D.C. Council member Michael A. Brown is repeatedly warning that repealing the District's online-gambling law will put the city in a bind if Congress decides to legalize and regulate Internet gaming, clearing the way for "casino interests" from Nevada and elsewhere across the country to hit the jackpot in a burgeoning market.
"I think we've just hurt ourselves," Mr. Brown, at-large independent, said last week after the council killed off the controversial gambling program, based on ethical and procedural concerns.
To be sure, casino giants such as MGM and Caesars would have an easier time entering a nationwide market than wading through 50 states with varying regulatory systems.
But there are strong doubts that Capitol Hill lawmakers have the political will, especially in an election year, to pass a gambling bill that affects moral attitudes and may infringe on states' rights, lawmakers and gaming experts say.
"In Washington today, the Congress can't agree today is Friday," says Richard D. Bronson, chairman of Beverly Hills, Calif.-based U.S. Digital Gaming. "The thought that this is the thing they're going to pass is naive."
The decision in the District to kill the existing legislation and start over was primarily based on procedure; namely, a perceived lack of transparency in the iGaming section of the lottery contract and the way Mr. Brown attached iGaming's legal authorization to a budget bill in December 2010.
Council member Tommy Wells, Ward 6 Democrat, spearheaded the repeal, and nine of his 12 colleagues also agreed there was time to take it slow and propose online gambling in a more deliberate manner.
Mr. Brown has vowed to reintroduce an iGaming bill, but says he does not know how long it will take in light of his other legislative duties. He maintained that extensive public hearings on regulations to govern iGaming were more critical than hearings on the law.
A Justice Department opinion issued shortly before Christmas appeared to have cleared the way for states to set up online-gambling measures, leading Mr. Brown to bemoan the District's potential loss of market share by scrapping its program while ahead of the pack.
While the District starts from scratch, he said, many states are clamoring to set up online-gambling programs — through their lotteries or otherwise — to balance their budgets and "grandfather" themselves in before federal regulations take hold and ostensibly siphon off their revenue.
Mr. Brown has said he would likely include a clause in revised legislation stating that no casino interest may bid on this particular project. He also said he looks forward to seeing "which of my colleagues support that."
Mr. Brown said he has no idea if any casino interests, which he linked to proposed federal regulations, have lobbied council members. He acknowledged that politics could block the "federalization" of online gambling, but thinks the District spun the roulette wheel unnecessarily by throwing out its law.
Among at least three key bills on the Hill is one by Rep. John Campbell, California Republican, that would regulate Internet gambling across state lines and offer consumer protections. Mr. Campbell's bill would allow Internet gambling only among operators with a federal license.
The bill essentially offers states an opt-out clause to bar online gambling within their borders. Utah, for instance, does not have a lottery or allow gambling of any kind.
States' rights are likely to play a large role in the debate on Capitol Hill. In October, the Public Gaming Research Institute released a study that found lotteries around the country "will be severely and negatively impacted" by any proposal that calls for Congress to license, regulate and tax online poker. It predicted a net loss of $1.4 billion to the states.
In November, a hearing before a House subcommittee delved into concerns that federally sanctioned online gambling could "cannibalize" state lottery revenue. A lottery director from New Hampshire testified its lottery and casinos tend to draw from the same customer pool, but poker players tend to be much younger than the lottery's demographic of 35 to 60 years old. Therefore, cannibalization might be a more relevant question 20 years down the road.
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