A QUESTION OF AUTHORITY

(389) (5-September-2006)

Law professor asks valid questions on US banning attempts

Respected online gambling legal authority, university professor I. Nelson Rose published an interesting article this week, starting with the provocative view that the United States Congress has lost sight of a fundamental fact about gambling: It is up to the states, not the federal government, to decide what forms of gambling should be legal.

Claiming that the individual states that make up the U.S.A. have always made public policy when it comes to both legal and illegal gambling, Professor Rose says that the states are free and are even encouraged to try social experiments.

That being the case, the professor opines, if New Jersey wants to legalise casinos to revive a dying resort, it can do so. If it works, other states can follow. Conversely, states like Utah are free to keep all forms of gambling illegal, if they wish. Gambling is an activity that has always come under the states' police power, which is the right and obligation of the states to protect the health, safety, welfare and morality of their residents.

In the article, Professor Rose says that the idea that the federal government can tell a state what its public policy toward gambling must be violates the very concept of the union of states.  That being the case, he asks why Congress is considering bills to outlaw all forms of Internet gambling? Even with these bills, Congress recognises that states have the right to operate remote wagering on horse races and state lotteries (the notorious 'carve outs').

So, why are casino games, bingo and poker not also being left up to the states?

Attacking the irrationality of the pending legislation, the professor points to its treatment of horseracing versus dogracing. Interstate betting on horse races would remain legal, but the exact same wagers would not be allowed on dog races.

Professor Rose says that the solution to the problem of Internet gambling already exists. In December 2000, Congress amended the Interstate Horseracing Act to expressly allow patrons to bet from their homes and offices by phone or computer, so long as the state where the bettor is and the state where the bet is accepted have made such gambling legal.

(As a side note, the U.S. Department of Justice has taken the position that all cross-border betting is illegal, even on horse races. Besides being a great surprise to the horseracing industry, which would not survive without off-track and inter-track betting, the position is just plain silly - why would Congress pass an Interstate Horseracing Act, if it wanted to outlaw interstate horseracing?)

There is no reason why the states should have the power to decide whether bettors can bet by phone or computer on horse races but not have the same power to make public policy on games like poker, Professor Rose comments. Why should the federal government care if states with legal poker, like Nevada, New Jersey and California want to allow their licensed poker rooms to operate online, and take bets from each other. As with horseracing, no one is forcing Utah to change its policy of complete prohibition.

Professor Rose also considered the World Trade Organisation dispute (see earlier InfoPowa bulletins) in his article, saying that by allowing the states to decide whether they will license operators and permit their residents to play poker online would also solve this problem. The World Trade Organisation found the U.S. was discriminating against Antigua, because the U.S. only allows state-licensed books to accept bets on horse races. Antigua and every other foreign nation and state should be allowed to make the same decision about online gambling as the U.S. states.

But only licensed operators, who meet the same standards as American poker rooms, would be allowed to take bets from the U.S. And these foreign states would have to allow their residents to bet with U.S. online operators.