US Law Roundup - May 2005

29 April 2005

Staying on top of interactive gambling bills as they move through the United States' federal and state legislatures no longer entails hours of research, thanks to this monthly update on U.S. state and federal legislation.

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New This Month: A prohibitory is nearly law in Indiana and the Illinois and Texas legislatures consider bills that would allow lottery ticket sales over the Internet.

State Legislation

New Jersey AJR-66

Bill Summary

This bill, proposed by Assemblyman Joseph Azzolina, would create a 21-member Internet gaming study commission that would be charged with recommending a course of action regarding online gaming in New Jersey.

Bill Status

The bill was introduced Jan. 13, 2004 and immediately referred to the Assembly Tourism and Gaming Committee. It has seen no action whatsoever in the last 14 months. A similar bill was introduced during New Jersey's 2002-2003 legislative session but never made it out of committee.

Outlook

This bill was originally created to provide the Tourism and Gaming Committee with more information about the Internet gambling industry before considering other bills on I-gaming. Other I-gaming-related bills were introduced during the last legislative session and then resurrected for this one, but none are likely to be moved out of committee unless some outside catalyst propels Internet gaming into the limelight.

New Jersey

A-429

Bill Summary

A-429 would authorize licensed land-based casinos in New Jersey to offer their games via the Internet.

Bill Status

Sponsored by Assemblymen Vincent Prieto and Neil Cohen, A-429 is the latest version of a bill that has appeared in the state's last two legislative sessions. A-429 was introduced on Jan. 13, 2004 and referred to the Assembly Tourism and Gaming Committee but has not received an attention since then.

Outlook

Unlike the I-gaming bill passed by Nevada's legislature in 2001, A-429 has failed to garner great support among legislators and casino operators.

New Jersey

S-1013

Bill Summary

Senate Bill 1013, authored by Sen. Richard Codey, is nearly identical to last year's Senate Bill 2376, which Codey also authored. The bill clarifies the definition of illegal gambling to include Internet gambling and voids credit card debt incurred through illegal gambling. The bill also includes a clause establishing that only the state may sue to recover gambling losses.

Bill Status

The bill was introduced and referred to the Senate Wagering, Tourism & Historic Preservation Committee on Feb. 9, 2004, but it hasn't since seen any action since then.

Outlook

Codey became president of the Senate this session, so it would seem that any bill with his name on it will be taken seriously. New Jersey sources indicate, however, that I-gaming is not a top priority in the state.

Indiana HB 1191

Bill Summary

House Bill 1172 would make Internet gambling by consumers a Class B misdemeanor. The act of operating or promoting an online gambling service would become a Class D felony. Authored by Rep. Jerry L. Denbo, the bill would require Internet sites to shut down if a law enforcement agency were to determine that a site promotes online gambling. Internet service providers would also be required to restrict access to sites that promote and offer online gambling.

Bill Status

The bill received its first reading on Jan. 6, 2005 and was then referred to the Committee on Public Policy and Veterans Affairs.

Outlook

The bill has appeared for the last three years and failed every time. It places obligations on Internet service providers that they are not likely to welcome.

Indiana

SB 92

Bill Summary

SB 92 makes it a Class D felony for an operator of an Internet site to use the Internet to engage in gambling activities. The wording of the law gives interactive computer services (Internet service providers) a right of action against any person that transmits information for the purpose of online gambling. Internet service providers may block access to gambling sites and will not be held liable for action voluntarily taken in good faith to block the receipt or transmission of information if it reasonably believes is related to illegal gambling.

Bill Status

An amended version of the bill passed the Senate on January 26th by a vote of 46 to 0 before moving on to the House, where it eventually passed without amendments by a vote of 464-74. The bill has been signed by the speaker of the House, the President of the Senate and the President Pro Tempore.

Outlook

It is amazing that this bill has passed both the Senate and the House and acquired three necessary signatures while remaining largely under the radar. With only the signature of the governor left to be attained, there is not much that can prevent this bill from becoming law. Whether the law has any teeth or whether it will be enforced at all remains to be seen.

Illinois

SB 0198

Bill Summary

SB 0198 would allow the Illinois State Lottery to begin selling lottery tickets to Illinois residents over the Internet. Rather than a permanent, state-wide launch of lottery games via the Internet, the bill proposes a pilot offering so that the Illinois Lottery may test its online system over a small area for a limited time.

Bill Status

Sen. John Cullerton introduced this bill on Feb. 2, 2005. It passed the Revenue Committee on Feb. 17 by a vote of 6-4. The bill received little attention until April 11th, but is now on quite a roll. On April 14th a slightly amended version passed the Senate by a vote of 32-24-01 and then on April 27th it passed the House's Gaming Committee.

