By Michael Borden, of Sidley Austin
The fight in Congress over Internet gambling is back.
Sen. Harry Reid, the Democratic leader, predicted last week that Republicans will try to ban all forms of Internet gambling next year. He promised to support a ban so long as it does not include betting on Internet poker. Meanwhile, recent events suggest legislation permitting “poker only” Internet gambling might not be enough for the National Basketball Association (NBA).
For decades, even as casino gaming moved to the mainstream, the Internet developed, mobile technologies emerged and fantasy games became part of so many fans’ viewing experiences, the professional and amateur sports leagues steadfastly opposed expanding gambling on their games in the United States. In fact, they have often led legislative efforts to restrict legalized gambling of all types. But NBA Commissioner Adam Silver’s November 13, 2014, op-ed in the New York Times supporting the legalization and regulation of sports betting is a position-reversing game changer. By calling for a “different approach,” Commissioner Silver has reset the entire policy discussion.
Many policymakers believed that the enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006 would have ended the debate. Without clarifying what was legal or illegal, the law was designed to block the money flow from gamblers to Internet gambling sites. The drafters relied on long-time Justice Department interpretations regarding the legality of gambling and gave federal and state governments additional tools to enforce gambling restrictions. UIGEA enhanced criminal penalties for gambling businesses settling Internet wagers with financial instruments and required payment systems to develop policies and procedures for blocking Internet gambling transactions. They believed that the Justice Department’s multi-decade consensus interpretation that all Internet gambling was illegal (including games of chance, horse racing and sports) would persist.
But in December 2011, just months after the Justice Department shut down the three most popular Internet gambling sites on “Black Friday” and just as it appeared that Internet gambling was finished in the United States, the department’s Office of Legal Counsel issued an opinion that opened the door for states to authorize Web-based, non-sports gambling within their borders. New Jersey, Nevada and Delaware have taken advantage of this loophole in federal law and policymakers have since grappled with how best to respond.
The gambling debates have largely focused on whether Internet gambling should be explicitly banned or legalized and regulated. For years, it appeared that a broad Congressional consensus to permanently bar online wagering would persist. It took nearly a decade to enact a law reflecting that consensus (thanks, in part, to the corruption of Jack Abramoff and his associates). But when UIGEA passed the House in 2006, it passed by a vote of 317 to 93. And when Rep. Barney Frank, the powerful chairman of the House Financial Services Committee and a long-time opponent of Internet gambling restrictions, tried to delay the implementation of UIGEA in 2008 in his committee, he became the only House Democratic committee chairman to lose a contested vote during the four years the Democrats ran the House.
A lot has changed. Can a new Congress ban Internet gambling once and for all? Will Congress allow online poker? In light of Commissioner Silver’s comments, is legalized Internet gambling, including sports betting, tomorrow’s reality?
Four Internet gambling bills were introduced during the recently adjourned Congress. Two of them would have expanded gambling; two would have restricted it severely. Because of the professional and amateur sports leagues’ previously unwavering opposition to the legalization of sports gambling and the leagues’ political clout on Capitol Hill, none of the bills would have authorized sports betting. And none were considered by the House or the Senate.
It is important to note that fewer than half of the members of the new 114th Congress have ever even cast an Internet gambling vote. When the issue is raised in the new Congress, they will be free to evaluate the merits of prohibition versus federal legalization or state-by-state regulation without concern for contradicting past positions.
As the debates begin again in earnest, the influence of Sheldon Adelson, Chairman of the Las Vegas Sands Corp., cannot be underestimated. The casino mogul wants to prohibit Internet gambling in all forms across the United States. Still, prohibitionists might not have enough votes to explicitly ban online wagering. Sen. Reid might not have enough support to authorize poker, even though he would likely be backed by Adelson’s competitors MGM Grand, Caesar’s Entertainment, and others. And the NBA commissioner’s support for authorizing sports betting might also be rejected (including from the other professional sports commissioners).
But it is encouraging to see that a renewed debate will come and that Congress is finally inching toward establishing a national gambling policy. The outcome of the legislative efforts is unclear, but it is highly desirable for Congress to set the rules and eliminate ambiguity. The legal uncertainty is expensive and unnecessary.
Congress’ choice will impact more than just the players in the gaming industry. It will affect the financial services sector, technology companies, state economies and American families. Some of the interested parties have begun to reengage with Congress in a meaningful way. This new debate is important. It has the potential to transform the American gaming industry forever.
Michael Borden is counsel in Sidley Austin’s Washington D.C. office. He is a former Senior Counsel with the House Financial Services Committee. During his tenure on Capitol Hill, Michael was in instrumental in the development, enactment and implementation of UIGEA. He can be reached at mborden@sidley.com.
This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.
