For years, the federal government has opposed virtually all forms of online gambling, from poker to lottery sales. But a Justice Department legal opinion– quietly released to the public on the Friday before Christmas– appears to open the door for a major expansion of the industry within, and perhaps across states. We examine why the politics and cold economics behind the decision.

Guests

  • Edward Wyatt Business Reporter, New York Times
  • Michael Brown Member, D.C. Council (At-Large, Independent)

Transcript

  • 13:06:44

    MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, a global food fight, how American laws requiring country of origin labeling sparked an international trade dispute. But first, the Obama administration quietly opens the door to online gambling. For years, the federal government has loudly and publicly opposed internet betting, its crackdown on sites like Full Tilt Poker and Pokerstars.com, it's pursued financial institutions that process payments to those sites.

  • 13:07:28

    MR. KOJO NNAMDIIt's even gone after internet companies that carried advertising for online wagering. But on the Friday before Christmas, the Obama administration quietly signaled a major change in federal policy, releasing an opinion that appears to allow online gambling within states for non-sporting events. Joining us to discuss this is Edward Wyatt. He's a business reporter with the New York Times. Ed Wyatt, thank you so much for joining us.

  • 13:07:54

    MR. EDWARD WYATTSure, thank you.

  • 13:07:56

    NNAMDIThe federal government has long opposed internet based gambling in all of its forms, but during the holiday week last month, the Department of Justice quietly released this legal opinion that appears to mark a major change in federal policy. What did it say?

  • 13:08:11

    WYATTWell, the opinion said that internet gambling is allowed, specifically in the sense of lottery agencies being able to sell tickets online to lottery players within their own state, but it had a far bigger reach than that, actually. The way that legal experts reading it have said, that it allows online gambling in just about any form as long as it's done within a state and the state has approved online gambling, whether it be poker or some other form of gambling, which is a complete reversal from what the Justice Department has long held and what the Obama administration itself had held up to now.

  • 13:08:55

    NNAMDIIf you'd like to join the conversation, call us at 800-433-8850 with your own view of internet gambling in general or what the Justice Department ruled in particular. Ed, everyone agrees that this 50-year-old law, the Wire Act of 1961, explicitly bans sports gambling across state borders. But since the advent of the internet, the federal government has also interpreted it to ban pretty much any and all gambling over the web, hasn't it?

  • 13:09:24

    WYATTYes, they have. And the way they justified that was to say that when you send an email or some sort of financial transaction online, that actually in most cases crosses state lines because of the routing that it goes through in the internet. And so it used that to say, well, this is interstate commerce and therefore the Justice Department has the ability to go into it.

  • 13:09:49

    WYATTNow, what they're saying -- there's a separate law that says specifically -- that doesn't apply to -- in certain cases that when transactions are rooted across state lines, it doesn't mean that it's interstate commerce. And that's one of the things that Senator Harry Reid and John Kyl of Arizona asked the Justice Department to clarify. Where do you really stand on this?

  • 13:10:13

    NNAMDIThe Friday news dump is something of a Washington institution when the government has something to release and doesn't want people to see it. But releasing an opinion like this on the Friday before Christmas seems to indicate that the Obama administration really doesn't want this to make the headlines.

  • 13:10:30

    WYATTI think they didn't. As you said, it's a long standing tradition that if you want something ignored, release it on Friday before a three-day weekend. And the press coverage was not widespread on this. I think the Obama administration, from what it has signaled with this is saying, we don't really want to fight internet gambling because states -- a lot of states want it in order raise money. They have budget crunches, deficits. They need to do something to raise tax money and states are starting to say, well, maybe we need to turn to gambling.

  • 13:11:07

    NNAMDIYeah because obviously this is coming down to a matter of budgets and economics, but how big is the online gambling industry if they're talking about helping to balance budgets using online gambling? How big is the industry?

