Davis Legalizes Gambling, Again

16 October 2002

California Gov. Gray Davis keeps professing he is against the expansion of legalized gambling. He may be. But you certainly would not know it by his actions.

Davis is responsible for making the following forms of gambling legal in the nation's largest state:

  • Casino slot machines, from three reel to video poker.

  • Casino banking card games, including blackjack and Caribbean Stud.

  • Off-Track Betting (OTB) by telephone by Californians on horse races, both thoroughbred and harness.

  • Internet wagering by Californians on horse races.

  • Telephone betting by residents of Connecticut, New York, Pennsylvania, Oregon and any other state that allows interstate phone wagers, with OTBs in California.

  • Internet betting by residents of Pennsylvania, Oregon and any other state which allows interstate online wagers, with OTBs in California.

  • Telephone and online wagering on horse races taking place in California by anyone in any state with any OTB in any state.
  • The most recent bill he signed into law went into effect on Jan. 1, 2002. This new law legalizes at-home betting by phone and, more significantly, by computer on horse races.

    Davis and California's state legislators are master politicians. They knew it would not have been politically wise to admit they were legalizing online wagers, especially when there were bills pending in the State Legislature and Congress to outlaw Internet gambling. So, they called it "advance deposit wagering."

    For almost a hundred years, California has had a law making it a crime to make, accept or record a bet on any "contest of skill, speed or power of endurance of man or beast, or between men, beasts, or mechanical apparatus." When horse racing was legalized in 1933, an exception had to be made for bets made within the "enclosure" of a licensed racetrack.

    To legalize Internet and phone gambling ... excuse me, "advance deposit wagering" ... the law had to be amended. The governor and legislators had to use subterfuge to avoid stating that they were legalizing at-home wagering.

    So, the new law declares that "Wagering instructions concerning funds held in an advance deposit wagering account shall be deemed to be issued with the licensee's enclosure."

    This is an extreme example of what is known as a "legal fiction." By law, if you make a bet with a racetrack using your home computer, you are not making a bet from your home--you are making a bet within the enclosure of the racetrack.

    The year before, Davis vetoed an almost identical bill. Why the change of heart?

    Campaign contributions may have played a role. Davis wants to run for president, and he is considered to be one of the most aggressive political fund-raisers in the country.

    He has been known to reward his friends, like the time he overruled county supervisors and had a new freeway exit built to the front door of a big contributor, a tribal casino.

    It is also possible that Davis truly did not realize what "advance deposit wagering" really is. As his mishandling of the state's energy crisis shows, Davis does not have the most competent advisors. He was completely out-negotiated and approved incomprehensible tribal-state compacts, indicating he also did not have anyone around him who knew anything about legal gambling.

    Davis also got bum advice from his legal advisors, including the state attorney general, Bill Lockyer. Davis declared, incorrectly, in a news release that the law allowing advance deposit wagering would not be an expansion of gambling in California, because there had been a recent change in federal law.

    The federal law in question is the Interstate Horseracing Act. And the only change was an amendment by Congress, which made it clear that an interstate wager was not prohibited by any other federal law, such as the Wire Act, but only if the bet was legal under states laws.

    If California wanted to keep interstate betting illegal, it could do so. No other state found it necessary to change its laws.

    Davis's attempt to use the change in federal law is a poor excuse, on its face. These federal laws only apply if interstate commerce is involved. The main beneficiary of the new California law will be California tracks, which can now take phone and computer bets from gamblers in the state.

    There is no way you can say this is anything other than another major expansion of gambling.

    But maybe Davis is only against some forms of gambling. Although he allowed the tribes to have casinos and the tracks to have phone and Internet gambling, he vetoed a bill that would have allowed betting on mule races. His reason? He said this would be an expansion of gambling.

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    I. Nelson Rose

    Articles by Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, California, where he teaches one of the first law school classes on gaming law. Professor Rose is the author of more than 300 books, articles, book chapters columns. He is best known for his internationally syndicated column, "Gambling and the Law ®," and his landmark 1986 book by the same name. His most recent book is a collection of columns and analysis, co-authored with Bob Loeb, on Blackjack and the Law. A consultant to governments and industry, Professor Rose has testified as an expert witness in administrative, civil and criminal cases in the U.S., Australia and New Zealand, and has acted as a consultant to major law firms, international corporations, licensed casinos, players, Indian tribes, and local, state and national governments, including Arizona, California, Florida, Illinois, Michigan, New Jersey, Texas and the federal governments of Canada and the United States. With the rising interest in gambling throughout the world, Professor Rose has spoken before such diverse groups as the F.B.I., National Conference of State Legislatures, Congress of State Lotteries of Europe, United States Conference of Mayors, and the National Academy of Sciences. He has presented scholarly papers on gambling in Nevada, New Jersey, Puerto Rico, England, Australia, Antigua, Portugal, Italy, Argentina and the Czech Republic. He is the author of Internet Gaming Law (1st & 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials.

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