Outlook

The bill's chief sponsor in the House, Rep. Lou Lang is very supportive of the initiative. Lang says the bill has the support of the Speaker of the House and could potentially serve as leverage during a tumultuous budget process. The U.S. Department of Justice has so far been silent about the prospect of either Illinois, Georgia and now Texas putting selling lottery tickets over the Internet, but after what happened in North Dakota the DOJ's influence is certainly something to be feared.

Georgia

HB 346

Bill Summary

HB 346 would allow the Georgia State Lottery to begin selling tickets over the Internet. Georgia residents would be able to set up electronic accounts from which money could be used to participate in lottery games. The bill's main sponsor, Terry Barnard, attempted to pass a similar bill last year. Although last year's bill passed through Georgia's House, it never received a vote by the Senate. Lottery retailers opposed last year's bill because they feared it would take away some of their profits. To alleviate their fears, Bernard altered this year's bill to provide a clause that requires customers who wish to play online to apply for an account at a lottery retail agency. Besides verifying that players are of legal age to participate in the lottery, requiring customers to register for an account at a retail agency would also enable the lottery to track which players originated from which agencies so that a portion of the profits could still be distributed to the agencies. Jim Tudor, a lobbyist for the Georgia Association of Convenience Stores, says that the state's lottery agencies are now neutral on the bill since the new clause has been introduced.

Bill Status

The bill was passed by Georgia's House on March 10, 2005 with a vote of 98-48 (with 29 no votes). On March 17, the state's Senate Committee issued a favorable report on the bill and sent it to the full Senate, where it had already received two full readings by March 21.

Outlook

The bill has a fair chance of succeeding. Its main opponents are the standard ilk that opposes any expansion of gambling because of its detrimental effects on society. However, there is no telling at this point whether the Department of Justice will weigh in on the bill if it begins to gain momentum. No state has come as close as Georgia has to allowing the sale of lottery tickets over the Internet. The DOJ has stated on several occasions that it believes all forms of online gambling violate the Wire Act. In March, an effort in North Dakota to pass legislation that would make the state a licensing jurisdiction for online gambling was killed by a DOJ letter stating the department's opinion on the legality of such legislation. A similar letter would probably have the same affect on Georgia's HB 346.

North Dakota

HB 1509

Bill Summary

House Bill 1509 would have revised the definition of gambling under North Dakota law to exclude Internet poker, which would have been reclassified as a game of skill. The plan would have also allowed the state to begin licensing Internet poker companies to operate in the state, and would have contributed millions of dollars in tax revenue for education, property tax relief and other public funding.

Bill Status

This bill is dead. It was narrowly passed by a the state's House with a vote of 49-43 on February 16, but was defeated in the Senate with a vote of 44-3. The U.S. Department of Justice issued a letter to North Dakota's legislature a few days before the Senate vote expressing the department's belief that Internet poker violates the federal Wire Act and that HB 1509 was therefore unconstitutional. Several representatives of the online gambling industry delivered testimony stating their belief that the Wire Act applies only to sports betting, but the DOJ letter still had a massive influence on the Senate's vote.

Outlook

Efforts to revive the bill have failed, and there is no prospect for it or a similar bill to pass in North Dakota during this legislative session.

South Dakota

SB 95

Bill Summary

Senate Bill 95 permits South Dakota residents to use the Internet or a telephone to place a bet on horse or dog tracks in other states. Residents who wish to wager on races in other states are now required to set up special accounts in South Dakota banks from which their bets will be deducted. A 25 percent tax on every bet placed on an out-of-state race will go toward the support and operation of South Dakota's tracks.

Bill Status

The bill has already passed through both chambers of the state legislature and on March 22 was signed into law by the governor.

Outlook

This bill is now law.

Texas

HB 3540

Bill Summary

HB 3540 would allow players to establish an online account with the Texas Lottery Commission and to pay for tickets over the Internet with debit cards. The bill has been inserted into a larger bill that would allow motorists to display one license plate on the rear of a vehicle. The bill's author, Rep. Jim Pitts, who is also chairman of the House Appropriations Committee, believes selling tickets over the Internet could earn the state an additional $100 million a year.

Bill Status

The bill was introduced on April 11th and referred to the House Appropriations Committee, where it later passed by a vote of 22-0 on April 25th.

Outlook

One supporter of the Bill, Rep. Carlos Uresti, believes the bill has about a 50-50 chance of becoming law.

Federal Legislation

HR 1422

Student Athlete Protection Act

Bill Summary

Introduced by Rep. Tom Osborne, R-Neb., the bill would prohibit Nevada casinos from accepting wagers on college sporting events. Osborne introduced a similar bill in 2003 and gained the support of 33 representatives, but the measure was never scheduled for a Congressional hearing. Sen. John McCain, R-Ariz., first introduced a bill prohibiting college sports betting in 2000, but efforts to move such legislation have lost much momentum in the last few years.

Bill Status

The bill was introduced and referred to the House Committee on the Judiciary on March 17, 2005.

Outlook

This bill has failed in every legislative session since 2000, and is not likely to pass this time either.