  • 13:11:20

    WYATTWell, the estimates vary widely from $5 or $6 billion a year to as high as $100 billion. I don't think that that's realistic. I know some experts who have tried to estimate the size of the markets looking at Nevada, have estimated that there, the market could be $6 billion and the Massachusetts -- or I'm sorry, the head of the Illinois state lottery said that, you know, this is very significant and the head of the Massachusetts lottery said this could be tens of billions of dollars a year in revenue for states.

  • 13:12:00

    NNAMDIJoining us now by telephone is Michael Brown. He is a member of the D.C. Council. He's an At-Large independent member. He joins us by phone. Michael Brown, you may remember, is the one who has introduced internet gambling into the District of Columbia. Councilmember Brown, thank you for joining us.

  • 13:12:17

    MR. MICHAEL BROWNNot only did we introduce it, Kojo, we were the first in the country. But Happy New Year to you and your guest.

  • 13:12:23

    NNAMDIHappy New Year to you. Washington, D.C. and Nevada are the only two jurisdictions that have approved limited forms of online gambling to date. Here in D.C., the whole process has been controversial. Where do we stand right now, Michael Brown? And how do you view this new legal opinion from the Justice Department?

  • 13:12:43

    BROWNWell, first on the latter, Kojo. Clearly, we were pleased to see the validation of our legislation. I mean, we had done so much research for almost a year, both legally and policy wise, to see kind of where we were. And every step along the way, we were validated. So obviously, we were glad to see that the Justice Department agreed with what we had accomplished, where we are now, as you know, we had some community meetings in each ward around the city. Unprecedented to give the community folks an opportunity to speak either for or against. And we were pleased to see that most people were for it. A lot of folks were wanting to make sure the money was going to the right places, to social programs and the like.

  • 13:13:31

    BROWNYes, there was some descent, but then it's hard to find any piece of legislation anywhere that doesn't have some level of descent. We're having another hearing at the end of the month. As you know, I sit on the Finance and Revenue Committee which oversees the lottery and the like. And we're having a hearing at the end of the month and hope to be implementing soon thereafter.

  • 13:13:52

    NNAMDIWhat exactly would online gaming look like in the District under the current plan?

  • 13:14:00

    BROWNWell, you'd have to have your own laptop, you'd have to have -- there would be no devices, there will be no casino hall or video terminal sites or anything like that. You can't do it in a library or a school or a government building. A lot of the dissenters were putting out a lot of misinformation about that. So we had to squelch that. And if you have your own laptop and a bank account, you can play. And as you know, Kojo, we have a very tough time, if not impossible because we are not a state yet. And obviously, as you know, I'm also a big statehood advocate...

  • 13:14:34

    NNAMDISure.

  • 13:14:34

    BROWN...but one day we'll be a state, but in the meantime, as visitors come into our city, the most we get from them, really, is their lunch money or their dinner money or if they stay over and watch a new play or something, all the wonderful activities going on here in the District of Columbia. And now we'll have an opportunity to really capitalize on the revenue of folks to come in because -- keep in mind, Kojo, people are playing every day unregulated on either overseas sites or illegal sites. The Justice Department already took action against those and shut some of those down.

  • 13:15:05

    BROWNBut we have some of our fellow residents, today, thousands of them that are playing unregulated so if there's a problem, they can't call the government agency and say, hey, this company defrauded me, because there's no regulations. Now, folks can play protected, they can play safe and we can get revenue for it. So it's a win-win.

  • 13:15:25

    NNAMDINevada actually issued regulations for online poker the day before this opinion was released in December. Michael Brown, do you think the District is in competition with other jurisdictions on this?

  • 13:15:38

    BROWNOh, absolutely. We -- that's one of the things that disappointed a lot of us when some of the dissent came because it slowed the process down. Everything's competition. Everything's about market place. But we wanted to do it right. We wanted to make sure the community had the proper input. But more importantly, yes, my fear now is not just Nevada, but what if some of the surrounding jurisdictions -- as you know Kojo, some of the surrounding jurisdictions already have brick and mortar casinos where a lot of residents leave our jurisdiction with our dollars and take their money and play somewhere else.

