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GOP Divided on Internet Gambling Ban

As expected, members of the GOP reintroduced a measure that would create a de facto prohibition on all Internet gambling. The effort, which was written by GOP mega-donor Sheldon Adelson, has Republicans divided. Three states have already legalized online gambling while others are considering legislation to do the same.

A move by the federal government to overturn or block these state laws is seen by some as an example of “crony capitalism” and as incompatible with traditional Republican values, such as federalism. The measure failed to gain traction in the last session, thanks in part to opposition from prominent free-market, conservative, and grassroots organizations. But with a presidential election looming, it is uncertain if the allure of Adelson’s billions will sway the now Republican-controlled Congress.

Introduced by Rep. Jason Chaffetz (R-Utah) and Sen. Lindsey Graham (R-S.C.), the Restoration of America’s Wire Act (RAWA) would amend the 1961 Wire Act by removing language that limits the Act to interstate sports betting and adding language that makes it clear the Act applies to all online transactions. Supporters of RAWA assert that it is necessary because: 1) The DOJ unilaterally reinterpreted the Wire Act in 2011 eliminating an online gambling ban, 2) The Internet is inherently “interstate” and states that don’t want online gambling won’t be able to stop it, and 3) A ban will protect consumers.

As I demonstrated in my UNLV paper, the 1961 Wire Act was not originally intended as a prohibition against all online/telephone gambling. It was very clearly meant to be narrow in its scope, limiting online sports betting “over the nation’s wire.”

The bill was authored and championed by then Attorney General Robert F. Kennedy as a means to target organized crime. As he saw it, the only way to get at the “kingpins” of the mob was to target their means of fundraising. In all of his statements, testimony, and during Congressional hearings on the bill, RFK and his staff noted that the bill was focused on wagers related to horse racing and “such amateur and professional sports events as baseball, basketball, football and boxing.”

Those who assert the bill was not limited to specific kinds of gambling (despite the fact that aids explicitly told Congress that it was) point to the language of the 53-year-old bill. Because it prohibits wire transmissions of betting on “any sporting event or contest,” they assert that “contest” covers every other form of gambling. Of course, if the bill was intended to prohibit all gambling, it isn’t clear why it would have needed to stipulate that it also prohibited gambling on sports.

Fears about the “interstate” nature of the Internet are also overblown. In a 2014 interview with Newsweek, Rep. Jason Chaffetz noted that his state of Utah—one of only two in the U.S. without some form of gambling—has areas where geolocation would be problematic. Texas Governor Rick Perry echoed this sentiment, saying that allowing some states to legalize online gambling “compromises the ability of states to control gambling within their borders.”

As I pointed out in a follow up to Newsweek’s story, these fears are completely misplaced. For one thing, around 85 nations, including Canada and Mexico, have legal online gambling. If Perry et al think we can’t control online gambling between our own states, how do they think we’ll be able to stop online gambling throughout the world? Second, the technology and legal framework already in place to identify who is playing and where is well-established and proven to be effective. Chaffetz and Perry are either willfully ignorant of the state of technology or they are attempting to scare their constituents into supporting a ban. 

Finally, a ban will do nothing to protect consumers. Online gambling is here, with or without legalization. Between 2003 and 2010, Americans spent $30 billion gambling on foreign websites, without the oversight of American authorities. Any of the problems cited by RAWA supporters, whether it is about minors having access to gambling, addiction, identity theft, money laundering, etc. are far more likely to occur on black market gambling websites than on sites licensed and regulated by American states. In fact, in all of the three states that have laws governing online gambling sites, there are rules pertaining to age-restriction, geolocation, and problem gamblers. If these sites violate the laws, they risk losing money and their licenses to operate. Black market websites have nothing to lose by violating U.S. law.

Despite what RAWA supporters claim, this is not about protecting consumers or restoring the law: it is about doing the bidding of a powerful donor and the power dynamic between the federal government and state governments. This is why the National Governors Association, the National Conference of State Legislatures, and the Fraternal Order of Police expressed opposition to a national prohibition on online gambling. As the Republican Governors Association urged in a letter to GOP leadership, the “restoration” that is really needed is to restore the powers reserved for the states to make their own decisions about matters like online gambling.