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Inside Gaming: Wire Act hearing a disaster for online gambling opponents

20 December 2015

By Howard Stutz

The recent congressional hearing into legislation that would ban online gaming couldn't have gone worse for backers of the bill even if they attempted to sabotage the three-hour meeting themselves.

Maybe they did.

Three witnesses who testified in support of a measure that would roll back the Interstate Federal Wire Act to its pre-2011 interpretation came off as uninformed and unprepared.

Republican congressmen trashed the legislation, which has been endorsed by billionaire casino owner Sheldon Adelson, a prolific GOP campaign contributor who has made wiping out Internet gaming a pet project.

Rep. Jody Hice, R-Ga., a Southern Baptist pastor and conservative radio talk show host who "opposes all forms of gambling," said the Wire Act rollback "flies right in the face" of the U.S. Constitution's 10th amendment, which defines the balance of power between the federal government and the states.

The hearing went downhill from there.

Poker and gaming journalist Steve Ruddock tweeted that Rep. Jason Chaffetz, R-Utah, lead sponsor of the Wire Act restoration legislation, was "outside digging a grave for (the) RAWA bill."

Chaffetz chaired the House Committee on Oversight and Government Reform and handpicked the witnesses, including former Nevada Gaming Control Board Chairman Mark Lipparelli, who was to be the lone opponent to the bill. Lipparelli, a Republican state senator and gaming consultant, was the only witness armed with data and facts.

He told the committee that regulatory structures for Internet gaming in Nevada, Delaware and New Jersey have defended the activity from money laundering, underage gambling and other nefarious areas. Lipparelli told lawmakers they should focus efforts on stopping illegal, offshore Internet gaming companies.

"Illegal gaming operators need to be put in the spotlight," Lipparelli said.

South Carolina Attorney General Alan Wilson, FBI Assistant Director Robert Anderson and Douglas County (Nebraska) Attorney Donald Kleine seemed to be making up testimony as the hearing went along.

Rep. Ted Lieu, D-Calif., bluntly told Wilson and Kleine they lacked any understanding of technology that ensures would-be Internet gamblers can't wager across state lines.

"I'm, sorry, but parts of your testimony are clearly wrong," Lieu said. "The notion that South Carolina citizens are playing online in Nevada or New Jersey has no basis in fact."

Rep. Dina Titus, D-Nev., who isn't a committee member but was allowed to participate, chastised Anderson for not having any hard evidence to back up claims that online gaming supports money laundering. She called the testimony "jabberwocky."

Chaffetz tried to save the hearing at the end, reading into the record a 2007 Washington Post article that said three people used an offshore online casino to fund terrorists.

"I think its naive at best to say you're going to put a wall on the Internet and say we're not going to be able to penetrate this," Chaffetz said.

But the damage was done.

Gambling Compliance reported there was little appetite to added either the House or Senate version of the anti-Internet gaming legislation into an omnibus spending bill that Congress must pass before adjourning.

Online gambling supporters shouldn't take a victory lap just yet. There is still a lot more time on the clock.

U.S. Department of Justice lawyers said the Wire Act, which was written in 1961 and deals with the transmission of wagers, applies only to only to sports betting and not poker and casino-style games.

The opinion didn't open the legal Internet gaming floodgates. Nevada, New Jersey and Delaware are the only three states with online gaming laws on the books. Several states, including California and Pennsylvania, are considering legislation to legalize the activity.

The activity has not been a financial panacea predicted by analysts and industry experts.

Nevada had three online poker websites until Station Casinos pulled the plug on Ultimate Gaming in November 2014. Only once did the three sites combine for more $1 million in monthly gaming revenue. New Jersey was predicted to bring in $1 billion in Internet gaming revenue its first year. The actual figure was $122 million.

Adelson has just one high-profile backer in his opposition to Internet gaming — Wynn Resorts Ltd. Chairman Steve Wynn.

Station Casinos Senior Vice President Mike Sloan said that "changes in technology since the Wire Act was passed probably warrants a review to make sure we fully understand what is legal."

Nevada's two U.S. senators don't support Internet gaming as a whole but back poker.

Neal Patel, spokesman for Sen. Dean Heller, said the Republican's position has not changed. "He believes that a significant expansion of gambling, that would bring slot machines and other games of chance into every computer and home in America, is bad for Nevada and the country," Patel said. "Senator Heller supports restoration of the Wire Act and feels there should be an exemption for online poker since it is a game of skill."

Meanwhile, Senate Minority Leader Harry Reid spokeswoman Kristen Orthman said the Democrat "has long said he would support shutting down Internet slots and other games of chance but we should seek a path forward for Internet poker."


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Howard Stutz
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