Don't bet on an online gambling bill

Senate leaders are less optimistic about moving online gambling legislation through Congress during the lame-duck session than they were just a few months ago.

Earlier this year, Senate Majority Leader Harry Reid, D-Nev., and Minority Whip Jon Kyl, R-Ariz., began crafting legislation that would legalize online poker while banning other forms of Internet gambling. Their effort was prompted in part by a new interpretation of the Wire Act that the Justice Department released late last year. The department reversed course in deciding that the 1961 law, which bars wagering over telecommunications lines, applies only to sports betting. The opinion opened the door to new forms of online gambling at the state level, and many states have taken steps to move into this space.

Reid said on Wednesday that although he is still hopeful about action on his draft bill before the end of the year, “we don’t have a path forward right now, but we're working” on it.

Kyl, who is leaving the Senate after next month, was also pessimistic about prospects in this Congress given the major issues that lawmakers must tackle, including legislation to avert the so-called fiscal cliff, when automatic tax hikes and spending cuts go into effect at the beginning of 2013. A longtime online-gambling foe, Kyl helped craft the 2006 law that barred payment processors from handling bets for online gambling. The law’s effectiveness has been put into doubt in the wake of the Justice Department’s decision on the Wire Act.

“I am not saying that it's parochial or special legislation, but it’s not sequestration and the fiscal cliff and defense bill and all that, so it would be hard,” Kyl told National Journal on Wednesday, citing the lack of time left to resolve those major issues.

He said the House presents the biggest problem. Kyl said that although acting on the bill this year will be hard, “don’t infer from that I wouldn’t like to see something done.”

The measure enjoys the backing of major gambling interests, including the American Gaming Association, which counts casino operators such as Caesars, the Las Vegas Sands, and MGM as members.

The bill would “in effect be a limitation of gaming,” AGA President and CEO Frank Fahrenkopf said in an interview on Thursday. “It would just allow Internet poker.”

He and other supporters of the legislation warned that unless Congress moves to limit the fallout from the Justice Department's decision, Internet gambling will proliferate at the state level. The AGA and others argue that poker should be legalized because it is less susceptible to fraud online given that participants play against each other and not the operator of the game.

“We think it’s very important to have a federal standard on consumer protection,” Fahrenkopf added. “If you don’t have a federal floor standard, you’re going to have one state competing with another, and it will be a race to the bottom.”

The bill does face opposition from some stakeholders, including the National Governors Association, which wrote to congressional leaders last month voicing opposition to the latest draft. The draft bill would limit the ability of states to expand their lotteries to include new forms of online gambling and would also limit those who could immediately offer online poker to current brick-and-mortar casino operators.

John Pappas, executive director of the Poker Players Alliance, said that although his group supports the bill, it would like to see improvements to the measure, including removing a provision requiring all states—even those where gambling is now legal—to opt in to providing online poker.

“Ultimately, we want to get licensed and regulated poker in the U.S.,” Pappas said on Thursday. “This does achieve that goal.”

If it does have a chance in the lame-duck session, the draft bill is unlikely to move as a stand-alone measure and instead would probably be attached to a “must-pass” piece of legislation.

(Image via Galushko Sergey/Shutterstock.com)