  • 13:16:10

    BROWNNow, we'll have an opportunity to keep them here. So I'm -- it's not just Nevada, but we hear Maryland and New Jersey and Illinois and New York and Florida and Montana and Idaho, a bunch of other states are just copying our legislation and they're going to move forward with it as well. So we just need to get to the market place as quickly as possible.

  • 13:16:28

    NNAMDIWe'll get back to that in a second. But first, Ed Wyatt, we said that this law opens the door for other forms of gambling by sort of signaling that the federal government will not object to other gaming besides Lotto. But now state legislatures need to act to make these types of gaming legal.

  • 13:16:45

    WYATTRight. A state has to approve online gambling specifically and that will be a fight from state to state. Now, one thing that Harry Reid, who's from Nevada, of course, tried to impress on the Justice Department is saying, if you are going to change your opinion and say that online gambling is legal, then you need to coordinate with Congress because we need some national regulation for that. And the Nevada casinos, particularly, are interested in seeing national regulations so that other states don't come in and have looser rules about how online gambling can work and put Nevada at a disadvantage.

  • 13:17:25

    NNAMDISo Nevada sees online gaming, you're saying, as both an opportunity and a threat, if you will?

  • 13:17:30

    WYATTYes, they do. I mean, you know, they virtually have the market cornered on many forms of gambling so they don't want other people getting into their business.

  • 13:17:42

    NNAMDIThe legal opinion involves online gambling within states, but a lot of legal experts believe it could allow states and jurisdictions like Washington, D.C. to ban together for gaming systems similar to the current system for Powerball. First you Ed Wyatt, how would that work?

  • 13:17:58

    WYATTWell, a state could agree with another state that we're going to allow, between us and crossing state lines, online gambling. So say, if California agreed with Nevada to allow California residents to gamble online poker using the Nevada sites, they could do that. But the legal opinion here, you know, there is some uncertainty. The Justice Department went so far as to analyze in several paragraphs where a comma appeared in the 1961 Wire Act in order to justify its decision. So, I think, there's going to be some legal battles to come over what is allowed and what's not and where the commas are and where they're not.

  • 13:18:45

    NNAMDIMichael Brown, would you envision a collaborative process with Maryland or Virginia?

  • 13:18:51

    BROWNWell, I don't know. It depends on what their state legislators decide to do. In the meantime, you know, we don't want to -- we can't wait for anyone. As you know, we are facing some -- in these out years, in the next few years, some unbelievable budget cuts and revenue issues and we need to make sure we have as much revenue as possible. So in the meantime, we need to get implemented and start to bring the revenue in as quickly as possible as well as make sure our residents are protected through the regulations.

  • 13:19:19

    BROWNAnd then, you know, in the future if states want to talk to us, we certainly may talk to them but in the meantime, right now it's just intra-state which means you have to be within the borders of the District of Columbia. Now, what the future holds, I'm not sure. I don't have a crystal ball but as the law is now, you have to be in D.C. to play and we welcome folks to come in and play and stay in our hotels, eat in our restaurants and at the same time bring your laptops and play some poker.

  • 13:19:45

    NNAMDIIf you'd like to join the conversation you can call us at 800-433-8850. Do you think it makes sense to legalize online gaming? There are potential tax dollars for local and state jurisdiction but also social impacts. What do you think? 800-433-8850 or you can go to our website kojoshow.org and join the conversation there. The Maryland lottery actually released a report in December recommending that it be allowed to sell lottery tickets online, Ed Wyatt. So this is really something that lotto commissioners are thinking about all over the country, huh?

  • 13:20:19

    WYATTClearly they're thinking about it. And it's not surprising that lotteries would be the first to want to do this because lottery, in many ways, has become an almost national sport, particularly with games like Powerball. There's also horse racing where betting is allowed from state to state through simulcasts. And so again looking to raise revenue and improve their lottery's results anyway they can, I think it's only natural with every other kind of commerce going to the internet that gambling should too.

