

The first step in legalizing online gambling may come in the form of a Bill currently before the US House. HR 1174 would legalize online gambling, except in states that enact laws prohibiting it. Online gambling opponents fought for an opt-out mechanism for states such as Utah that ban all forms of gambling. Two days ago, Rep. Stephen Sandstrom (R-UT) introduced a Bill that would do just that.

The Bill currently before Congress, HR 1174, takes the potential for billions of dollars in tax revenue away from the states and gives it directly to the Secretary of the Treasury. Sponsored by Rep. John Campbell (R-CA), the Bill’s introduction states:

‘To amend title 31, United States Code, to provide for the licensing of Internet gambling activities by the Secretary of the Treasury, to provide for consumer protections on the Internet, to enforce the tax code, and for other purposes.’

Some critics worry that this legislation is the first step in the federal government’s intention to regulate, control and tax the internet. If the federal government can mandate taxes on internet gambling, it can also collect taxes on all other internet activities and purchases.

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