- The Washington Times - Wednesday, December 8, 2010

Congress sent a message Wednesday to D.C. officials who this week approved plans for the city lottery to offer online poker: Not so fast.

The D.C. Council on Tuesday, with little discussion and no public notice, voted 11-2 in favor of a budget amendment that would legalize online poker and fantasy sports gambling through the D.C. Lottery as a means of helping plug a $200 million budget gap.

But on Wednesday, Rep. Jason Chaffetz of Utah, ranking Republican on the House subcommittee that oversees the District, said he is “absolutely, totally opposed” to the idea — and because of the District’s status as a federal enclave, Congress has final approval over its laws.

“Washington, D.C., should not be the mecca for gambling. You don’t solve financial problems that way,” he said. “I’m not sure how Congress will weigh in, but I will make sure my colleagues know about this, and I expect there will be a lot of resistance.”

Mr. Chaffetz compared the likely resistance to that facing federal legislation being promoted by Senate Majority Leader Harry Reid, Nevada Democrat, who is seeking to allow Internet poker games at casinos and racetracks. But he noted that the D.C. Lottery proposal, introduced by council member Michael A. Brown, at-large Democrat, arrived suddenly with little discussion either in the city or on Capitol Hill.

“There is no foundation that has been laid to gain any broad support,” Mr. Chaffetz said. “It was slipped into a budget discussion in the middle of the night. That doesn’t strike me as a good way to do business.”

Mr. Brown said public notice for a budget amendment is not required, and that he has been working with colleagues on the D.C. Council for months to develop his plan for the lottery to establish a private computer network that would allow customers to play poker online as long as they were playing in the District.

But regardless of near-unanimous council support for online poker, including from Mayor-elect Vincent C. Gray, who is serving his final weeks as council chairman, Mr. Brown and his colleagues could face political and legal resistance from other directions.

D.C. Attorney General Peter J. Nickles, due to step down by the end of the month to make way for a Gray-appointed successor, has his own concerns.

“This is transforming the lottery, which is a game of chance, into a system that involves both games of skill and games of chance, and that could run afoul of a number of federal laws,” he said. “And I don’t think the city’s chief financial officer has looked at it seriously. I’m not sure what they were thinking at all.”

According to Mr. Brown, the city’s legislative general counsel, Brian K. Flowers, “signed off on this proposal,” and the Office of Chief Financial Officer Natwar M. Gandhi issued a fiscal impact statement that estimates more than $13 million could be generated by online poker in the next three years.

Mr. Brown refused to provide written copies of those opinions.

An e-mail obtained by The Times, sent from Mr. Gandhi’s office to the attorney general, states that the CFO has not yet issued a fiscal impact statement on the D.C. Lottery proposal.

Mr. Nickles said he has asked to see a legal sufficiency memo, but Mr. Flowers’ office denied his request.

Mr. Flowers and Mr. Gandhi did not return multiple calls and e-mails from The Washington Times requesting confirmation of the information offered by Mr. Brown.

Still other detractors could complicate the District’s online-poker plans.

Despite Mr. Brown’s assertion on Tuesday that “the Department of Justice has made no effort to curtail procurements in other states,” Attorney General Eric H. Holder Jr. has publicly said he would not support efforts to legalize online gambling, a position taken by many state attorneys general.

And in a Nov. 13, 2009, letter to Rep. Spencer Bachus, ranking Republican on the House Committee on Financial Services, Shawn Henry, assistant director of the Justice Department’s Cyber Division, expressed concerns that technology exists to manipulate online-poker games to allow for cheating, and that online poker could be used to transfer illicit funds from one person to another in a serial fashion, essentially “washing the money.”

Mr. Brown’s proposal also states that the new lottery poker game would have to comply with the Johnson Act, which generally prohibits the manufacture, possession, use, sale or transportation of any gambling device in the District of Columbia.

But lottery experts say that to ensure such compliance, the system would have to rely on an Internet Protocol (IP) address to confirm that players are playing in the District. And Mr. Henry warned that “the use of IP address-based information for geolocation allows for the manipulation” of that information.

“By changing the IP address information, someone can make it appear that their residence is in a different location,” he wrote.

A second hearing on the budget amendments passed by the council this week, including the lottery proposal, is scheduled for Dec. 21. By then, an additional issue also could surface, according to industry experts.

A spokesman for Providence, R.I.-based GTech, which has been a part of a joint venture to run the D.C. Lottery for the past 27 years, said technology exists to confirm the location of online-poker players to ensure they are playing in the District, but it may involve a platform different from the one specified in the District’s request for proposal in the most recent lottery procurement.

Robert K. Vincent, senior vice president of corporate affairs for GTech, which lost in its bid for the D.C. Lottery last year to Greece gaming giant Intralot said, “This is a separate procurement from the one we bid on. It’s a different gaming platform.”

“It could very well be that the bidder deemed the best through the procurement is not really the best when you look at the new elements they are looking to put in place,” added Mr. Nickles.

Beyond the changing of the guard in D.C. government lies the city’s congressional overseers, some of whom are about to take majority control of the House.

“They may want to get more creative,” said Mr. Chaffetz, “but they also might want to seriously look at running the city more efficiently first.”