  • 13:20:55

    NNAMDIBut this isn't the only legal obstacle to online gaming. Back in 2006 Congress passed the Unlawful Internet Gambling Enforcement Act which went after financial institutions that processed the payments for online wagers. Would this law prevent online gambling within states?

  • 13:21:14

    WYATTThe Justice Department didn't officially rule on that but the general view is that it would not. That law was put into effect in part to keep the offshore casinos from being able to process transactions. But it does not specifically ban transactions within a state. So that -- most legal experts generally agree that that is not going to prevent it. And -- but the law again is kind of vague. What the law prevents is illegal internet gambling. And so it's not completely clear what the definitions of all those terms are.

  • 13:21:58

    NNAMDIMichael Brown, what is your own interpretation of that 2006 law which went after financial institutions that processed the payments for online wagers? Do you see that law inhibiting or affecting gambling in D.C. at all?

  • 13:22:13

    BROWNNo. We looked at that as well and when we -- as any law, Kojo, can be interpreted differently and questions are asked or answered after each law is passed or if the Justice Department makes the ruling. But from our standpoint that was one of the first things we checked was the transactional legality of it. And again, every step along the way of our legal analysis and checking what we had to check, it was verified each step of the way.

  • 13:22:40

    BROWNSo from our standpoint we interpret it as we interpret it, which is it's legal. And the issue is really more of a mechanical issue related to the banks and the transactional rather than whether it's legal or not. So from our standpoint no, we think it's legal and we're ready to move forward.

  • 13:22:56

    NNAMDIDespite this Justice Department ruling we're still getting a lot of Tweets from people who are concerned about how we passed gambling -- online gambling in the District. It was inserted into a supplemented budget bill. Do you think that was sufficiently transparent? And do you think the new legal landscape would make sense to start from scratch all over again?

  • 13:23:18

    BROWNNo, that's -- of course not. I certainly don't believe in that theory. As you know, when you look at a budget and we put what's called new subtitles in a budget, new subtitles stand out like sore thumbs because they were not really part of the process. They're in bold print and it's up to folks to look at it, research it and read the new subtitles. And frankly in this tight economic climate where revenues are falling, I saw crisis. Because every time we go in to cut the budget it always falls on the backs of poor folks. And I just refuse to have our budget balance on the backs of poor folks.

  • 13:23:51

    BROWNAnd what I like to do is try to find other revenue opportunities for us, no matter what it is. Whether it's a tax increase, whether it's online gaming, whether it's changing the laws related to armored calls to come in our city that weren't taxed before and now they are. And so no, from my standpoint actually once we went out to the community in each ward the unprecedented, Kojo, to have to get public input and we got it. Some folks didn't like it but most folks were comfortable with it.

  • 13:24:18

    NNAMDIHere's a...

  • 13:24:19

    BROWNKeep in mind some -- and some folks, Kojo, stood up at the end of the day too and said, you know, this is a choice. People can make a choice with it. I'm not a poker player so it's not really impacting me. But when you're watching folks that are sleeping under a bus depot at night or sleeping in their car 'cause we've had to cut the homeless shelter budget or we're wondering where the housing production trust fund money's gonna come from. You know, it makes a difference in people's lives where these revenue dollars are coming from.

  • 13:24:43

    NNAMDIHere's Nate on the competition aspect of this. Nate, you're on the air. Go ahead, please.

  • 13:24:50

    NATEYeah, I just had a question. Since there's really no geographic, you know, aspect to online gaming right now, how -- like for example, wherever I am I can get on my computer and gamble, right. But how do we shift that revenue so that because of this change in the law here in the District that money actually flows to D.C.? Does that mean it's specific, I guess. And I'll leave it at that. If Mr. Brown could answer that for me that'd be great.

  • 13:25:16

    NNAMDIMichael Brown.

