Breaking: Gambling Bill Could Restore Freedom to States

Congress may soon consider a bill that would repeal outdated federal gambling prohibitions, and thus allow states to legalize and regulate any form of gambling, online or offline. 

The Gaming Accountability and Modernization Enhancement (GAME) Act, sponsored by Rep. Frank Pallone (D-NJ), details minimum standards for state-based regulation.

“Despite the federal gaming laws in place today, Americans are betting up to $400 billion a year on sporting events alone,” Pallone said in a news release issued by House Energy and Commerce Committee Democrats. “It’s time to recognize that the laws are outdated, and the GAME Act will modernize them by increasing transparency, integrity, and consumer protections.”

The proposal would end the 25-year prohibition on state-authorized sports betting by repealing the Professional and Amateur Sports Protection Act (PASPA) of 1992—a law that is likely unconstitutional and awaiting a possible hearing before the Supreme Court.

However, the GAME Act’s comprehensive draft doesn’t stop there; it also allows states to legalize and regulate any form of gambling—online or off—so long as the states enact rules that address problem gaming, restrict access to minors, comply with federal banking and reporting laws, and contain other consumer protections.

The bill is merely a “discussion draft,” meant to stimulate conversation and feedback from interested parties, but not likely something on which Congress will vote. Still, should the draft result in a similar comprehensive bill, it would end the longstanding injustice of Congress preventing state legislatures from regulating and taxing intrastate gambling activities as they—and their constituents—see fit.

It also would open up new avenues for desperately needed tax revenue and reduce the enormous black market into which current federal law forces millions of Americans.

It also has the potential to fuel the creation of an enormous coalition in support.

In the past, groups representing various aspects of the influential gaming industry have fought—often at odds with one another—for their particular slice of the pie.

The Poker Players Alliance, a nonprofit outfit representing players, has opposed the online gambling prohibition and fought for state-regulated Internet poker for years, but hasn’t weighed in on sports betting.

The American Gaming Association, which once supported online gambling but recently switched to a neutral stance, has begun pushing for legalized sports gambling.

Daily Fantasy Sports (DFS) companies, resisting the label of “gambling,” have focused on protecting their own business model as a form of skill games.

Still, other groups like the lotteries, race tracks, and tribal gaming authorities have weighed in on various legislative efforts—mostly at the state level.

If the final version of the GAME Act is as wide-ranging as the current discussion draft, it could unite these disparate gaming interests, creating something of a regulatory unicorn within the gaming world: universal industry support.

Furthermore, because the draft merely puts the power to regulate in the hands of the states, it could mollify congressional conservatives—always skeptical of gambling expansion—because it restores a principle most of them champion: federalism.

The 10th Amendment of the Constitution was intended to protect the states from undue federal influence, giving them the power to regulate commerce within their own borders. Pallone’s bill, in its current form, would simply undo the violation of state sovereignty perpetrated by PASPA and other federal gambling laws, giving states the choice of whether or not they want to legalize gambling while preserving their right to prohibit the activity if they desire.

Right now, this is a win-win bill with little to criticize. One can only hope that as it moves through the legislative meat-grinder, it remains as noble a proposal as it is now. 

For the GAME Act draft proposal, see here.

Update (5/25/17, 2:10 pm): As Dustin Gouker over at Legal Sports Report notes, language in the bill that defines “fantasy sports” as gambling is, perhaps, the bill’s big Achilles heel. This puts the proposal at odds with both state and federal laws, which exempt fantasy sports from laws aimed at “gambling.” The inclusion of fantasy sports betting in the bill may temper some support and generate opposition.

While Daily Fantasy Sports companies would likely oppose any attempt to legalize sports betting (since it directly compete with their business model) they will certainly fight against being labelled as gambling by federal law.

Furthermore, this inclusion of fantasy sports could also prompt opposition from sports leagues, like the National Basketball Association, that might otherwise support sports betting legalization. This is because many professional sports teams have sponsorship deals with DFS companies, but also because most of the leagues have very strict rules about gambling. Designating DFS as gambling could put them in a tricky situation.

If Rep. Pallone and GAME Act supporters want to give the bill its best chance of passage, they ought to strike all the language related to fantasy sports.