Intrastate Online Gambling on Hold in Nevada

6 December 2002

A snag has arisen in the movement for in-state interactive gaming in Nevada.

After regular meetings, the Nevada Gaming Control Board has expressed concerns in going ahead with a system that would facilitate interactive gambling on an intrastate basis throughout the state.

Regulators have been studying the intrastate option since the U.S. Department of Justice opined three months ago in a letter to the Gaming Commission that any interstate system would be in violation of federal law.

After three public comment meetings conducted by the Nevada Gaming Commission, in which regulators sought input from industry operators and the general public to try and gauge the level of interest for an intrastate system, the Gaming Control Board could put the kibosh on the entire process.

Board Chairman Peter Bernhard told IGN that the intrastate concept would be looked at more closely at the end of the year, after the board has had a chance to study all of the information presented during the public meetings. Regulators, he said, were hoping to make a decision by the end of January.

Board member Scott Scherer told the Las Vegas Sun that the commission will probably not sign off on any intrastate initiative until it gets the support of the state Legislature, which doesn't reconvene until February.

Scherer also indicated that a legislative review is necessary. Enabling legislation passed in June 2001 opened the door for interactive gambling in Nevada, but the state will only proceed if certain conditions are met, chief among them is approval from the federal government.

In light of Department of Justice's letter, Scherer thinks legislators will approach the intrastate option with an open mind.

"We want to put information together so that when the Legislature meets in February, we can report to them what we found, make any recommendations and allow the Legislature to at least consider whether or not we want to go forward with this," he said.

Meanwhile, a recent court decision could lessen the impact of the DOJ letter. A federal court in November upheld a ruling that online casino gambling is not illegal under the terms of the Federal Wire Act--precisely contradictory to the DOJ's statement. Only sports betting has been deemed by the courts to be a violation of the Wire Act. The November ruling, Scherer said, could sway policymakers to again consider an interstate system.

Scherer also said the board could theoretically adopt rules for in-state gambling without violating federal law. Still, he added, intrastate systems open up a host of policy questions that weren't addressed when Nevada's regulatory bill was passed.

"Some have argued that if we allow people to gamble from their homes, it will take money away from bricks-and-mortar casinos," he said. "But it may create new jobs; companies may build new facilities here. It's really about (striking) a balance. That's a legislative issue."

Should the Legislature adopt intrastate interactive gambling, it could either move to pass updated guidelines or keep the existing law on the books. The original legislation included a definition of Internet gambling that was broad enough to include in-state betting, but the bill's focus, Scherer pointed out, was worldwide Internet gambling.

Supporters of intrastate gambling say legalization is the only way to keep profits and tax revenue close to home while offering some protections to consumers.

Private Internet networks, otherwise known as "closed-loop" systems, would satisfy legal requirements by allowing only certain people to enter the systems to gamble, they say.