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States and the PPA Prepared to Challenge Gaming Laws as UIGEA Deadline and Midterm Elections Near...By HARTLEY HENDERSON

States and the PPA Prepared to Challenge Gaming Laws as UIGEA Deadline and Midterm Elections Near

It appears 2010 could be the year of the pro-gambling movement.

Earlier this week New Jersey officially announced their intentions to seek legalized online gambling and sports betting in the state with the introductions of Bill 490 and Bill 492.

Bill 490 is designed to supersede the Casino Control Act of 1977, and if passed, would allow citizens of New Jersey to wager on poker, roulette, baccarat, blackjack, craps and various other games of chance on the internet. The state plans to place servers inside existing New Jersey casinos which would be subject to stringent controls and regulations. The state believes the UIGEA would not apply to this bill since the casinos and betting would be intrastate and the UIGEA only applies to cross border wagering.

The DOJ may not agree, however, since they expressed an opinion when Alberto Gonzalez was AG that as far as they were concerned any activity on the internet is interstate by nature. Whether the current DOJ has the same opinion is uncertain, but to date, Eric Holder has given no indication that the current Department of Justice feels any different about online gambling than Alberto Gonzales and the Republicans did. However, it seems pretty evident that the New Jersey government is prepared to fight for their right to offer forms of gambling which they believe to be legal in the federal courts if necessary.

Along with Bill 490, New Jersey introduced Bill 492 which would permit sports wagering in the State. The Bill, also introduced by Lesniak, seeks to legalize all wagering on professional and amateur contests by various means of communication within the state including telephone and the Internet. There is also a provision to allow sports betting lounges within existing casinos where patrons can wager on sports pools. The bill would require a state constitutional amendment but polls to date have shown New Jersey residents to be very much in favor of sports betting. New Jersey residents are able to bet on horse racing currently via so the extension to sports betting wouldn't be difficult. Of course the state currently has two big hurdles to overcome, namely the 1992 federal legislation (PASPA) which prohibits them from offering sports wagering and the sports leagues who have vowed to fight states as far as they have to in an effort to prohibit legalized sports wagering beyond Nevada. The leagues still have a lawsuit in effect trying to stop the Delaware lottery, which was initiated this year, from continuing.

When introduced it appeared very unlikely that New Jersey would have much success in getting the bills passed at the Federal level since they were seeking the change unilaterally. But that changed this week as other states have come forward calling for changes to the sports betting laws.

Delaware governor Jack Markell announced that they will appeal to the U.S. Supreme Court restrictions placed on them by the Federal Court of Appeal earlier this year which limited the offerings they could provide to NFL parlays of 3 games or more and the states of Missouri and Rhode Island passed joint resolutions urging Congress to lift its ban on sports wagering. There is every indication other states will follow. The wording of the resolutions makes it clear that the states find it unfair and unconstitutional that PASPA allows sports betting in 4 states to the exclusion of the other 46 and they seek to have the law changed whether they choose to offers sports wagering in the state or not.

Asked to comment on the surge of interest by states to overturn PASPA and consequently enhances state's rights in the area of gambling, iMEGA chairman Joe Brennan Jr. stated the following:

"We're happy that the states have taken this issue into their hands. The efforts to resolve the Internet gambling issue have stalled in Washington DC. If states assert their right to regulate gambling within their borders and start to take a serious look at permitting Internet gambling, one side affect might be a breaking of the deadlock in Congress.

Regarding Delaware's appeal, everything Delaware does in their suit helps our suit. If Delaware is successful in the US Supreme Court and benefits from the special status PASPA confers on it, it amplifies the unconstitutional restraint placed on the other states preventing them from regulating sports wagering. If Delaware loses, that itself is an example of how unfair the law is, permitting Nevada the freedom to offer any sports-based wagering product they wish, while Delaware is specifically limited to 3-team minimum parlay bets only on the NFL."

The truth is that Delaware really has no option but to appeal the ruling because the law, as it stands now, limits the state to 4 months of betting. By all accounts the NFL lottery in Delaware was a success this year but trifles in comparison to what could have been made with single game sports wagering and once the NFL season ends in 2 weeks the state isn't allowed to offer anything else until the season starts up again next September. Furthermore, the decision given by the Court of Appeals was based solely on an interpretation of PASPA by judges there that may not be warranted. There was nothing in the wording of the law that said the states were limited to a specific type of sports wager offering so it's uncertain why the courts restricted Delaware to NFL parlays.

The timing of the state resolutions is ideal because Congress is set to address Barney Frank's bill HR2267 which aims to overturn the UIGEA. The treasury agreed to extend mandatory compliance of UIGEA regulations until June 2010 and those close to Congress have indicated that Frank and the Poker Player's Alliance will likely make a huge push to make some headway in changing the regulations within the next month. There is indication that the treasury will allow a further extension only if some progress has been made. Consequently Frank will likely try and ensure that the next meeting will be significant. To date Frank has called hearings to discuss the merits of UIGEA regulation and promised HR2267 will be brought before the Financial Services Committee again in 2010. PPA Executive Director John Pappas indicated to a writer at Bluff Magazine that he expects the meeting to take place in February but this time it will be a markup where committee members make amendments to the bill and vote on the legislation.

The PPA's biggest obstacle to date is that only 4 Republicans are co-sponsors of Frank's bill and if it has any chance of passing a full house vote they need more Republican support. They believe they can get this support if they can convince fence sitting Republicans like Chris Lee (NY) to come aboard along with influential Congressman like Peter King (NY). The other ace in the hole (pardon the pun) that the PPA and Frank have is the success the PPA has in influencing voters. In the 2006 midterm elections, Jim Leach of Iowa was defeated in a shocker to Dave Loebsack by 6,000 votes almost exclusively as a result of the efforts by the gambling industry. Leach was instrumental in the passing of HR4411 to the anger of the industry which claimed it was passed without a hearing. Leach gave the typical Republican argument that it harmed the economy and the family but the PPA decided to make it personal and were able to convince gamblers who were usually Leach supporters to change their votes. This ultimately led to his defeat. Needless to say there are likely many other candidates who are in close races for the 2010 midterm elections that could use the support of PPA and other gambling lobbyist groups to help put them over the top.

HR2267 has an exclusion on sports betting but Frank only included it because he believed the bill couldn't pass without the ban on sports betting. Frank doesn't seem to agree with the leagues, however, which was evident following a committee meeting in May where Frank stated

""The expression by the professional leagues of shock at the notion that people would actually bet on games was one of the least persuasive emotional outbursts I have encountered, but we acknowledged the reality of it, no one will be betting on professional sports games."

With all the states coming forward now urging Congress to legalize sports betting, Frank may view sports betting as an opportunity instead of a threat which could convince the committee to alter the bill in the end. After all, betting sites are very integrated now and to try and prevent wagering for sports while allowing it for casinos and poker could be a very difficult task. There may actually be more support for the bill if all forms of gambling were included rather than picking and choosing.

To sum it up, sports betting activists could be looking at the perfect storm. To date the gambling antagonists were winning the battle but with the UIGEA deadline delayed until June and a Financial Subcommittee meeting with teeth to take place in the first quarter of this year; with states coming forward now to ask for changes to federal sports betting laws; and with candidates with midterm election aspirations that could be aided with support by the PPA, iMEGA and other gambling lobbyists this appears to be the time for the industry to take the offensive and start winning the battle. For the first time in quite a while the future of the gambling industry in the U.S. is looking brighter.

Hartley Henderson

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