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D.C. slips online, fantasy gambling into bill

‘Games of skill’ eyed for Lottery

- The Washington Times - Tuesday, December 7, 2010

The D.C. Council on Tuesday took a first step toward legalizing online poker and fantasy sports gambling through the city lottery by tucking the proposal into a massive bill aimed at plugging a $200 million budget gap.

With budget talks roiling at the both the local and national levels, the council, by an 11-2 vote, passed an amendment — with little notice or public input — that would define the D.C. Lottery to include both "games of skill and games of chance."

Introduced by at-large Democrat Michael A. Brown, the amendment would establish a private computer network run by the D.C. Lottery that would allow customers to play poker online as long as they were playing in the District.

Mr. Brown said his proposal would raise more than $13.5 million by the end of 2014.

However, the amendment, approved by the city's legislative general counsel Brian K. Flowers, bypassed a review by D.C. Attorney General Peter Nickles, who said there are several complex federal statutes to be analyzed before he could say whether it passes muster.

"I didn't realize this was coming up," said Mr. Nickles, who is expected to step down by the end of the month to make way for a new attorney general, yet to be named by Mayor-elect Vincent C. Gray, who voted to approve the budget amendment.

It also remains to be seen whether members of Congress would prevent such a measure from taking effect.

In 2006, Congress restricted online gambling by prohibiting financial institutions from transmitting funds from U.S. residents to gambling websites. Currently, though there is significant interest in a number of states, there are no legal Internet poker sites based in the U.S.

Senate Majority Leader Harry Reid, Nevada Democrat, is promoting federal legislation that would allow Internet poker games but would restrict initial licenses to casinos and racetrack operators. Mr. Reid's proposal, which also is proceeding through the budget process and has drawn resistance from House Republicans, would supercede any state regulations allowing online poker.

Asked whether he anticipated resistance from Congress, Mr. Brown replied: "Obviously Congress can do a variety of things with anything we pass, but we can't stop from being innovative just because they legislate what we do."

Mr. Gray did not return e-mail requesting comment.

D.C. Lottery revenues have sagged in recent years because of competition from Maryland and Virginia, which have cross-marketed Powerball and Megamillions games, with the potential for Maryland to take an even bigger bite out of District revenues in years to come with the advent of slot machines.

According to the D.C. office of the chief financial officer, which oversaw a two-year lottery procurement process, revenues from the lottery have declined by more than $36 million since 2006.

The council approval of that procurement is under review by the city's office of the inspector general.

It remains unclear exactly how the D.C. Lottery would implement the new games.

Mr. Brown distinguished the new lottery definition approved by the D.C. Council as a "hybrid" of games of skill and games of chance. Pointing to the need for the District to compete with nearby states, he drew comparisons to Maryland and West Virginia. But the games in those states are not administered by the lottery.

Mr. Brown's budget presentation emphasized that "there are at least 12 states contemplating legislation similar to this amendment." He pointed to California, where an online poker bill died in the state Legislature this year, and New Jersey, which has yet to pass a bill.

He also cited other states, such as New York and Illinois, which are in the process of implementing online poker. But those states had previously approved either casino gambling or video poker.

As additional support for his proposal, Mr. Brown told his colleagues: "Online poker is currently played by D.C. residents and offered by vendors outside the United States."

In addition to the online poker provision, the council approved language that would expand the current lottery's products to include "fantasy sports," like the games offered by ESPN and Yahoo, which allow players to simulate pro football, basketball and hockey using computer-generated statistics. However, those games do not involve payouts.

Reaction to the budget amendment was muted. Some council staff suggested that even as an incremental effort to legalize online gambling, Mr. Brown's proposal might call for more input from the public.

Mr. Nickles said he would be looking at a number of federal statutes in the coming days, including the Federal Wire Act, the Unlawful Internet Gambling Enforcement Act and the Johnson Act, which generally prohibits the manufacture, possession, use, sale or transportation of any gambling device in Indian Country, the District of Columbia and possessions of the U.S. The Johnson Act was cited by a federal appeals court in the District, which in 2006 ruled the federal law prohibited slot machine gambling in the District.

Mr. Flowers did not return calls for comment. But according to Mr. Brown, the council's top legal adviser "has signed off on the proposal."

"This specific area of law is a bit unsettled," stated Mr. Brown in a memo provided to The Washington Times. "However there is nothing in current local or federal law that prohibits this type of gaming and the U.S. Department of Justice has made no effort to curtail procurements in other states."

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