Battle for US online gambling legalisation moves to state level

Attempts to make online casino gambling in the USA legal have moved to the states as regulators try their luck with bills that attempt to navigate around the federal level laws which in theory are supposed to prevent online gambling.

New Jersey is the destination of the first efforts, where the state governor Christopher Christie is set to make a decision on the bill that proposes to to let casino operators in Atlantic City open their own online casinos, poker rooms and sportsbook sites for residents of New Jersey.

If the bill was successful it would mean that New Jersey would become the first American state to legitamise online casino gambling.   The governor, who is a Republican, must decide by Thursday (3.3.11) whether or not to veto the bill or to pass it into law.  He hasn't publicly indicated what his preferences are, be sure to check back here in the casino gambling news section for an update on his decision.

Whether the bill passes or not, experts in the field of casino gambling have stated that the legalisation movement is steadily growing with a large swell of support in particular behind the state efforts.  While at the federal level it remains largely intractable, support is high for what is known as intrastate wagering whereby online casinos are legalised within the state for the state's own citizens.

Just last week, legislators in the state of Iowa proposed a bill which would make online poker legal, while the states of Florida and California are amongst several states in which similar proposals have been tabled.

It will only take one state to make that first step of legalising online gambling before other states suddenly realise the massive tax potential of such a move, internet gambling law experts have said.  The momentum of the move towards legalisation of online casinos is growing after states have tried and failed to balance their immense budget deficits.

Supporters of poker and online casino gambling in America have been keen to emphasise the benefits to state houses of new revenue streams generated by online gambling.   Gambling has been expanded in several states in the last couple of years due to precisely this fiscal line of argument.

The new push towards intrastate online casino gambling is the latest approach in a long running saga to legalise US online gambling for American residents.  In 2006 it was all but banned following the controversial UIEGA bill which was sneakily tagged onto the end of another bill at the last second before passing.  While not criminalising individual players, the bill did stop banks from processing transactions from online gambling operators, rendering the legality of american online casinos highly questionable.

There were attempts in 2010 by large online casino operators to make federal laws that would legalise online poker but they did not make it through congress.  It has been widely regarded that attempts at the federal level to pass anti-prohibition bills are doomed to failure in the near future which is why the state level legislation is such a lifeline for American online casinos.

While there has been a long history in the US of opposition to gambling for moral reasons or due to the supposed impact on society, these voices have been quieter recently as financial arguments have started to hold sway and state houses are asking themselves why they should not benefit from gambling tax revenue that is enjoyed by neighbouring states or lost altogether to online casino operators.

The federal ban is circumvented in the current proposals by stating that access to the online sites will only be available to residents within the particular state and this is technologically feasible.  The federal government has not commented on the state proposals thusfar. However there is a growing feeling that if states start to legalise then the federal government's hand will be forced and federal level gaming legalisation will become inevitable.

Many players within the industry which includes off shore online casino operators, land based casinos, and Indian tribes have spoken out against the state level proposals.  The CEO of the brand which owns the WSOP and many casinos across the country has stated that they are continuing to press for federal level law changes and that they weren't prepared to get behind the one state at a time method.

Two of the most popular online poker sites that allow US players - Full Tilt and PokerStars, rule the roost in terms of American online poker players despite the fact that their banking actions are considered to be illegal by the federal government.   Despite the difficulties in processing deposits from US players due to the banking restrictions imposed by the 2006 bill, they are still able to circumvent this ban, allowing an estimated ten million American poker players to successfully play poker online.  

It goes to show what many critics said at the time the bill was passed - that it is at best unenforceable and at worst unconstitutional.

Supporters of the New Jersey state bill have argued for the ways in which the state could benefit.  Senator Lesnik said "Revenue is leaving the state to offshore online gaming and we should reclaim that lost Revenue for our state".   His estimates are that the new legislation would recuperate approximately thirty million dollars every year in tax, from an estimate of two hundred million dollars in total revenue.

The New Jersey Office of State Legislative Services has stated that total revenue for the state would surely increase if the bill was passed but the lack of certainty surrounding online casino gambling made the precise amount difficult to predict.

The last attempt by a state to pass such a bill came in 2002 when Nevada attempted to pass a law which would legalise online gambling across the nation but they scrapped it after pressure from the Justice Department.

This could be a truly momentous step for the anti-prohibition movement if the bill is successfully passed.

*****    UPDATE    *****

Christopher Christie vetoed the bill and offered the following explanation: "The State Constitution explicitly requires casino gambling to be restricted to the territorial limits of Atlantic City. Senate Bill No. 490 seeks to avoid this requirement by deeming all Internet wagers as being placed in Atlantic City, even if the person placing the bet is outside the boundaries of the city. In my view, the creation of a legal fiction deeming all wagers to have 'originated' in Atlantic City cannot overcome the clear and unambiguous language of the State Constitution."

He went on to suggest that the only way forward for changes in the gambling law was by public referendum.

Focus has now moved to Nevada, where three new online gambling bills are being processed.