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Nod from Justice clears hurdle for online gambling

- The Washington Times - Wednesday, December 28, 2011

A Department of Justice legal opinion that clears the way for states to offer lottery services and gambling over the Internet reinforces the District's efforts to introduce poker and other games, but may threaten the city's status as a first-in-the-nation pioneer in the industry.

Nevada, a state that knows a thing or two about gambling, shored up its role as a front-runner by issuing regulations for an online-poker program a day before the DOJ's opinion made the rounds on Friday.

Gambling proponents say the opinion's interpretation of the Wire Act of 1961 gives the green light to states looking to build revenue by offering non-sports gambling over the Internet to residents within their respective borders. They heralded its legal reasoning as a reversal of the federal government's previous, tougher stance on Internet gambling, although the opinion was intended to address whether Illinois and New York can use out-of-state transaction processors to sell lottery tickets to its own residents.

D.C. Council member Michael A. Brown, at-large independent, placed the District at the forefront of sanctioned online gambling in December 2010, when he slipped an initiative authorizing a program called iGaming into a supplemental budget bill that passed into law.

"We always knew it was legal. It didn't come as a shock to us," Mr. Brown said Wednesday of the DOJ opinion. "But other states might beat us to the punch, and that would be a tragedy."

The program's implementation through the D.C. Lottery has stalled while officials fully vet the program through community meetings and council hearings. Critics say the program should have been introduced as stand-alone legislation from the start, so lawmakers could have examined the program's merits in public before passing it into law.

Mr. Brown said the "vocal few" are holding the program back and argues the nation's capital should lay the foundation for iGaming and reap the benefits of revenue and regulation.

"I'm hopeful we still will be the first to the marketplace," he said. "Frankly [other states] have said, 'We're just going to take D.C.'s legislation and copy it.' "

Lottery officials say they have no plans to change the main components of iGaming based on a series of community events they held to address concerns about the program, which allows pre-approved users to wager money and play on their home computers or on their laptops in certain public areas.

Council member Jack Evans, Ward 2 Democrat, scheduled a hearing before his Committee on Finance and Revenue for Jan. 26 to discuss how iGaming would work, what the lottery learned from the community meetings and if there are potential budget risks if the program does not go forward. The hearing will also examine a bill to repeal iGaming in the District, as well as the D.C. inspector general's investigation into the program and the awarding of the overall lottery contract.

While other states formulate their own Internet gambling plans, Mr. Evans said being first in line is "not the driving force for me."

"What matters to me is we get it right," he said Wednesday.

Mr. Evans said he did not need the DOJ's opinion to prove the legality of iGaming in the District. The city's attorney general, Irvin B. Nathan, said in June that the program is legal as long as play remains within D.C. borders, and federal officials explicitly chose not to intervene in the city's plans.

"Congress signed off on this, for better or worse, in our budget," Mr. Evans said, referring to the congressional review of all laws passed in the District.

The DOJ's opinion indicates federal officials may leave online gambling up to the states, although the American Gaming Association says the time is ripe to introduce nationwide legislation that protects consumers against fraud, underage gambling and money laundering. These protections "must be enacted to avoid a patchwork quilt of state and tribal rules and regulations that would prove confusing for customers and difficult for law enforcement to manage," the association said Friday.

Even before the Justice Department weighed in, Nevada and New Jersey had been laying the groundwork for Internet play as part of their established gaming traditions.

New Jersey state Sen. Ray Lesniak, a Democrat, is deciding whether to drop an online-gambling provision in a bill designed to benefit the state's casino industry, after Republican Gov. Chris Christie vetoed an earlier version based on fears that betting parlors would spring up around the state.

In Nevada, new regulations on Internet poker will allow vendors to submit an application for an operator's license, said Mark Lipparelli, chairman of the Nevada Gaming Control Board. Whether or not Nevada becomes the first jurisdiction to offer state-sanctioned Internet gambling, he said, "will depend on the operators and how quickly they submit technologies."

By contrast, the District has researched technical specifications, and its lottery vendor, Intralot, is in place to operate the iGaming system. The looming question is whether lawmakers want to implement the program.

D.C. Lottery Director Buddy Roogow on Wednesday deferred to the council on the subject, but noted that states from California to New York are reviving their Internet-gambling plans.

"I'm sure a lot of other states feel the way has been cleared to move forward," he said. "Whether we're first or not, what matters is if it generates revenue."

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