Friday, Jan. 13, 2012 | 7:21 p.m.
The gambling lobby has a message for Congress as states line up to cash in on a White House ruling that in-state online lotteries and poker won’t violate a federal Internet betting ban: Deal now or get stuck with a bad hand.
A Justice Department opinion issued before Christmas has created a now-or-never dynamic on the Hill for lawmakers and lobbyists pushing for a federal Internet poker law as state and regional officials move ahead with online gambling plans.
Come April, D.C. plans to offer online poker and blackjack. Illinois intends to be selling lottery tickets on the Web by then, too. Meanwhile, New Jersey Gov. Chris Christie was quoted this week saying his state could be the “epicenter” of Net betting.
“The writing is on the wall. The states are going to do this,” John Pappas, executive director of the Poker Players Alliance, told POLITICO. “The first three or four months of the year is going to be pretty important for Congress to act.”
All bets are on some key lawmakers — some backed by Las Vegas casinos — trying to do an end-run around the DOJ opinion by pre-empting it with a federal law. That could set up a showdown pitting states vs. the feds.
Supporters of a federal bill say states aren’t equipped to handle the complexities of Internet gambling, and Congress needs to step in.
State officials say that’s hogwash, and the Obama administration has already taken the wind out of the sails of a federal Internet poker bill by clearing the way for states to start setting up their own systems.
The DOJ opinion dealt states already pushing in the direction of legalization — like California and New Jersey — a couple of aces by saying a ban on intrastate Internet gambling only applies to sports betting.
That frees up those states and several others — including Iowa and Connecticut — to follow Illinois and D.C. in the coming months by passing online gambling laws during state legislative sessions. Passage in each Legislature will be complex, but state lawmakers are extra motivated in tight budget times to find new revenue streams.
“Many of the states are looking at this as a states’ rights issue,” said D.C. Lottery Executive Director Buddy Roogow, who is also an executive committee member of the North American Association of State and Provincial Lotteries.
NASPL passed a resolution late last year opposing the federal online gaming push, essentially arguing that a national bill would trample on the ability of states to regulate online gambling.
Federal Internet poker bills give states an opt-out clause, but officials at the local level are worried a national law could cannibalize state lotteries that fund everything from road projects to schools. And they weren’t fond of the idea of being told by folks in Washington what kind of gambling they can or can’t offer within their borders.
The governors of Maryland, Iowa and New Hampshire separately wrote to lawmakers last year to tell Congress to back off federal Internet poker for those two reasons.
If Congress were to step over the DOJ ruling via a federal online gaming law it would cause an uproar in states, said Melissa Riahei, a lobbyist for U.S. Digital Gaming, which sells online gaming technology.
“It would take a lot, at this juncture, for Congress to pass a law that would strip the states of their right to offer and regulate Internet gaming as they saw fit,” said Riahei, a former lawyer of the Illinois Lottery who helped draft the state’s request to DOJ in 2009.
That puts Senate Majority Leader Harry Reid in a difficult spot. A Reid spokesman declined to comment. But many in the online gaming world expect the Nevada Democrat will use his congressional muscle to push for a federal Internet poker law.
Las Vegas Casinos like Caesars and MGM are fighting for a federal bill because it would be easier for their brand name sites to penetrate a larger share of one, national market. And Nevada, which supports efforts on the Hill for a national bill, stands as the only state currently prepared to issue licenses for online gaming under federal legislation.
Nevada is eyeing the fall as a tentative launch for its Internet-poker only system, though officials say that’s dependent on what happens with federal legislation.
The gaming movement has also been stepping up its activities recently, hiring on former lawmakers, like ex-Sen. Al D’Amato (R-N.Y.). Former Homeland Security Secretary Tom Ridge and one-time FBI Director Louis Freeh have also recently joined forces to serve as mouthpieces for the Internet poker cause.
The PPA spent $1.1 million on lobbying during the first nine months of 2011, according to Senate lobbying reports. The American Gaming Association, which until recently opposed federal Internet poker legislation, spent $1.7 million in the first nine months the year, up 43 percent compared to the same period a year ago.
Rep. Joe Barton (R-Texas) said Congress needs to get serious about passing a federal Internet gambling bill or fraud could become rampant because of a series of “fractured” state laws. Barton, who is pushing an Internet poker bill, said in a statement, “If Congress doesn’t act soon we could end up with fractured rules and regulations that vary state to state, leaving more opportunity for fraud and fewer safeguards for players.”
But whether Congress in an election year could muster the will to pass Internet poker or have the stomach to fight states and their lotteries is a wide open question.
Congress hasn’t had much of an appetite for federal Internet poker in the past and bills have been stymied by some influential gambling opponents, notably House Financial Services Chairman Spencer Bachus (R-Ala.).
Pappas, the executive director of the PPA, admits that Congress has had a hard time passing anything of substance in the last year.
“It will be interesting to see where this fits into their priorities,” he said. “But I don’t think anyone is looking forward to getting into a states’ right fight here in Washington.”
Some expect Reid will give it one more shot and try to squeeze online gambling language into a must-pass piece of legislation, similar to what he did in 2010, said Mark Hichar, head of the gaming law group at Boston-based law firm Edwards Wildman.
He’ll get that opportunity when a payroll tax extension debate resurfaces in February, online gambling experts say.
“This is an issue that resonates with him,” said Hichar, who represents a company that helps runs several state lottery systems. “Those are his constituents and he wants to get this done for them.”
As a result of the DOJ ruling, Internet poker groups are pointing to the states as the main reason for a federal law.
Freeh, who sits on the advisory board of a online poker group bankrolled primarily by Caesars and MGM, said only a federal law can keep players safe because states “do not possess the necessary law enforcement tools to enact such regulatory requirements in a borderless Internet.”
And the AGA, the gaming industry’s most powerful lobby, said DOJ’s decision “mandates even more the need for some federal legislation” to create a base set of rules for all states to abide by.
“Because of the way the Web works … there has to be some minimum standards,” said Frank Fahrenkopf, CEO of the AGA. “If not, it will vary from state to state, which is not healthy.”
Nevada’s top gaming officials are also echoing the same lines.
That’s an argument some at the state level take issue with.
“I find it kind of offensive,” said New Hampshire Lottery Director Charlie McIntyre. “We handle education, crime prevention and a lot of important things but e-commerce?”
“The state I work for,” he added, “is not going to want to hear that Congress has passed a bill for Internet poker.”