Ready to Roll: States Are Venturing into the New Frontier of Online Gambling

By Griffin, Jonathan | State Legislatures, December 2012 | Go to article overview

Ready to Roll: States Are Venturing into the New Frontier of Online Gambling


Griffin, Jonathan, State Legislatures


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Online gambling proponents received an early Christmas present last year. It came wrapped in an opinion from the U.S. Department of Justice on Dec. 23, 2011, giving states the thumbs up to sell lottery tickets and allow gambling over the Internet.

The department clarified that the ban on interstate betting in the Wire Act of 1961 applies only to a "sporting event or contest" and that all other gambling operations are outside the purview of the act.

The decision opened the door to any form of gaming over the Internet, provided it isn't on sports. A state may sell lottery tickets online and authorize online poker, roulette, blackjack and other casino games, as long as the actual betting takes place within their boundaries, even if out-of-state credit cards are used by the gamblers.

But like the proverbial tacky sweater, this gift hasn't been universally welcomed. There are a variety of concerns surrounding online gambling--from moral objections to state/federal control issues.

States' rights advocates and NCSL believe the control should stay in the states. They oppose a bill currently being debated in Congress that would severely limit state control of gambling.

Those on both sides of the issue feel obligated to protect minors from gambling illegally and adults from gambling irresponsibly. Others are concerned that equipment manufacturers and local gaming operators, like the neighborhood 7-Eleven, may not be able to compete against big online gambling businesses, potentially resulting in job losses.

There is also concern about the costs involved in making sure online bets take place within state boundaries, which typically requires buying geo-locating software and staff time and expertise to track each online gambler's unique IP (Internet Protocol) number.

All Bets Are On

Nevertheless, some states--seeing the potential for millions of dollars in additional revenue from taxes and licensing fees--are jumping on the cyber-gambling bandwagon. There's a reason for their optimism. In 2011, according to the American Gaming Association, casinos across the country together brought in $35.64 billion and returned $7.93 billion in gambling taxes to states and localities, a 4.5 percent increase over 2010. The association also reports that the industry employs almost 340,000 people, who earned $12.9 billion in wages, benefits and tips in 2011.

Nevada was ready to roll when the justice department ruling arrived. Anticipating the federal opinion, lawmakers passed a law on June 10, 2011, making the state the first to authorize any form of gambling--in this case, poker.

The legislation assigned the state Gaming Commission the job of regulating the licensing of online or interactive poker when and if either a federal law was passed or a rule was issued by the Department of Justice allowing interactive poker. The December ruling gave the state's gambling officials the green light to get gambling websites up and running. They issued the first permit in August, and poker sites are expected to open soon.

Nevada regulators studied gambling markets, timing and feasibility for nearly three years before adopting regulations. Their experience and attention to detail, according to Senate Judiciary Chair Valerie Wiener (D), will allow Nevada to maintain its position as the world's "platinum standard" for regulating the gambling industry. Further, Wiener believes the state's gambling laws and regulations successfully balance Nevada's support of the emerging online gambling industry with protections for local manufacturers, operators and consumers.

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In March, Illinois became the first state to allow the sale of lottery tickets online, followed in June by Delaware, which became the first state to authorize full casino gambling over the Interact. In addition to poker, Delaware offers blackjack, roulette and other games, and, like Illinois, now also sells lottery tickets online. …

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