  • 13:25:18

    BROWNNo, absolutely. Well, that's exactly right. The -- because it's only intrastate and not interstate, any time someone plays there's something called the rake and the District of Columbia gets a percentage of that rake. And that's where the revenue comes in. So when the players are playing on their laptops in a bar or a restaurant or a hotel or wherever they are, then the District gets a portion or a percentage of that. And that's what goes directly into the coffers of the District of Columbia.

  • 13:25:47

    NNAMDIEd Wyatt, a lot of the big players in this make it a political story in a way because the gaming industry has a powerful lobby right here in Washington. And many of the most powerful players on Capitol Hill have a vested interest in this issue. One person in particular, Senate Majority Leader Harry Reed hails from Nevada. How has congress viewed this issue?

  • 13:26:11

    WYATTWell, congress has tried to pass some bills that would legalize online gambling. They've, in various cases, either failed to make it to the floor or failed to make it out of committee. But there is a movement within congress within certain corners of congress to make this legal. Now, of course there are also people in congress who oppose gambling of any sort, even opposing lotteries and feel that gambling in any form itself falls on the backs of the poor, or that it doesn't comply with their personal beliefs.

  • 13:26:49

    WYATTSo it looks like the majority in congress is edging toward allowing this. The question is now will they intervene in trying to set some national standards or will they say it's up to each state to do what it wants.

  • 13:27:04

    NNAMDIAnd finally here is Dan in Ashburn, Va. Dan, you're on the air. Go ahead, please.

  • 13:27:10

    DANHi. I wanted to take issue with the use of the term gambling even to describe poker in the first place. As a sometime professional myself I can tell you that there are very few or zero professional roulette players in the world but there are quite a few professional poker players. This is how, you know, they support their families. This is how they -- this is their job. And I think we need to draw a clear line between, you know, gambling like roulette and a game of skill like poker, both in terms of our laws and in terms of our responses.

  • 13:27:43

    DANAnd that also brings me to my actual question which is how is it not from a legal standpoint but from a moral standpoint when people object to play poker online how can they object to that and yet not object to, you know, the church bingos of the world. And I'll take my answer off the air.

  • 13:28:02

    NNAMDIOr the lottery, for that matter. But, Michael Brown, you have the final comment on this. What is your view of poker as a sport of skill as opposed to, oh, slot machines?

  • 13:28:13

    BROWNWell, as you probably also know too, Kojo, I am totally opposed to any kind of slots here in the District of Columbia no matter how defined. I don't think that slots -- I understand that Prince Georges County is considering slots. And other jurisdictions around our region and around the country are considering them. I am not for it, don't like it. Online gaming to me though is a little different because of the skill element involved.

  • 13:28:41

    NNAMDIOkay, Dan. Thank you very much for your call. Ed Wyatt, thank you so much for joining us.

  • 13:28:45

    WYATTThanks.

  • 13:28:45

    NNAMDIUnless you had another comment.

  • 13:28:47

    WYATTWell, the only thing I would say is if poker is in fact a game of skill and a sporting event that would make it illegal under the wire act. So the Justice Department concluded that, in fact, it is not a sporting event or contest. That it is, in fact, gambling.

  • 13:29:03

    NNAMDIAnd for the time being Ed Wyatt has the last word. Edward Wyatt is a business reporter with the New York Times. Ed, thank you for joining us.

  • 13:29:10

    WYATTThank you.

  • 13:29:10

    NNAMDIMichael Brown is a member of the D.C. Council. He's an at-large independent member. Michael Brown, thank you for joining us.

  • 13:29:16

    BROWNThank you, Kojo. Appreciate it very much and Happy New Year to you.

  • 13:29:19

    NNAMDIHappy New Year. When we come back, a global food fight. How American laws requiring country-of-origin labeling spark an international trade dispute. I'm Kojo Nnamdi.

Comments

comments powered by Disqus
Most Recent Shows

The Politics Hour – October 20, 2017

Friday, Oct 20 2017Montgomery County State's Attorney John McCarthy discusses his efforts to address gang violence. Plus, D.C. Councilmember Trayon White joins us to recap the "grocery march" protesting food deserts east of the Anacostia River.